Oil Firms to See Windfall From EU CO2 Scheme
Date: 25-May-05
Country: UK
Author: Tom Bergin, European Oil and Gas Correspondent
To the chagrin of environmentalists, figures released by the UK government indicated oil and gas producers in the North Sea will receive more allowances to emit CO2 than they need to cover current emissions.
They will be entitled to sell the surplus allowances on the new CO2 market, which the government described as "one of the main components in the fight against climate change.".
According to Reuters' analysis of the government data, offshore oil and gas firms will receive the right to emit over 175,000 tonnes of CO2 equivalent more annually over the coming three years than they did in 2003.
The price for 2005 CO2 emissions allowances, which are awarded on the basis of historical emission levels, rose to 18.75 euros per tonne on the European Climate Exchange in morning trade on Tuesday.
This values the excess credits at more than 3 million euros ($3.8 million).
The size of the surplus, and the consequent windfall, could be much larger because oil and gas extraction, which produces a lot of CO2, is falling in the UK North Sea.
This could push emissions below 2003 levels in coming years, while analysts expect the price of allowances to increase due to growing demand from European firms who are emitting more CO2.
Energy firms operating in other European countries where oil and gas reserves are being depleted, such as Denmark and the Netherlands, may also face a similar windfall from the scheme.
Environmentalists, who put much of the blame for climate change on oil firms, said they were disappointed by the possibility of oil companies benefiting from environmental legislation in this way. "Over-allocation of these permits is a big problem ... basically the whole emissions trading scheme will stand or fall on these initial allocations," said Mark Strutt, senior campaigner at Greenpeace.
No one was available for comment at the UK Offshore Operators' Association but a spokesman for BP said his company had launched an effort to reduce emissions at its facilities.
He added that the increased energy required to extract hydrocarbons from depleting reservoirs also put upward pressure on CO2 levels.
