UK emissions market could be worth 900 mln stg
Date: 05-May-00
Country: UK
Author: Fiona O'Brien
The total UK market could involve some 30 million tonnes of carbon, Margaret
Mogford, who is also Environmental Advisor to the BG group, told a carbon finance
conference in London.
The emission trading scheme aims to help energy-intensive companies reach their
emission reduction targets and is scheduled to go live in April 2001 in time for
the introduction of the Climate Change Levy (CCL).
Firms unable to sufficiently reduce their gas emissions will be able to trade for
the right to pollute more, buying carbon credits from firms who have already
reached their targets.
The mechanism is one of three measures proposed by the United Nations Kyoto
protocol to reduce gas emissions. If ratification of the treaty goes ahead, a
worldwide trade in carbon credits could begin in 2008.
The proposals for early UK trade by the Emissions Trading Group, which draws
together industry and government specialists, follow the lead of markets such as
Chicago, Frankfurt and the Sydney Futures Exchange which is due to start trading
in emissions in July.
GOVERNMENT WANTS INDUSTRY GUIDANCE
Henry Derwent, Director of Environmental Risks and Atmosphere at the Department
of Environment, Transport and the Regions, asked businesses for help in setting
up the trading mechanism.
"We want all the guidance we can get to help get trading in this bizarre new
commodity we have invented effective and comprehensive," he said. "And we want to
get business into a win-win mind-set."
Companies wishing to trade in emissions on the UK exchange will have two options,
if the Government accepts the UK ETG proposals.
A core "cap and trade" market will consist of firms willing to take an absolute
cap on their emissions, while a second "baseline and credit" scheme will include
firms that choose energy efficiency targets related to their output.
An Emissions Trading Authority will oversee both schemes.
The UK ETG believes emissions trading will provide a cost effective means of
meeting future, more demanding targets and signal a move to a low carbon economy.
In the short term, Mogford said it will guarantee carbon reduction delivery,
credibilty on international negotiations and encourage participation of UK
business in the Kyoto flexible mechanisms.
At the moment, prices for carbon are as low as $1 or $2 per tonne, but once the
obligations outlined by Kyoto are in force, it is estimated they will settle at
around $10 or $20. Firms including European majors BP Amoco , Shell , and
U.S.-based companies Pacificorp and TXU Corp have already begun inhouse carbon
trading mechanisms.