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 user 2005-02-10 at 9:57:00 am Views: 90
  • #10163
    Making Environmentalism a Commodity
    Zero Chance of Federal
    Carbon Trading Under Bush, But States Take Steps
    Feb.05 – Environmentalists always said there would be a price to pay for
    all the carbon dioxide being spewed into the atmosphere. Well, now there is.

    While prized resources such as oil, gold and wheat have
    been traded for decades, there is a budding market for one of the industrialized
    world’s abundant but unwanted byproducts: carbon dioxide, a gas produced when
    fossil fuels are burned and which many scientists believe causes global

    If it succeeds, the new market for carbon emissions will
    reward businesses that minimize their output of this “greenhouse” gas. It will
    also benefit the environment and thereby prove, advocates say, that making green
    and being green are compatible goals.

    “It’s a sign of things to come,” said Luis Martinez, an
    attorney at the Natural Resources Defense Council in New York.

    The only mandatory carbon emissions trading program is in
    Europe. It was created in conjunction with an international treaty on climate
    change – the Kyoto Protocol – that goes into effect Feb. 16 and caps the amount
    of carbon dioxide that power plants and fuel-intensive manufacturers in more
    than two dozen countries are allowed to emit.

    A similar program is scheduled to begin in 2008 in Canada,
    which also signed Kyoto.

    By contrast, the United States, one of the few
    industrialized countries that did not ratify Kyoto, is many years away from
    compulsory trading or nationwide caps on carbon dioxide, concepts that are
    strongly opposed by industry and the Bush administration.

    However, nine Eastern states are developing a regional
    cap-and-trade program that will require large power plants from Maine to
    Delaware to reduce their carbon emissions and California is attempting to place
    greenhouse gas limits on automakers. Separately, a small group of companies has
    voluntarily agreed to cap their carbon emissions in the United States as part of
    an experimental market that is based in Chicago.

    “We believe that at some point in the United States there
    will be mandatory legislation,” said Bruce Braine, vice president of strategic
    policy analysis at American Electric Power Co., a large power producer and one
    of the founding members of the Chicago Climate Exchange, or CCX. Other members
    include chemicals giant DuPont Co., computer manufacturer IBM Corp. and
    electronics maker Motorola Inc.

    Under the European Union’s Emissions Trading Scheme, some
    12,000 industrial plants will be granted a limited number of emissions
    allowances, or credits, equaling the amount of carbon dioxide they are allowed
    to emit. Companies that exceed their limits must purchase credits to cover the
    difference, while those that produce less carbon dioxide than they are legally
    permitted can sell surplus credits for a profit.

    Companies can trade directly with each other or through
    exchanges located throughout Europe.

    By giving the private sector a financial incentive to make
    their operations more environmentally friendly, proponents believe the
    market-based approach will accelerate investment in emissions-reduction
    equipment, create positive reinforcement from investors and spur technological

    “We’re confident that once people get used to managing
    carbon in their businesses it will be successful,” said David Hone, climate
    change adviser at Royal Dutch/Shell Group, which has 46 facilities across Europe
    that will be regulated under the cap-and-trade system.

    Hone said his optimism is based in part on the success of
    the cap-and-trade system the United States designed more than a decade ago to
    reduce sulfur dioxide emissions, which cause acid rain. The U.S. sulfur dioxide
    market, on which the EU’s carbon market is based, is widely praised for
    accelerating emissions reductions at a lower cost than originally anticipated by

    But environmentalists and executives said there is much
    more at stake when it comes to carbon dioxide emissions, both in terms of the
    ecological benefits and the potential costs to industry.

    “Carbon is the mother of all environmental commodities,”
    said Richard Sandor, who helped design the U.S. exchange for sulfur dioxide and
    is now the chairman of CCX.

    The first phase of the EU trading program runs from 2005
    through 2007 and the caps will be lowered from one year to the next. While
    detailed plant-by-plant limits are still being finalized, participants estimate
    that EU-wide industrial emissions will drop as much as 5 percent by 2008.

    The cost to European industry over the next three years is
    estimated to be a few billion dollars, based on current market prices for carbon
    dioxide of about 7 euros per ton, according to Ilex Energy Consulting of Oxford,
    England. Of course, companies with surplus allowances stand to profit an equal

    “Frankly, a lot of companies will be hoping that the
    emissions price is low so they face lower penalties from having to go out and
    buy allowances,” said Andrew Nind, principal consultant at Ilex.

    “The main concern of environmentalists is that the
    governments have been too generous in how many allowances they’ve given out,”
    Nind said. The lower the price, the less incentive there is to invest in
    equipment that reduces emissions, he said.

    The second phase of the program runs from 2008 through
    2012, by which time the European Union must lower its carbon emissions to 8
    percent below 1990 levels. Canada must cut its emissions by 6 percent to comply
    with the Kyoto treaty.

    In the United States, carbon-intensive industries
    successfully lobbied against Kyoto by refuting the threat of global warming
    itself, and by arguing that the treaty would hurt the global competitiveness of
    American companies and cause electricity prices to rise.

    “There are some notable exceptions, but on the whole it
    remains an ongoing battle to try to convince corporate America to deal with
    greenhouse gas emissions,” said Ethan Podell of Orbis Energy, which advises
    companies seeking to devise long-range strategies on carbon emissions.

    U.S.-based companies that are already engaged in the issue
    - either because they have factories in Europe, or are part of CCX – believe
    early involvement could pay off down the line, in large part due to the
    logistical expertise they are gaining.

    CCX participants agreed beginning in 2003 to cut their
    carbon emissions by 1 percent per year through 2006, or 4 percent below their
    baseline, which is determined by their average annual emissions from 1998
    through 2001.

    There is virtually no chance of federal limits on carbon
    emissions under the Bush administration, which is openly skeptical of the threat
    global warming poses. But U.S. executives anticipate a cap-and-trade program for
    carbon dioxide, at least at the state level, within the next decade.

    The Regional Greenhouse Gas Initiative, which aims to
    produce a preliminary market design by April, already has the support of
    Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New
    York, Rhode Island and Vermont.