Chicago Climate Market Books First Europe CO2 Deal
Date: 05-May-06
Country: US
Author: Timothy Gardner
Baxter Healthcare Corp. transferred 100 tonnes of its greenhouse gas allowances from the European Union's Emissions Trading Scheme to Baxter's account in the voluntary Chicago Climate Exchange (CCX).
"The transfer effectively linked two global emissions markets, demonstrating additional flexibility for companies, such as Baxter, in meeting emission reduction commitments," the CCX said in a statement.
The European Union set up its European Trading Scheme in January 2005 for members to meet their emissions obligations under the Kyoto Protocol on global warming. Under that agreement, developed nations are required to cut their emissions of the gases, which many scientists believe are warming the planet, by about 5 percent under 1990 levels from 2008 to 2012.
President Bush pulled the United States, the world's largest producer of greenhouse gas emissions, out of the pact soon into his first term. He said it would hurt the economy and unfairly excluded rapidly growing developing nations, such as China and India, from mandatory emissions caps.
Some businesses in the United States are joining voluntary plans such as the CCX in order to prepare for possible future mandatory climate plans in the United States. In addition, states on both the east and west coasts are trying to set up regional climate pacts that would require power companies to trade emissions of heat-trapping gases.
The development of a wider carbon market would be sure to get European political backing, given the EU's long-running battle to have the United States join multilateral action on curbing climate change.
British finance minister Gordon Brown last month told the United Nations in New York that a global carbon market was the "ultimate goal" in cutting greenhouse gas emissions: to link the existing EU market with initiatives in America and Australia, and Canada and South Korea, a market which he said would create economic opportunities.
Cap and trade systems first set limits on emissions. If a power plant or factory cannot meet those limits, it must buy allowances from another factory that has reduced its emissions -- by switching from coal to cleaner-burning natural gas, for example.
Baxter cut emissions at a plant in Ireland by conserving energy. Through the deal between the two trading systems, it is applying those credits to its efforts in North America, the CCX said.
Prices for CO2 equivalent allowances are much higher in Europe, where carbon limits are mandatory, than at the CCX. On Thursday, CO2 allowances in the European Trading Scheme were trading at nearly US$18 a tonne, while on the CCX they were trading at about US$3.50 a tonne.
"It's a step towards these markets being compatible, it proves that things work," said Anthony Dols, director of business development at the European Climate Exchange, on Thursday.
"(But) economically it has to make sense. It was worthwhile for this company (Baxter) but I'm not sure you'll see a big rush," he said, citing the difference between European and US carbon prices.
(Additional reporting by Gerard Wynn in London)
