issue 4.0, New Values Newsletter

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

In this issue:

1. Publication of National Allocation Plan for CO2
On 24 February 2004 the Netherlands published its CO2 allocation plan, too. Here is an overview of the allocations, the best-endowed companies and the expected reactions.

2. The European route to Kyoto
The route to Kyoto is long. But slowly the EU member states are finding their way. In some states the negotiations are in full swing, while in others the draft plan still needs to be presented.

3. Report on CertiChange workshop
New Values regularly organizes workshops. On Thursday 4 March it was the turn of CertiChange. Various aspects of trading in Certificates of Origin were dealt with at the Media Plaza in Utrecht. A report.

4. The Centre of Expertise: a sneak preview
New Values is hard at work creating a Centre of Expertise in collaboration with various organizations. The focus is on your requirements. Here’s a sneak preview.

5. Diary
An overview of interesting meetings in the field of emissions trading and trading in Certificates of Origin.

6. Glossary
The world of emissions trading and trading in Certificates of Origin is relatively new and still subject to change. This is creating a range of new terms. New Values keeps you up to date.

1. The Netherlands publishes the long-awaited CO2 allocation plan
On 24 February of this year the Netherlands published the National Allocation Plan for CO2. This marks the official start of the public inquiry procedure. Companies can respond to the plan until 14 March. On 31 March a definitive proposal must then be submitted to the European Commission. The allocation plan is now appearing following a year of heated discussions and negotiations with the business community. This also had its advantages, however: thanks to extensive research, negotiations and information the level of support in the business community has now increased considerably.

The total CO2 volume for the industrial and energy sector for the years 2005 to 2007 has been set at 115 megatons per year. These 115 megatons comprise all emissions. Thus also the emissions from companies not covered by the CO2 emissions trading directive, the emission volume for new companies and, for instance, possible results of legal procedures. The following table shows how the rights are distributed over the various sectors:

Participating sector Megaton C02 2005 - 2007

Refineries 14
Mining 1.6
Chemicals 15.6
Metalworking 11
Construction 1.2
Paper 2.2
Foodstuffs 3.7
Electricity production, incl. 3.3% growth 39.1
Total energy power plants 5.7
Total 94.1

Claims + contingency 1.5
Growth 2.5
Total 98.1

Non-participants 16.9

Total NAP 115

The Corus steel company leads the allocation list with over 10.5 megatons of CO2 rights. Amercentrale van Essent comes a good second with almost 7 megatons. Other power stations such as the one operated by the German company Eon on the Maasvlakte have also received considerable emission rights. The figures reveal that a fairly generous growth volume has been included in the calculations. The risk involved in this volume is that the European Commission might regard the allocation as overly flexible and not in line with the rest of the EU. In this case a correction will be required.

It is expected that the chemical sector in particular will raise objections. This is chiefly because in France and the UK this sector does not participate at all in the distribution of emission rights. In France, for example, it is only the energy sector that needs to meet the standards for the time being. The Dutch industrial sector will thus also keep a close eye on the national allocation plans of other countries; the interpretation of the EU directives are in fact highly varied.

However, the Netherlands is not averse to making its own interpretations either. The government has decided that companies that are formally subject to the directive but which have an annual emission of less than 25,000 tons of CO2 are allowed to remain outside the trading system if they wish. The reason for this is that the administrative costs are too high in comparison with the possible benefits. This applies to a total of 152 companies which are together responsible for less than 1.5% of the CO2 emission. It is now up to the European Commission to respond.

2. The European route to Kyoto
In the rest of Europe too the route to Kyoto is slowly taking shape. But for a number of EU members the end of this road is still a long way off. Besides the Dutch, the Danes and the Irish also completed their national allocation plans last week. The most recent contribution was from Finland, which published part of its draft plan on 2 March. Italy, France, Spain, Portugal and Greece have yet to make their plans public.

Negotiations are now in full swing in the countries that have already published a draft plan. And these negotiations are sometimes generating a lot of heat by themselves! In Germany, for instance, where major differences of opinion between the Ministry of Economic Affairs and the Ministry of Environmental Affairs are delaying the process. The industrial sector is highly critical of the debate and of course would like to see the Ministry of Economic Affairs emerge as the winner. However, an independent board of environmental experts has issued a warning. They predict that acceding to the wishes of industry will lead to a rise in CO2 emissions of 20 megatons instead of the required reduction of 45 megatons. And after the representatives of the industrial sector walked out of recent negotiations, the German NAP is stalled for the time being.

But the real problem child in the class of 15 EU member states is Greece. In this country companies have not even received an official request to submit emission figures. The first and only news from Greece to date is the appointment of such groups as KPMG, the Athens University of Technology and LDK Consultants. These are to supply sorely needed assistance in this sector. But by now Greece is already months behind the rest of the EU.

On 4 March the European Commission announced that it has reservations about the allocation plans of a number of states. The Commission was not yet prepared to say which states these are, but it did indicate that the plans of the UK meet with approval. The European Commission is entitled to reject plans that do not meet the Kyoto requirements and to take countries that refuse to make adjustments to court. In order to avoid even more delays to the Kyoto process, however, the EC has decided that companies may buy emission rights in countries in which the allocation plan may lead to drawn-out legal disputes.

3. Report on CertiChange workshop
On Thursday 4 March the second in a series of CertiChange workshops was held in the Media Plaza in Utrecht. This workshop was not only informative but also highly interactive. After all, you can talk a lot about an online trading platform, but the best way to experience it is to get involved in trading and negotiations for yourself. And this is exactly what the 14 participants did with each other at the end of the morning session: a round of pilot trading. But prior to this they took a more in-depth look at the new legislation concerning the Certificates of Origin and at New Values in general.

Changes following the introduction of Certificates of Origin
The head of CertiQ, Jan Vorrink, got the ball rolling with an account of the changes brought on by the introduction of the Certificates of Origin. In fact the new legislation has both positive and negative aspects. The good news is that the market is becoming more international and thus bigger. It is now easier to trade with every country that has implemented the Certificate of Origin in its legislation.

At the same time, it is this implementation that forms the biggest stumbling block. Each country implements the rules for itself – and the interpretations often differ significantly. This makes the mutual interchangeability, and thus the tradability, of the Certificates of Origin into an important issue. Until a standard – known as the European Energy Certificates System – has been introduced it will not be possible to make proper checks. At the moment CertiQ is working hard to set up this standard.

About New Values
Following Jan Vorrink’s account, it was the turn of New Values director Axel Posthumus to present the developments at New Values. What are we doing, what have we done and what are we going to do? He gave close attention to the advantages of New Values: convenience, reliability, independence, flexibility and transparency. He also stressed the target group of CertiChange. This includes not only buyers and sellers who are registered with CertiChange but also, for instance, environmental coordinators and consultants.

He then turned the spotlight on clearing & settlement: how does the complete processing of a transaction actually take place? A transaction can come about in one of three ways: automatic matching, responding to a placed order or starting with negotiation. The latter option can be conducted anonymously, but does not have to be. Before a deal is concluded the creditworthiness of the trading parties is checked. Then both parties receive an electronic confirmation. And all this is carried out in line with high banking standards.

Trial trading
Then it was time to see how the theory is put into practice: twelve laptops logged into a demo application. Automatic matching, requesting, offering and negotiating – the participants could try everything out. This was a good learning experience for them, but also for New Values. Because in this way we discovered what users really want, and the users could confirm our discoveries. This brings us a step closer to a user-friendly platform that is fully geared to the requirements of the trader. Currently we hope to commence the first trading on CertiChange in mid-April.

Would you like to take part in a New Values workshop? Then check the diary for the next meeting.

4. The Centre of Expertise: a sneak preview
The preparations for the New Values Centre of Expertise are in full swing. If everything goes according to plan then we can open the virtual doors around the end of March. The aim of the Centre of Expertise is to build up a large network with the assistance of various expert organizations. Members of New Values will find a wide range of in-depth information within the network, including such areas as law, technology, economics and environmental engineering.

New Values is open to the needs of the market and we are delighted to collaborate with other organizations. This is why we would also like to involve you in the development of the Centre of Expertise. After all, you are the one who will soon be using it. What are the questions that concern you right now, and what problems keep cropping up? Let us know so that we can adjust our newsletter, and soon also our Centre of Expertise, to fit your requirements. We will soon be publishing the answers to frequently asked questions here, too.

Send your questions and remarks to monique.broekhoff@newvalues.net

5. Diary

European Emissions Trading 2004
On 23 and 24 March the IQPC is organizing the European Emissions Trading congress in Brussels. It titles itself the only real Pan-European Emissions Event and brings together the knowledge, experience and best practices of large industrial companies.

Congress for CO2 Emissions Trading
On 22 April Euroforum is organizing the CO2 Emissions Trading congress in the Kurhaus Hotel in Scheveningen. All opportunities and barriers for trading in emission rights will be dealt with during the congress.

Carbon Market Insights
On 20 and 21 April Point Carbon is organizing the Carbon Market Insights congress in the Meervaart in Amsterdam. The congress features speakers from such organizations as Shell, PWC and the European Commission.
Would you like more information, or to register? Then visit: pointcarbon.com

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 1 April 2004
Thursday 6 May 2004

EEeXchange
Tuesday 1 June 2004

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

<6. Glossary

Energy Efficiency Benchmarking Covenant
On 6 July 1999 the Dutch government concluded the Energy Efficiency Benchmarking Covenant with the energy-intensive industrial sector. The chief aim of this is to reduce the emission of CO2 by dealing with energy more efficiently. In the covenant the industry undertakes to join the world leaders in the field of energy efficiency for process installations as soon as possible, but at the latest by 2012.

The covenant was a cause of heated discussions during the development of the national allocation plan for CO2. This was because many companies had already made the necessary investments. It was thus feared that ‘Kyoto’ would not take this into account – meaning that companies would, so to speak, be punished for their investments in the past. After all, a company that has never spent money on cleaner production can limit its emissions much more easily and cheaply than a company that has already been environmentally aware and responsible for a longer period.

When allocating the emission rights it was decided that existing agreements should be taken into account as much as possible. But this should be within the space provided for by the EU directive. This means that companies that are already relatively energy-efficient thanks to earlier measures have been allocated more generous rights than companies that have not previously taken any measures.