Rio Stock Exchange Begins Trade in Carbon Credits

RIO DE JANEIRO, Brazil, November 23, 2005 (ENS) - The Spanish multinational energy company, Endesa, inaugurated a mechanism on Monday that makes it the first company to negotiate direct, large-scale purchases of Emission Reduction Certificates (ERCs), or carbon credits, on the Rio de Janeiro Stock Exchange. ERC transactions are the way developing countries have found to contribute to the reduction of greenhouse gases responsible for global climate change.

Endesa pays for emission reductions, and then acting as sellers of emission reductions certificates, Endesa provides additional value to energy project developers using the mechanisms of the Kyoto Protocol.


Rafael Miranda is Endesa's chief executive officer. (Photo courtesy Endesa)
Working in English, Portuguese and Spanish, Endesa has more than 150 employees trained in the Kyoto Protocol's Clean Development Mechanism (CDM).

The Clean Development Mechanism yields certified emission reductions for the industrialized countries that are legally bound under the protocol to reduce their greenhouse gas emissions an average of 5.2 percent compared to 1990 levels, by the year 2012.

The ERCs are created when companies based in industrialized countries build clean energy projects in developing countries that do not have emissions targets under the protocol.

Or by buying ERCs on the market, the industrialized countries can accomplish greenhouse gas reductions outside their own territories and still receive credit for them against their national Kyoto targets.

Endesa will buy credits from CDM projects which are eligible under the European Union emissions trading scheme. Credits generated from forestry activity and through large hydro projects are excluded.

Vagner Victer, the Brazilian state secretary of energy and shipbuilding, said the company intends to buy 15 million tons of carbon credits between now and 2012.

Endesa Climate Initiative contracts, said Victer, will also be concluded in Spain, China, and India as well as Brazil.

Endesa will in turn sell these carbon credits to European countries governed by the protocol.

In order to achieve the emission reduction target set by the Kyoto Protocol, the European Union decided to cap the carbon dioxide (CO2) emission of energy intensive industries in Europe as carbon dioxide is the main greenhouse gas responsible for global climate change.

Each energy intensive company receives an emission quota and a respective number of emission allowances each equaling one ton of CO2.

At the end of each year, the covered company has to return a number of allowances equal to its total CO2 emissions. If it emitted less than its quota it can sell those allowances, if it emitted more it has to buy allowances.

In addition to buying allowances a covered company can also buy and surrender Emission Reduction Certificates, which are credits of emission reductions generated under Kyoto mechanisms, such as the Clean Development Mechanism.


Wind turbine in Fortaleza, capital of the Brazilian state of Ceará, known for its strong steady winds. (Photo courtesy Rio5)
Carbon credit sales can earn Brazil around US$3 billion a year, according to professor Emílio La Rovere, coordinator of the Energy Planning Program of the Coordination of Postgraduate Engineering Programs at the Federal University of Rio de Janeiro.

La Rovere explained that a company gains the right to sell carbon credits if it develops what are referred to as "clean projects, ones that re-utilize gases that would otherwise be discharged into the atmosphere."

The Endesa Climate Initiative is implemented by Endesa’s environment department, supported by the CDM consultancy company Climate Focus. The team combines Endesa’s international experience in project development with a specialized team of carbon market advisors.

Endesa says the way it has managed to reduce its own carbon emissions qualifies the company as an expert in the emerging carbon market. Endesa's Spanish installations have been able to reduce their CO2 emissions by 27.5 percent in the period 1990-2004, while more than doubling the electricity output.

For its Spanish facilities, Endesa’s specific CO2 emissions in 2007 will be 35 percent below 1990 levels. The company built Spain's first wind farm, the first pressurized fluidized bed combustion plant.

Endesa S.A. is an electricity company with operations in Spain, the Mediterranean region, including Italy, France, Portugal and North Africa, and Latin America. In Brazil, Endesa runs Ampla, the former Rio de Janeiro Electric Company, and Coelce, the Energy Company of Ceara. In December 1996, Coelce inaugurated Brazil's largest wind farm at Fortateza with a capacity of 3.8 million kilowatt hours.