THE WALL STREET JOURNAL: Traders Predict Large Market In Trading Carbon Credits: “…more companies have begun regularly trading in the last few weeks, mostly big power companies, said Garth Edward of Shell Trading, a division of Royal/Dutch Shell (RD). "Now we have a real market," he said” (ShellNews.net) Posted 2 March 05
DOW JONES NEWSWIRES
AMSTERDAM (AP)--Traders in the world's newest commodity, carbon credits, said Tuesday the trade is changing the way European industries do business, and predict that billions of dollars will exchange hands as companies buy and sell the right to pollute.
About 850 businessmen and bankers reviewed the prospects of emissions trading opened up by the Kyoto Protocol, which took effect two weeks ago, aimed at controlling the greenhouse gases blamed for heating the earth and changing the climate.
By Monday, 12,000 European industrial plants should have been told how many tons of carbon each is allowed to emit for the year. Each ton of carbon spewed into the air amounts to one "allowance," or carbon credit. Companies that won't use all their allowances can sell the excess to companies likely to need more than they are permitted.
Only the Netherlands, Finland and Denmark met Monday's deadline for having the facilities in place to begin spot trading in allowances, a European Union spokeswoman in Brussels told Dow Jones Newswires.
But more companies have begun regularly trading in the last few weeks, mostly big power companies, said Garth Edward of Shell Trading, a division of Royal/Dutch Shell (RD). "Now we have a real market," he said.
Illustrating the effect of allowances in the power industry, Edward said some Danish utilities switched off their coal-fired generators for a while earlier this year after heavy rain filled the reservoirs of Scandinavia, reducing the cost of hydroelectricity.
By buying hydropower, the utilities not only saved coal; by reducing their pollution they saved allowances, which they could then sell on the carbon market.
"If you're running an energy business in Europe, allowances just become part of the economics," Edward said. The carbon market is "an entirely significant part of the energy spectrum, just like you have gas or oil markets or coal markets."
On Tuesday, carbon credits were being traded at EUR9.50 per ton, down from Monday's closing at EUR9.64. That compared with just over EUR7 per ton in early January.
The volume since official trading began Jan. 1 grew to an average 300,000 to 500,000 tons daily, peaking at about 1 million tons.
The Kyoto accord seeks a global emissions cut of 5.2% below the 1990 level by 2012. Europe is committed to reduce carbon dioxide emissions by 8%. After that, further cuts are envisioned.
Several traders also were critical of the slow pace of approvals by U.N. regulators for clean energy projects, mainly in developing countries, which can earn carbon credits.
The 10-member Executive Board has approved only two proposals so far, a methane gas project in Brazil and a hydroelectric project in Honduras.
"There has to be a fundamental change in the way projects are handled," said Marco Monroy of MGM International.
Marc Stuart, of the U.S.-based Eco Securities which carried out the Brazil project, said his company alone has dozens more proposals on hold while it waits for the board to confirm that carbon credits will be granted.