E.ON UK Powers Ahead in Carbon Trading Market
Date: 15-Dec-04
Country: UK
Author: Stuart Penson
"We are taking carbon trading very seriously," said Simon Vasey. "We believe we are the number one trader in the UK," he told Reuters in an interview.
"We got in early. We thought the best way to learn about carbon was to start trading it and lead the market."
A forward market in CO2 permits has emerged ahead of the January launch of a European Union emissions trading scheme.
Power generators like E.ON face some of the toughest targets on curbing CO2 output under the scheme, which is part of the EU's effort to meet its Kyoto Protocol commitments.
The scheme slaps limits on industrial sites' output of CO2. Firms are allowed to buy and sell permits to help meet their targets.
E.ON UK, one of Britain's biggest power generators, now trades up to half a million tonnes a week, said Vasey.
Industry sources say the total market is trading up to a million tonnes a week.
Vasey declined to comment on E.ON's counterparties in the CO2 market. Other industry sources say Shell, Germany's RWE, and investment bank Barclays Capital are among a core of frequent traders.
Barclays has estimated the market could ultimately be worth 40 billion euros ($53.30 billion) a year.
Vasey said the UK's latest national CO2 permit allocation plan (NAP) -- which sets the limits on emissions that companies must achieve under the EU scheme -- was more realistic than the previous version but still too tough on generators.
The UK's plan was watered down in October. The latest version is awaiting approval from the European Commission.
"We now have a more realistic business as usual NAP, it is still challenging. As it stood before, we felt the first calculations were wrong," said Vasey.
"However, our concern remains that the burden on the UK energy sector is much greater than that being imposed on energy sectors in other EU countries or other sectors in the UK," he added.
