issue 6.0, New Values Newsletter

To read the English version of the New Values Newsletter follow the link below.

In this issue:

1. NOx emissions trading to be called off?
2. New Values is taking part in the NEA trial. You too?
3. Linking EU CO2 emissions trading to the international market
4. Jos Cozijnsen’s column
5. Report on Carbon Market Insights
6. Diary
7. Glossary

1. NOx emissions trading to be called off?

Last month we reported on a range of rumours concerning the delays in NOx legislation. And because delay is often a precursor to cancellation, it was soon being said that trading in NOx emission rights was to be dropped completely. So we asked Bram Maljaars, the contact person for NOx emissions trading at the Ministry of Housing, Spatial Planning and Environment, about the rumours. He reacted with surprise: “The advent of NOx emissions trading is absolutely certain. I’m curious as to where these stories originated, but there is no truth to them”, stresses Maljaars.

The Council of State has recommended that the legislative bill for amendment of the Environment Management Act be split into a NOx section and a CO2 section; Secretary of State Van Geel has agreed to this proposal. The reason for the division is that CO2 emissions trading has a mandatory starting date: 1 January 2005. And, quite simply, the Emissions Trading Act is required as early as October 2004 in order to give the Netherlands Emissions Authority (NEA) a legal basis and to allow the allocation notifications to be sent in time. Moreover, the stipulations for CO2 emissions trading (in contrast to NOx) constitute for the most part direct EU implementation about which the Dutch Parliament has nothing to say. “In the view of the Council of State, mixing the two systems would create considerable confusion, also in parliamentary debates, and lead to mutual influencing of the schedules for system introduction”, explains Maljaars.

According to Bram Maljaars, the only effect of this division is to give priority to CO2 (it is mandatory and is urgent) and lower priority to NOx. Secretary of State Van Geel has now announced that the NOx Trading Act will come into effect in May 2005. This will determine the NOx Performance Standard Rates for all of 2005. The NOx ceilings will be set later together with the PSRs. This means that companies must keep tabs on the NOx in their installations right from the start of 2005. For EEeXchange this will bring a peak in trading in July!

2. New Values is taking part in the NEA trial. You too?

The Netherlands Emission Authority, currently in formation, is organizing a large-scale trial for trading in NOx and CO2 that will run from 1 June to 1 October 2004. The NEA has invited New Values to participate in the trial. During the testing period you can, at regular times and from your own workplace, take part in trading through one of our electronic platforms for NOx and CO2 trading. This is the ideal way to find out in practice whether this manner of trading is suitable for your company. In addition, New Values can support you in this trial in three other ways:

1. Network Workshop
Prior to the trial period and in cooperation with Ecofys, KEMA, Promasys, TNO, PriceWaterhouseCoopers and Baker & McKenzie, New Values is organizing a workshop which will fully prepare you for participation in the NEA demonstration. Participation is free of charge. The workshop will take place on Tuesday 25 May from 1.30 pm to 5 pm in Media Plaza, Utrecht.

2. Quick Scan
Are you not yet sure where you stand and what you need to do before you can take part in the demonstration? Then have one of the organizations in the New Values Network carry out a Quick Scan for you.

3. For non-participants
Following the end of the trial period, New Values will be organizing another workshop for companies not participating in the NEA demonstration. Here too the above-mentioned partners will be spotlighting the most important aspects of emissions trading. Moreover, companies that did participate will be invited to talk about their experiences.

New Values is taking part! You too?
Would you like to take part in the NEA trial period. Then send an e-mail to hans.warmenhoven@planet.nl. before 31 May. Participation means that you need to submit your monitoring protocol before 31 May as well. If you need help with this then we will refer you, without obligation, to such bodies as KEMA, Promasys, TNO or Ecofys.

Would you like to know more about the workshops and the Quick Scan or to register straight away? Then contact Monique Broekhoff
E-mail: monique.broekhoff@newvalues.net.
Tel: 020 – 305 4073

3. Linking EU CO2 emissions trading to the international market

Whereas in our previous newsletter the European Parliament, the Council of Europe and the European Commission were still busy negotiating on a link between emissions trading and the Clean Development Mechanism, this month the matter has already been settled. The result is known as the Linking Directive. This gives companies cheaper options for meeting their emission obligations or expansion requirements. Emission rights deriving from CO2 projects in a developing country (CDM) can generate rights that are also valid on the EU emissions market. And this provides a major boost for emissions trading. After all, more available rights lead to more price differentiation.

Due to the increase in the playing field the market will become bigger too, in both scope and volume. Companies now have the option of cultivating or buying emission rights outside the EU as well. In this way they can meet the requirements of the National Allocation Plan in a cheaper and easier manner. Companies operating in third-world countries can, for instance, switch from coal-fired power stations to gas-fired energy generation. The CDM Executive Board must judge whether a particular project would also have been carried out without the CDM scheme and whether a good and monitorable baseline is applied. If this is the case then the EB issues Certified Emissions Reductions (CERs).

New Values hopes that its soon-to-be-realized CO2 platform will also facilitate the buying and selling of CERs. The good thing about CERs is that a company can also use them for the following allocation period (2008-2012). This is why New Values will stimulate trading in these.

4. Jos Cozijnsen’s column

The Russians are coming!
In recent weeks the Russians have been attracting a lot of my attention. After all, they are our new neighbours now that Poland is part of the EU. It started with André Kuipers, who was shot into space by the Russians in a Soyuz capsule. Once he’s out of quarantine and has been through all the normal tests, André will be in demand as the new chairman of the World-Wide Fund for Nature as a proponent of climate measures. Because, as he said from the space station: “I could (still) see the Wadden Islands” and “the atmosphere is such a thin, vulnerable layer around the planet: we have to look after it carefully”.
After his return ESA stated with commendable precision that the launch alone had cost 180 tons of CO2; they appealed for a ‘reliable’ company to contact them in Noordwijk for the compensation for this emission. By the way: that amounts to a bill of some € 1800-3000 in emission rights, or 3000 trees.

The week after I heard about an enormously rich Russian who was in the process of buying into Corus – which is in any case better than an Englishman at the head of the metal-fatigued company, we might say. But the reason for his interest only became clear to me later. On the list of companies with the biggest allocation of emission rights, Corus was leading the field with some 33 megatons of CO2. The amount of allocated emission rights is increasingly becoming an acquisition item.

At the same time, a delegation with Prodi, the Chairman of the European Commission, had flown to Moscow to negotiate with Putin on a large number of outstanding points. The EU has agreed to steel and gas deliveries. Russia will behave as a WTO country. The road is now clear for Putin to ratify the Kyoto Protocol and to let it come into effect.

And then the last choice item: in a top-priority letter to Balkenende, the VNCI (Association of the Dutch Chemical Industry) and the Association of Chemical Fertilizer Manufacturers urged him under no circumstances to conclude a deal with Russia on Kyoto and the WTO. It turns out that they want the same gas prices to be imposed on their Russian competitors as for the industry in the Netherlands. However, the Kyoto Protocol is about a whole lot more than the market position of our national fertilizer sector: it’s about the Wadden Islands, support for developing countries, cooperation in climate science and innovation, and getting countries and companies to commit to more sustainable production. And that seems to me to be worth making a deal for!

5. Report on Carbon Market Insights

On 20 and 21 April Point Carbon organized the Carbon Market Insights congress in the Meervaart. New Values was there, of course. Our columnist Jos Cozijnsen presents his report.

Although the timing might have been a little early for the emissions trading event of the year, Carbon Market Insights was very well attended. For two days some 500 participants soaked up dozens of company presentations and market analyses. The presentations showed that organizations such as Vattenfall, BP, Shell and Fortis are set for the future. Shell’s chief recommendations were to trade actively and not to pick up any emission rights for 2006 in 2005. That’s actually not a real decision, because who knows now what the emission price will be doing in 2007? But this is precisely one of those unknown factors on which many companies are adopting a wait-and-see position.

The analyses of Point Carbon and 500ppm indicated that major companies have been generously favoured but that the smaller ones are having to buy emission rights. This is something that could well lead to a tense market, which makes it essential to have proper supervision of dominant parties and transparency of trading and prices. And, of course, a lot was said about the National Allocation Plans, three-quarters of which still need to be submitted. Natsource trader Forrister expressed the view of the congress participants when he said that the European governments submit weak allocation plans and want the European Commission to reprimand them as ‘bad guys’.

The congress received a festive note through the presentation of the award for the CDM project ‘which you wish you’d thought of yourself’. Econergy International and TÜV received the award for the Brazilian Vale de Rosario project, a sugar mill that uses the residue products from sugar cane to heat the boiler. On this occasion it was remarked that it’s a real achievement “if you can get the reduction calculation method accepted at all”. During the congress it was reported, via portfolio holder De Roo’s telephone, that the European Parliament had just voted by show of hands to accept the Linking Directive. So the market is opened! But in view of the limited number of nominations for the CDM Award, we assume that it will have a relatively slow start.

6. Diary

Climate Change Conference
The second annual Climate Change Conference is taking place in Brussels on 11 and 12 May 2004.

Kluwer Study Day
On 18 May 2004 Kluwer is organizing a Study Day for Trading in Emission Rights in the NH Atlanta Hotel, Rotterdam. Subjects to be handled during the gathering include the Kyoto Protocol, European aspects, national implementation and contracts.

Global Carbon Market Fair & Conference
The first Global Carbon Market Fair & Conference is taking place in Cologne on 9, 10 and 11 June, organized by the World Bank in collaboration with the

New Values Workshops
New Values regularly organizes workshops for CertiChange and EEeXchange.
Later this year these will be joined by workshops for the CO2 platform, currently still under development. All practical and legal aspects of trading in Certificates of Origin or emission rights are dealt with at these events. You can also carry out pilot trading through the platform, and thus experience for yourself how simply it works!

The New Values workshops are free of charge and take place in Media Plaza Utrecht from 9.30 am to 12.30 am.

Would you like more information, or to register? Then contact Monique Broekhoff,
tel. 020 - 305 40 73 or monique.broekhoff@newvalues.net
Please don’t forget to state your name and company details in the mail.

The next workshops will take place on:

CertiChange
Thursday 3 June 2004

EEeXchange
Tuesday 1 June 2004

CO2 trading (name of platform to be announced)
Wednesday 7 July 2004

7. Glossary

Pooling
Pooling gives companies the opportunity to form a pool with other companies, from the same sector for instance, and thus to share emission rights. The joint emission rights are used to cover the emissions of the group and can be jointly bought and sold. Operators wishing to form a pool must nominate a trustee to whom the emission rights are issued. The trustee is responsible for the submission of the emission rights on behalf of the companies. He is also liable for any sanctions if the regulations for submission of emission rights are infringed.

New Values believes that pooling is an excellent chance for smaller companies in particular to take part in emissions trading within a familiar environment; in any case it will lead to cost-saving (just like energy buying). It is an option that the experts working together with New Values will certainly be happy to support.