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Emissions Trading Market Falls Short of Hopes |
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By Sanjay Suri*
The first transactions on Britain's greenhouse gas emissions market have been disappointing, but it is too soon to say it has totally failed, say experts.
LONDON - A handful of relatively small operations is all that Britain's Emissions Trading Registry has to show so far, an effort launched by the governmental Department for Environment, Food and Rural Affairs (DEFRA) April 2.
The 32 British companies registered can sell their greenhouse gas emissions capacity if they are producing less than their assigned volumes of these climate changing byproducts. The buyers are companies that emit more than their allotted limit of gases produced by the combustion of fossil fuels, like petroleum, coal and natural gas.
The initial response from companies was better than expected. The participants adopted reduction targets that add up to more than four million tons of carbon dioxide by 2006 in an auction held Mar 11-12. The goals represent an 11-percent cut from baseline emissions.
But since then, "there have been only a couple of cases of trade," Russel Marsh from the Worldwide Fund for Nature (WWF, also known as the World Wildlife Fund) told Tierramérica.
The market value of carbon dioxide emissions was set at 77 dollars a ton when the market was opened. In the scant trading that has happened since, emissions capacity has been sold at just 7.2 dollars a ton.
"It's an artificial market that offers no real incentives," says Marsh. "If companies were making a real effort, the price would be very high. Public money is being used to 'bribe' companies to reduce emissions, and companies are being paid to do what they would have to do anyway," he adds.
In effect, the companies are not particularly interested in "carbon sales", but rather are focused on the government incentives. DEFRA has earmarked a budget of 313 million dollars over the next three years to finance the technological conversion that the registered companies must undertake to curb emissions.
As a result, a company can get public money to reduce emissions, and then sell its advantage on the emissions market.
Companies have been looking so far to receiving funds, not make money by selling. The incentive scheme is to run for five years.
"Just eight companies account for more than 85 percent of the claimed emission reduction," which means the biggest companies could also get the biggest chunk of government aid, according to a report by Environmental Data Services (ENDS), an independent research organization.
The market scheme will help cut emissions, David Nicholas from British Petroleum (BP) told Tierramérica. BP had set up an in-house emissions trading market earlier among its 120 installations in the country.
"BP installations in Britain are emitting about 80 million tons of carbon dioxide equivalent a year," Nicholas said. "If we took no action that would increase by 50 million to 130 million tons a year by 2012."
But a DEFRA spokeswoman said in a conversation with Tierramérica that "this is a market-based approach which ensures that emissions remain within the average limits set among participating companies."
Britain has promised to ratify the Kyoto Protocol, which establishes obligatory greenhouse gas reduction targets for industrialized countries.
If the treaty enters into force - depending on ratification by the European Union, Japan and Canada - the country would have to cut emissions by 12.5 percent, based on 1990 volumes, by the year 2012.
After reducing emissions throughout the 1990s, they have risen marginally over the last 18 months, the DEFRA spokeswoman admitted.
"The emissions market is only one of many schemes to meet our targets under the Kyoto Protocol," she said.
The British environment agency is promoting several new projects that tap wind, solar and other alternatives that are considered cleaner sources of energy.
Environmental groups in Britain hope these approaches will have better success than the emissions market has had so far.
* Sanjay Suri is an IPS correspondent.
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