Greenhouse Gas Emissions Trading Markets Take Off

NEW YORK, New York, March 1, 2005 (ENS) - The world's first privately owned mechanism set up to help corporations and governments purchase greenhouse gas emissions credits and comply with their treaty commitments was launched Monday, joining the booming field of greenhouse gas emissions trading.

The Greenhouse Gas Credit Aggregation Pool (GG-CAP) is owned by Natsource Asset Management Corp., a subsidiary of Natsource LLC, a New York based corporation. Natsource LLC is an introductory broker in the U.S. and international coal markets as well as in over-the-counter emission credits, renewables credits, electricity, natural gas and weather markets.

At first close on Monday, Natsource had €72 million (US$95 million) committed to acquire greenhouse gas emission reductions to meet the compliance needs of participating buyers. This amount will increase to €98.6 million (US$130 million) within 30 days, the company said.

The trading mechanism GG-CAP will pool initial contributions from six European, Japanese and Canadian companies, then find and invest in projects around the world to curb carbon dioxide and other greenhouse gas emissions, said Natsource spokesman Mark Harrop.

The participating companies are engaged in electricity generation, chemical manufacturing, oil and gas production, and gas transmission and distribution.

Chugoku Electric Co.'s Tamashima power plant in Okayama, Japan burns fuel oil. (Photo courtesy Chugoku)

“Over the past several years, it has become clear that our clients will be required to reduce their greenhouse gas emissions,” said Jack Cogen, president of Natsource. “We have a global team of experts who possess unparalleled expertise in the policies that created the greenhouse gas market, and significant commercial experience in contracting for such reductions.”

“Environmental issues, particularly the prevention of global warming is an important challenge facing our company and is an important social responsibility," said Tatsuaki Terada, managing director, general manager of the Corporate Social Responsibility Division of the Chugoku Electric Power Co.

"Chugoku decided to take this opportunity to join GG-CAP because we believe this initiative will contribute to the prevention of global warming by supporting the development of projects that reduce greenhouse gas emissions in developing countries,” said Terada.

“We have been implementing measures to prevent global warming such as the efficient and stable operation of our nuclear plants and efficiency improvement of our thermal plants. We believe that other actions such as joining GG-CAP, which will utilize the Kyoto mechanisms, will allow Hokkaido to make additional contributions to address global warming,” said Tatsuo Kondo, president and director, Hokkaido Electric Power Company, Inc.

Greenhouse gas emissions pools, or funds, are growing rapaidly as companies scramble to comply with the Kyoto Protocol, which became legally binding on February 16, and with the European Union's Emissions Trading Scheme, as well as with similar requirements imposed by nations like Canada and Japan seeking to meet their treaty obligations.

GG-CAP will purchase and manage the delivery of a large pool of greenhouse gas emission reductions (ERs) that GG-CAP buyers can use to comply with all these emission reduction requirements.

The 3,856 megawatt Niederaussem coal-fired power plant in Germany is one of the world's largest. (Photo courtesy RWE Energie)

The boom in greenhouse gas emissions trading is reflected in strong attendance of 850 bankers, businessmen, and government officials and 40 exhibitors expected at a three day conference opening today in Amsterdam, the first conference on greenhouse gas emissions trading since the Kyoto Protocol took effect.

The Netherlands has posted its carbon registry where trades are recorded and companies can buy or sell credits on the Internet, and is now one of the first countries to have the Kyoto Protocol structure in place.

In Norway, Nord Pool opened the first carbon allowances exchange, operating as a platform the way other exchanges trade in stocks and bonds.

French Prime Minister Jean-Pierre Raffarin suggested last week that France establish a €50 million carbon fund to purchase credits from the Kyoto Protocol's Clean Development Mechanism and Joint Implementation projects, both of which allow a government to invest in emissions reduction in another country for credit against its own Kyoto commitment.

The European Union's Emissions Trading Scheme also makes use of flexible mechanisms by which industrialized countries can buy emission reductions through climate friendly projects in developing countries and count those reductions towards their commitments.

Thirty-five industrialized countries now are formally governed by the Kyoto Protocol, and many others have informally adopted the Kyoto emission reductions target of 5.2 percent below a 1990 baseline in the 2008-2012 time period.

NatSource estimates that the 35 Kyoto countries will be 3.5 billion tons short of their emission reduction obligations from 2008-2012 based on current emission trends. Those countries that are short will then have to buy emissions reductions from a pool such as GG-CAP.

The largest such pools are operated by the World Bank, which runs eight similar funds in which 60 companies and government agencies are participating, drawing upon $800 million in credits.

Ken Newcombe, manager of the Carbon Finance Business Unit at the World Bank, said, "The most important issue right now is ensuring supply from the developing countries of emission reductions, because the demand has suddenly increased enormously as companies in Europe received their targets for emissions reductions and European governments like Spain, Italy, and Denmark have entered the market on a large scale."

Carbon Expo 2005, the next big trade fair and conference for emissions trading and the carbon market, will open May 11 in Cologne, Germany, sponsored by the World Bank and the International Emissions Trading Association.

The three day event will be a platform for sharing ways of mitigating climate change impacts through the use of market based mechanisms. More than 100 exhibitors, some 1,000 trade visitors and conference participants from more than 50 countries are expected.

NovaGerar Landfill Gas to Energy Project in Rio de Janeiro, Brazil. This landfill has been capped and the methane generated by the garbage will be drawn off for use as a fuel. (Photo courtesy IUEP)

The NovaGerar project is a joint venture of EcoSecurities Brasil Ltda and SA Paulista. The certified emission reductions generated by the project will be purchased by the Netherlands CDM Facility. This Facility was established under an agreement signed between the State of the Netherlands, acting through the Ministry of Housing, Spatial Planning and the Environment (VROM) and the World Bank.

Through 2012, the Netherlands CDM Facility will purchase 2.5 million tons of carbon dioxide equivalent from the NovaGerar project at a price of €3.35 (US$4.25) a ton of carbon dioxide equivalent, for a total estimated purchase price of €8,492,250 (US$11,001,250).

A total of 141 countries have ratified the Kyoto Protocol to date. Together, they account for 61.6 percent of the carbon dioxide emissions produced by the industrialized countries in 1990.