issue 7.0, New Values Newsletter

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

In this issue:

1. Moscow on the road to Kyoto
On 22 May the EU agreed to Russia’s request for admission to the WTO.
A move that, unexpectedly, boosted the realization of the Kyoto Protocol.

2. New Values news
There’s a lot happening in the New Values organization. The NEA demonstration has got underway, for instance, and from today onwards the most up-to-date centre of expertise in the field of emissions trading is live: the New Values Community.

3. A brief survey of NAPs
Extension followed extension, and even now not all definitive NAPs have been submitted to the European Commission. We make a brief survey of the newcomers and latecomers.

4. Jos Cozijnsen’s column: State support for emissions trading: is there any?
He’s a familiar figure: Jos Cozijnsen, the man behind emissierechten.nl and guest speaker at various meetings on emissions trading. Every month he airs his opinion in his column.

5. Diary
It’s important to stay up to date in a market that is continually subject to change. New Values keeps you informed about interesting congresses and workshops in the Netherlands and abroad.

7. Glossary
English jargon, endless abbreviations and acronyms. What do they stand for and in what context are they used? Every month New Values turns the spotlight on a new term.

1. Moscow on the road to Kyoto

In last month’s column the Russians were already a key theme. This month they even move up to the level of headline news. On 22 May the EU agreed to Russia’s request for admission to the WTO. This involved, among other issues, agreements on gas prices and access to the European steel and gas markets. Important news in itself. But, completely unexpectedly, Putin declared during the presentation of the accord that he would accelerate Russian ratification of the Kyoto Protocol. In his view the EU had made concessions to Russia on the WTO dossier. And that’s an important step forwards! For years the EU has been exerting major political pressure on Russia to ratify the Protocol so that it can actually come into effect. This now enables creation of an international framework and an agenda for far-reaching climate protection.

Although no deadline for the ratification has been given, this declaration is still an important step. After all, on previous occasions Putin had always stated that he would accelerate just the analysis of the consequences of the ratification. Putin has also given the EU more political leverage: if he should not ratify the Protocol then the EU can call into question the required concessions. It is important for the EU and the business community that Kyoto comes into effect, as this will lend the market more long-term security. Without this, other regions will not be obliged to carry out CO2 savings and in the course of time this can lead to unequal competitive conditions.

In fact, the EU can also implement emissions limitations and emissions trading without Kyoto. The EU now contains more than 25 countries and over 15,000 sites that are subject to emissions trading, and that’s a very substantial internal market. With Kyoto in effect, however, a global CO2 market can start to take shape. But above all the facilitating and monitoring bodies can get down to work.

Putin is expected to submit the ratification to the Duma (parliament) after the summer – at least if Russia’s membership of the WTO is not endangered. A decision will be taken on this in December, and negotiations still need to be conducted with the US. The highest body of the Climate Treaty, the Conference of the Parties, will subsequently be meeting in Buenos Aires in December 2004 and can then prepare for the moment when the Kyoto Protocol actually comes into effect. At this time the Netherlands will hold the chairmanship of the EU and has the right to co-compile the agenda for further development of the protocol and the emissions market.

2. News from the organization

New Values Community live!
The hour has struck: the most up-to-date centre of expertise in the field of emissions trading and trading in Certificates of Origin is ready for use. We have set it up together with our partners (PWC, Ecofys, KEMA, TNO, Baker & McKenzie and Promasys). In the New Values Community you will find the latest information, have access to all our partners and can post or respond to reports yourself.

Action, reaction and interaction. That’s what the Community is all about, because we want to offer you much more than just an online library. We want to give you an online platform for your questions, your opinions and your vision. And give you the chance to find out about the opinions and visions of others. Together with everyone else involved in emissions trading or trading in COOs, you can enter into an online dialogue through the New Values Community. And maybe gain some whole new insights, too.

Large-scale Emissions Trading Demonstration
1 June saw the start of the large-scale emissions trading demonstration organized by the Ministry of Housing, Spatial Planning & Environment. We’ll be keeping you constantly informed about developments during the demonstration – and it’s taking place in our Community! Here you can see how our partners support the participating companies and how the New Values trading platform participates in the trial. Here you can also give your own opinion and tell us about your experiences with the trial with other sections.

Network Workshop
In order to prepare for the demonstration, New Values and its partners organized a workshop for participating companies on 25 May. Hans Warmenhoven, project manager of the demonstration, started by taking a closer look at the background aspects. The driving force behind the demonstration is the Ministry of Housing, Spatial Planning & Environment, which in turn was commissioned by the Ministry of Justice. The demonstration will test not only emissions trading, but also the Register currently being set up and the NEA itself. This is why the preferred term is no longer the NEA trial but the Emissions Trading Demonstration

Moreover, Hans Warmenhoven stressed that there is still time to submit monitoring protocols to the NEA. A basic initial document is all that is required. The protocol can then be refined during the demonstration period, which indeed is the essential idea. Many companies have still not prepared a protocol. Indeed, research by CMG shows that half of all companies in the EU are still not ready for emissions trading.

During the workshop Frank Blank (KEMA) emphasized that companies should not make the protocol too complicated. Much information is already known, and the main issue is to make this resolvable and monitorable. This is why the NEA has developed a quickscan system which can identify gaps quickly.

Information from Hans Warmenhoven
Hans Warmenhoven, project manager of the Emissions Trading Demonstration, first set out a few facts for us:

“A total of 26 companies are taking part in the Emissions Trading Demonstration, which involves 36 separate installations. Almost all installations are taking place in both NOx and CO2 trading. The past month was spent recruiting participants and on 19 May almost all participants came together for a kick-off meeting at the NEA.

More information on the large-scale demonstration is available on the website of the Ministry of Housing, Spatial Planning & Environment: www.minvrom.nl/emissiehandel.

3. A brief survey of NAPs

Europe is on the go! Apart from punctual submission of the definitive NAPs, that is. France, Greece, Spain, Italy, Portugal and Belgium all failed to complete their homework by around 1 April, or submitted only a draft version. But this foot-dragging will soon be dealt with strictly. “The period of deferment has run out”, says EU Environment Commission Margot Wallström. If the European Commission does not have enough time to approve a plan, then the country in question will be excluded from emissions trading as per 1 January 2005

The deadline for the EU newcomers is 31 May. And 5 of the 10 new member states have now submitted their plan: Estonia, Latvia, Lithuania, Slovakia and Slovenia. The Czech Republic and Poland managed only a draft version. The newcomers are being given a little more time by the European Commission, however, and are not being directly confronted with tough measures. The EU considers it more important that companies have enough time to prepare for 1 January 2005.

The Commission plans to issue its first verdicts at the start of July. It is hard to estimate how difficult the Commission will make things for the member states. We estimate that the Dutch NAP should remain reasonably intact and that, at the most, some reduction in the total cap will be required. Most companies can take advantage of the early action bonus in the NAP if they already meet the benchmarking or covenant conditions.

One important factor is whether the Commission thinks that the NAP convincingly shows that the total emissions will be reduced in time for 2008 to make Kyoto achievable. We believe however that exceptions for smaller installations will not be accepted and that the Commission – as with all member states – wishes to limit the reserve scheme for newcomers.

Member states that have submitted a definitive NAP: Austria, Denmark, Finland, Germany, Ireland, Latvia, Lithuania, Luxembourg, the Netherlands, Slovakia, Slovenia, Sweden and the United Kingdom.

Member states that have submitted a draft version: Estonia, Italy, Portugal, Belgium.

Member states that have not yet submitted anything: Czech Republic, France, Greece, Hungary, Poland, Spain; of these, Poland and the Czech Republic have prepared a draft version.

4. Jos Cozijnsen’s Column: State support for emissions trading: is there any?

The real acid test for the National Allocation Plans is the verdict by the European Commission. This establishes whether a member state may be over-favouring a particular sector, and thus allocating more than companies need, while another state is imposing a strict ceiling. The EC looks closely at how the member states deal with new companies: is an auction organized or are rights distributed for free? It also investigates whether the differences between countries may lead to undesirable disruptions of the EU market. The Commission has informed the member states by letter that it will also look at forbidden state support provided through generous allocation. Other member states are already pointing the finger at the Netherlands because government purchase of CO2 credits abroad (JI/CDM) leads to generous allocation, and are calling this state support.

Checking on forbidden state support will be an impracticable task. After all, the other member states are also allowed to buy rights abroad. And whether the NAP of a member state constitutes state support depends on the allocation applied by other countries. This can only be established once all NAPs have been submitted. And don’t forget that these are just plans, not yet reality. The task of the Commission is to approve these plans. In fact, the degree to which JI/CDM may be linked to EU emissions trading will be agreed by the member states only on submission of the second-phase NAPs (2008-2012). So I don’t expect the Commission to take any action on state support.

But why is this? The Commission itself, in the current Directive on State Support relating to environmental policy, already states that the advent of the emissions market renders state support superfluous. The allocation system allows more efficient companies to be rewarded with a generous allocation and you can use strict ceilings to force the foot-draggers to seek their consolation on the market. Fine, as long as the member states do not allocate more than a company needs. So it’s a good thing that the allocation method will be standardized by the EU before the next period starts. What’s sauce for the goose is sauce for the gander.

5. Diary

2nd CO2/NOx Emissions Trading Information Congress (Ministries of Housing, Spatial Planning & Environment and Economic Affairs)
On 29 June the Ministries of Housing, Spatial Planning & Environment and Economic Affairs will be organizing a congress on emissions trading. This event will take place in the Rotterdam World Trade Center. The congress will deal with all the necessary steps companies must take in order to be ready for emissions trading by the end of 2004.

For more information visit: www.novem.nl

Second Annual European Environmental Markets Conference
The Emissions Market Association is organizing the second annual European Environmental Markets Conference, taking place from 28 June to 1 July. The event is being held in the Sheraton Hotel, Brussels. New Values is one of the sponsors and our columnist Jos Cozijnsen one of the speakers.

For more information visit: www.emissions.org

New Values Workshops
New Values regularly organizes workshops for CertiChange and EEeXchange.
These will soon 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

The next workshops will take place on:

CertiChange
Thursday 1 July 2004

EEeXchange
Tuesday 7 September 2004

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

6. Glossary

CO2 equivalent
In order to compare the effect of various polluting gases on the greenhouse effect, a calculation unit known as the ‘CO2 equivalent’ has been created. The CO2 equivalent indicates the degree to which a gas per unit of weight contributes to the greenhouse effect as compared to CO2. It is based on the Global Warming Potential (GWP), developed by the International Panel On Climate Change, an organization of the United Nations. CO2 has a GWP of 1. Methane has a GWP of 23. Sulphur hexafluoride (SF6), for instance, has a GWP of 23,900. This means that weight for weight it is 23,900 times more harmful than CO2. This shows that non-CO2 gases too are highly important to climate policy.