Japan, Canada Should Link to EU on CO2 - Analyst
Date: 31-Jan-05
Country: NORWAY
Author: Alister Doyle
Kristian Tangen, managing director of Oslo-based Point Carbon, said the EU model was the best blueprint for a global market under the 137-nation Kyoto protocol for curbing emissions of heat-trapping gases from cars, factories and power plants.
"It's very hard to see how Canada and Japan can meet their Kyoto commitments without linking to the EU emissions trading scheme," he told Reuters. "It would be the least risky strategy if they are serious about meeting their Kyoto commitments."
He estimated the two could be ready to link up from 2008. Under Kyoto, rich nations are due to cut their emissions of carbon dioxide by 5.2 percent below 1990 levels by 2008-12.
Kyoto, due to enter into force on Feb. 16 after years of delay, is an attempt to offset a creeping rise in world temperatures that most scientists say is likely to trigger wider floods, storms, droughts and raise global sea levels.
Tangen said Japan and Canada were the main industrial nations outside the 25-nation EU where there may be big demand among businesses from steel mills to oil companies to buy rights to emit extra greenhouse gases.
The United States, the world's top source of carbon dioxide, is not part of Kyoto. President George W. Bush pulled out in 2001, saying Kyoto was too costly and wrongly excluded developing nations. Australia is also staying out.
CUT OR BE FINED
Under the EU scheme, industrial sites have been set emissions limits for 2005-07 and will have to buy allowances if they overshoot, or pay fines. Those below target can sell surplus quotas.
Tangen said that separate Japanese or Canadian markets would not work well because, unlike in the EU, there were likely to be only buyers. "In the EU scheme you have much more variety and liquidity," he said.
Some EU nations, like Portugal, Spain, Greece and Ireland, are far above goals under Kyoto. But there are also sellers in the EU, like new east European members with emissions to spare after the collapse of communist-era smokestack industries.
Point Carbon, which has 30 employees, supplies analyses of the emerging carbon markets.
Tangen said another option for Japan and Canada was to buy surplus carbon dioxide from non-EU nations led by Russia, which hopes to earn billions of dollars by selling spare quotas.
"I think Japan and Canada will buy something from Russia. But it depends on the political system in Russia -- transparency, law and order and stability," he said.
The biggest emitters of carbon dioxide registered under the EU scheme so far are power companies, led by German energy groups RWE AG and E.ON and Swedish power company Vattenfall, according to Point Carbon.
Fourth is Spain's largest utility Endesa followed by Anglo-Dutch steel and aluminium company Corus Group, Royal Dutch Shell Group, Thyssen Krupp, Estonian power group Eesti Energia and Britain's Drax Power Ltd. Companies in Italy, Greece and Poland are still missing from the allocations plan.
The ranking helps explain why mild weather across much of Europe in early January has prompted a fall in EU carbon dioxide prices -- power companies have been burning less coal, oil and gas to generate electricity than in a normal winter.
In the EU market, carbon dioxide currently trades at about 6.95 euros ($9.06) per tonne, down 17 percent from a market debut at 8.4 euros on Jan 4.