Tue, 26 Oct 2004

New Zealand's ship has come in with Russia ratifying Kyoto, says international energy analyst

With the Russian Parliament ratifying the Kyoto Protocol this weekend, the treaty will now come into force and legally oblige signatory countries, which produce over 55 per cent of the world's greenhouse gas emissions, to reduce those emissions.

Henrik Hasselknippe, Senior Analyst, Point Carbon and a guest speaker at next week's inaugural Climate Change and Business Conference in Auckland, says carbon credits generated in countries like New Zealand, which has ratified the protocol, will be worth more than those generated in non-ratifying countries like Australia.

"For project developers in New Zealand, their ship has come in. Through its current tender process, the New Zealand Government has up to 10 million credits to assign to emissions reduction projects (four million of these credits are already assigned to 15 projects). At the average price for an Emissions Reduction Unit this year, these credits are worth EUR46 million and their owners are free to trade them."

Mr Hasselknippe argues that while "Australia remains outside the agreement it isolates itself from the international "emissions trading" regime, which will enable industrialised countries to buy and sell emissions credits."

International business opportunities for Australian companies will inevitably change as the Kyoto Protocol enters into force, according to Mr Hasselknippe.

"Australian credits might still have a value under a national domestic system, if one is established, but will be worthless under Kyoto," he said.

Climate Change and Business Conference Convenor Gary Taylor says: "Climate change is an issue which none of us can afford to ignore and forward thinking businesses are factoring this into their risk management and business planning.

"The conference will allow government and business representatives in New Zealand and Australia to improve their understanding of how business opportunities may arise from addressing climate change," he said.

Expert speakers, including representatives from the International Energy Agency, the Pew Center, the Australian Greenhouse Office and the Energy Research Institute China, will discuss the size and nature of emerging carbon markets and business opportunities and risks arising from climate change.

Mr Hasselknippe said Point Carbon estimates that the financial value of the European carbon market alone will be EUR10 billion per year by 2007, and this is even before the Kyoto Protocol begins.

"On the other hand, several companies have expressed worries that carbon constraints will lead to competitive disadvantages. This is an argument that has repeatedly been voiced in the USA and Australia.

"However, there is reason to believe that this fear is greatly exaggerated. Failure to control emissions domestically may actually damage a country's long-term competitiveness. Limits on emissions can spur technological progress and the development of new markets, e.g. carbon credits and renewable energy," Mr Hasselknippe said.

"Under the Protocol all carbon trading in Kyoto countries will be with credits and allowances from other Kyoto countries. And through the "Clean Development Mechanism" (CDM), industrialised countries will be able to promote sustainable development by financing emissions-reduction projects in developing countries in return for credit against their Kyoto targets."

Credits in one of the three Kyoto currencies (AAU, ERU, and CER) will clearly be the most valuable. In the short term, credits from emission projects in developing countries, CERs, will have the greatest value, as they can be used in the EU system in the 2005-2007 period, and also be banked into the Kyoto period.

Fellow guest speaker, Seb Walhain, Director of Environmental Products, Fortis Bank, agrees that those countries which have ratified the Protocol have set themselves on a path to greater economic efficiency.

"The future of the world is most certainly carbon constrained and those businesses and countries able to deal with these constraints early and proactively within the international framework are the most likely to benefit from these developments.

"Accelerating the development of the clean technologies that will dominate the global economy of the 21st century will earn those countries a competitive edge in global markets," said Mr Walhain.

That said, conference discussions will go beyond whether countries should or shouldn't ratify Kyoto to the real message, which is that climate change is taking place and that business has a crucial role to play in developing solutions to reduce the actual and potential effects of climate change.

The conference is an opportunity for senior level executives and policy-makers to identify how governments can link with business to address climate change and showcase greenhouse gas emissions reducing technologies.

For more information on the Climate Change and Business Conference visit see www.climateandbusiness.com

ENDS