German HEW urges industry to back emissions trading
Date: 29-Aug-01
Country: GERMANY
German energy industry associations had earlier criticised the European Commission's plan to introduce an EU-wide company-based scheme by 2005 as conflicting with their existing voluntary commitments to reduce emissions.
"We get enquiries from rating agencies on how we will manage our environmental risk, since it could affect the rating they give us and the funding we receive from banks," HEW's head of future energy concepts Helmuth-Michael Groscurth told delegates at a Euroforum conference in Frankfurt.
"The cost of carbon over the next decade could be as high as $5 to $15 per tonne and you need a tool to hedge against that risk."
Emissions trading was proposed by the UN-sponsored Kyoto Protocol in 1997 to help industrialised countries cut greenhouse gases, chiefly carbon dioxide, that have been linked to climate change.
Germany's target of a 21 percent cut in GHGs from 1990 levels by 2010 forms most of the EU's Protocol commitment.
Groscurth said it was too much of risk to see if Germany could achieve that target by voluntary commitment alone. He defended the proposed setting of absolute targets on companies in place of existing agreed reduction goals.
"Kyoto's absolute reduction goal for Germany isn't going to change, so we have to have absolute limits on company emissions. And it isn't a choice between emissions trading or nothing, but a case of trading along with other reduction measures."
HEW concluded the first transatlantic emissions trading deal last year when it sold emissions rights to Canada's biggest investor-owned power generator, TransAlta . It also did a deal with an Australian firm to buy rights.
"The TransAlta deal's volumes were so small that it will not affect Germany's target, but we did the the Australian deal in the same price range of 50 cents to $1 per tonne of CO2 and even made a profit on it," Groscurth said.
Germany should not believe that because the world's biggest polluter, the United States, had pulled out of the Kyoto pact, U.S. firms were not preparing for emissions trading, he added.
"A lot is happening in the U.S. at the state and company level, and once they are fit, the U.S. government will take notice. Then the U.S. will overtake us and we will have to play by their rules," he said.
Groscurth also noted plans to set up a Chicago Climate Exchange with a budget of $760,000.
Joachim Hein of the German industrial consumer group BDI said its members were sceptical about the role of emissions "verifiers" in the Commission's emissions trading plan.
"I could see firms simply having to make a declaration on emissions levels, which would be monitored just like a company's balance sheet is monitored by independent auditors, with spot checks like on income tax returns," Groscurth said.
He supported the German emissions trading working group's aim to distribute most emissions certificates under a system of free allocation according to historical emissions, or grandfathering, and, in lesser part, by auction.
"A large share by grandfathering would avoid a high threshold for entry into trading, while an auction would give a price signal and allow new companies to get involved," he said.