Tuesday, July 14, 2009

Emissions Trading: Unknown Currency

The EU-ETS will expand its coverage by including more industries. It currently applies to power plants, factories making iron and steel, cement, glass, lime, bricks, ceramics, pulp and paper. From 2013 petrochemicals and aluminum will be brought into the scheme. After 2012, more greenhouse gas emissions will be traded – nitrous oxide emissions (from acid production) and perfluorocarbons (from aluminum) will be traded along with carbon dioxide. At the moment, only the Netherlands trades greenhouse gases other than CO2.

From 2012 all planes landing and taking off from EU airports will be part of the trading scheme. Polluters will be able to buy carbon credits to cover up to 50% of their emissions, from projects outside the EU that are dedicated to clean technology.

The European Commission would have preferred all allowances to be auctioned to polluters as a general rule, but governments won exemptions for some power companies in central Europe, as well as for heavy polluting industries. The Commission estimates that roughly half of all allowances will be given away for free in 2013.

Some heavy polluters will be entitled to free allowances if they are deemed likely to lose out to competitors outside Europe. The Commission will publish a list of sectors at competitive risk at the end of the year. Steel, cement and ceramics are likely to be in line for free allowances, rather than having to buy their allowances.

The money raised from selling allowances will go to national governments. But some – 300 million allowances – has been earmarked to help build carbon-capture and storage plants, or “innovative” renewables, such as offshore wind power (source: European Voice).

The United States will soon pass climate change legislation and Canada will follow soon afterwards. The voluntary market is up-and-running and will likely take-off once legislation comes into effect. Other news:

- Federal regulators are preparing to launch "a very serious look" at requiring corporations to assess and reveal the effects of climate change on their financial health, according to a commissioner on the Securities and Exchange Commission

- The oil giant Exxon Mobil, whose chief executive once mocked alternative energy by referring to ethanol as “moonshine,” is about to venture into biofuels

In the meantime, if you would like to learn more on how you can quantify and monetize your carbon, training on carbon markets, how to match it with local (CDM) projects and offsets with renewable technologies, tackling major carbon challenges and other “advantages” that carbon has to offer to your company (i.e.: unknown currency), please call me to arrange a meeting.