issue 8.0, New Values Newsletter

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

In this issue

<1. Government gives in to European Commission on allocation
Although the European Commission’s definitive verdict on the NAPs will not be issued until mid-July, the Netherlands has already reduced its CO2 ceiling a little.

<2. New Values news
A new trading platform, the first trading in the framework of the NEA demonstration and the CO2/NOx emissions trading congress organized by the Ministry of Housing, Spatial Planning and Environment; the New Values diary was really full last month.

<3. Dutch Certificates of Origin ready for international trading
Now that the coding on the Dutch Certificates of Origin has been adjusted, nothing stands in the way of international trading.

<4. Jos Cozijnsen’s Column: Schraven and Van Geel agree on how to further Kyoto
He’s a familiar figure: Jos Cozijnsen, the man behind emissierechten.nl and guest speaker at various meetings on emissions. 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.

<6. 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. Government gives in to European Commission on allocation

At the Emissions Trading Congress organized by the Ministry of Housing, Spatial Planning & Environment and the Ministry of Economic Affairs on 29 June, Paul van Slobbe of the Ministry of Economic Affairs broke some fresh news. He announced that the European Commission viewed the Dutch allocation of 115 million tons as too high, in view of the emission forecasts (109). In a letter the government offered to subtract 3 million tons and to allocate a total of 112 million – the same quantity as envisaged for the period 2008-2012.

To this end the government is taking 1.5 million tons from the reserve for ‘unknown’ newcomers (Van Slobbe: "I do not expect any new, unknown major emitters before 2007"). The remaining reduction of 1.5 million tons will be realized through consultation with industry; the general correction factor is expected to shift from 3% to 4%. The Commission considered the reserve to be too high in itself (3%) and rejected assignment of remaining reserves to the sectors.

The government gave in so quickly because otherwise a higher correction was anticipated, and it was also expected that the rapid Dutch proposal would prompt the Commission to:
1) accept the 'opt-out' for installations with less than 25,000t CO2
2) deal with other Member States equally strictly with regard to the ‘level playing field’
3) ensure that other sectors in Europe, in particular chemicals, are treated the same. At the moment the chemicals sector in France is outside the system, while in other countries it comes partly or fully under the emissions trading system. The Vereniging van de Nederlands Industrie is pleased that the Netherlands has emphasized this point so clearly.

2. New Values News

Trading platform for CO2 emission rights is ready
New Values now boasts a third trading platform alongside CertiChange and EEeXchange: European Climate Exchange (Climex). The platform facilitates trading in CO2 emission rights. We are kicking off with an informative site on www.climex.com where you can read all about the advantages that the platform has to offer. Moreover, we are employing a prototype of the trading platform during the NEA demonstration.

This enables the 25 participant companies to gain experience in trading through electronic trading platforms. And in addition to this, we in turn learn from the users’ feedback during the trial period. In this way we can provide a trading platform fully geared to the market when emissions trading actually gets started.

Take a look at www.climex.com.
You can keep track of developments within the NEA demonstration on our Community: www.newvalues.net

Workshop for NEA demonstration
On 22 June New Values organized a workshop specially for companies participating in the NEA demonstration. For everyone who couldn’t be there, and as a reminder for the companies that did attend, we have drawn up an overview of the most important questions asked during the workshop:

- Which precise period is covered by the demonstration?
It concerns emissions in the period June and July 2004, while the trading period encompasses June, July, August and September.

- What is the Performance Standard Rate (PSR) for this period?
The PSR for combustion installations is 68. For process installations, however, various PSRs apply. A complete overview is being sent to all participants and can also be viewed at: www.vrom.nl

- Is the PSR taken into consideration within the New Values trading application?
No, the PSR is not taken into consideration. Each participant receives a sales ceiling for NOx, based on the PSR. This sales ceiling is the maximum quantity with which you may be “in the red” on the NOx operator holding account. One is not allowed to be “in the red” on any personal holding accounts, nor on the CO2 accounts. This means that before trading can take place through New Values a sufficient balance must first be transferred to the personal holding account.

- What reports will the NEA compile during the demonstration?
During the demonstration the NEA will regularly compile reports on trading volumes, in line with the guideline for the register..

- What reports will the NEA soon be compiling in reality?
Volumes and probably the number of transactions as well. A full overview is contained in the NEA trading guidelines: www.vrom.nl

- Can one also have a personal holding account (PHA) without an operator holding account (OHA)?
During the demonstration PHAs and OHAs are linked in order to prevent all sorts of players opening an account during the demonstration. In real trading this link is possible for CO2 but not for NOx.

- What happens if large surpluses arise?Then the NEA will intervene by buying emission rights itself.

First trading session of NEA demonstration (24 June)
The first New Values trading session took place on 24 June, in the framework of the NEA demonstration for trading in NOx and CO2 emission rights. During the session 12 trading parties concluded an equal number of transactions. Five of these involved NOx emission rights and seven CO2 emission rights. For a total volume of 18,000 kg of NOx emission rights, the average price was € 1.40. As regards CO2, a total of 31,000 tonnes of emission rights were traded at an average price of € 9.40. These prices are expected to be fairly close to the actual price levels. And with this the NEA demonstration would seem to achieve its most important goal: to approach all aspects of actual trading as closely as possible right now.

The following chart shows the development of demand and supply prices with regard to CO2. The spread becomes steadily smaller, towards a price that New Values considers realistic. Traders arrived at a deal increasingly quickly and this also proves that the participants were engaged in serious trading. The spread was rather larger for NOx trading. In this area it is still not so clear what can be traded and what a realistic price is.

During the demonstration period the New Values trading platform is open for you to input your orders and conclude your transactions. An intensive trading session is held every Thursday afternoon, between 2 pm and 4 pm. This is a time when a large number of the registered traders are active and many transactions are concluded.

Would you like to take part in the NEA demonstration, and would you like to trade through the New Values trading platform? Then visit www.newvalues.net/nea for more information and a registration form.

Report on emissions trading congress (29 June): Carbon Expo goes Dutch

Signs for presorting companies and the inevitable traffic jams: plenty of metaphors were flying around at the information congress organized jointly by the Ministry of Housing, Spatial Planning and Environment and the Ministry of Economic Affairs on 29 June. Metaphors that were intended to put over the message even more clearly: emissions trading is just around the corner and is becoming increasingly tangible. And this means that emissions protocols really are needed before October, and that they won’t automatically be approved.

Of course, the congress took a more international perspective, too. To given one example, the response of the European Commission to the Dutch allocation plan was presented. The demand that the CO2 platform be reduced from 115 to 109 million tons generated much surprise among the participants. Moreover, the way that some countries deal with the allocation plan led to a real outcry. In many ways, actually, the Netherlands seems to be the best-behaved girl in the class.

It also became clear that the differences between the member states are not confined to the allocation plans. Above all, the rules for taxation and accountancy vary widely. An international transaction where the seller is located in the Netherlands and the buyer in England is not subject to VAT. But this is the case if the positions are reversed. It also appears that publicly listed companies have to state the market value of the emission rights stock every quarter and indicate how many emission rights must be submitted again in the mandatory period. Other companies need to do this only once a year.

New Values was also an active participant at the congress. Not only by presenting its own platforms, but also by providing concrete information about trade volumes, transaction prices and price developments in the order book. This is crucial knowledge that enables a company to take sound decisions regarding clean-up investments or the position it wants to adopt in the market for emission rights. And it’s exactly the information that New Values will continue to provide in order to help create a market with sufficient transparency and liquidity.

3. Dutch Certificates of Origin ready for international trading

Since this month, International trading in Certificates of Origin transcends all borders. While agreement on a European standard for international trading was reached as early as 17 March, the coding for Dutch Certificates of Origin was adjusted on 21 June. This means it is now possible to trade Certificates of Origin and RECS certificates not only together as one certificate, but also separately.

By adding the existing RECS codes to Certificates of Origin, one can now trade in CEOs, CEOs combined with RECS certificates and only RECS certificates. This is possible because standards have been agreed within the European Energy Certificate System for coding various types of renewable electricity. The codes clearly state what sort of installation is involved and, in the case of biomass, what type of biomass is created.

Finally, besides the codes for the installation type a code is also added which indicates the type of subsidy received for the installation: a product subsidy, an investment subsidy, both, or no subsidy at all.

Source: CertiQ press release
Visit www.certichange.com for more information on trading in CEOs via New Values.

4. Jos Cozijnsen’s column: Schraven and Van Geel agree one how to further Kyoto

Until recently I though that Secretary of State for the Environment Van Geel, with his negotiating position of 30% emissions reduction for industrial states after 2012, and the employer’s president Schraven were absolutely opposed to each other. After all, Schraven is afraid that the EU is going off on a tangent of its own and is “murdering” the industry sector. He is annoyed at the Kyoto Protocol and the fact that emission ceilings are on the way, while the current benchmarking covenant has no ceilings, but allows growth. Continuing, Schraven states that he is favour of a ‘level playing field’, in particular with China, Russia and the US: is the government going to ensure this? And what is Van Geel saying: he wants to work towards the US and China and Russia reducing their emissions as well after 2012. The pair could soon be pulling together as a team...!

Is a 30% reduction financially feasible? Last week the Central Planning Bureau (CPB) stated that 30% less emissions will cost less than 1% of the national income (Gross National Product). At least if you do it internationally, including developing countries. In the employers’ journal Forum, Corus says that the efficiency lemon has been squeezed dry and that the benchmarking covenant will produce no more results after 2012. The benchmarking covenant does in fact allow emission ceilings if these are the consequences of EU regulations.

At the national Emissions Congress, Shell and Esso appealed to other companies to organize their emission monitoring properly and to prepare for the emission ceilings. From my own experience I know that many percentage points of emission reduction are potentially possible at refineries such as those operated by Shell and Esso – if CO2 is given a price. Eurelectric – the association of European power companies – says in its report of last week that electricity prices will have to rise if climate policy is implemented. Together with the current high oil price this makes energy-saving worthwhile again. Moreover, it says that emissions trading stimulates power generation with less CO2.

So I call Schraven and Van Geel to take up the gauntlet and join forces in their dealings with the international community and the international business sector. The EU chairmanship is an excellent chance to take joint action on the global level. The EU now comprises over 25 countries, and with the support of Japan, Canada, Norway as well as ratifications from China, India and Indonesia, you can talk about a substantial support base. More than 100 countries have ratified. And support for climate policy is growing in the US, too. Proposals have been prepared in Bonn for reductions in developing countries of 50 million tons a year. So will I see you at the Climate Conference in Buenos Aires in December?

Don’t worry: 30% at the international level means a much lower figure for the efficient Dutch industry sector. What is needed is that international business community develop benchmarks for CO2 (CO2 per ton of steel; kg CO2 per MWh; tCO2/t crude oil): this will harmonize the international allocations for emissions trading, this will raise the playing field to a higher level.

5. Diary

International Congress EU Climate Change Policy
On 17 and 18 September the University of Leuven is organizing an international congress with the fine title: "The Challenge of Implementing New Regulatory Initiatives: State of Affairs and Critical Issues of EU Climate Change Policy”. The congress will centre around the issue of whether market-based measures will be successful in reaching the environmental goals set by governments.

For more information and for registration visit: http://www.law.kuleuven.ac.be/imer/nieuws.html

Fourth annual Workshop on Greenhouse Gas Emission Trading
On 4 and 5 October the International Energy Agency and the International Emissions Trading Association are organizing the fourth annual Workshop on Greenhouse Gas Emission Trading. The gathering will take place in Paris and is an excellent opportunity for participants to take a close look at the market developments.

More information: http://www.iea.org/Textbase/work/workshopdetail.asp?id=193

New Values Workshops
New Values regularly organizes workshops for CertiChange, EeeXchange and European Climate Exchange (Climex).

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

6. Glossary

Carbon Sinks, sequestration and reservoirs
Industry is not the only producer of greenhouse gases. People and animals also produce CO2 simply by breathing out. And even belches, flatulence and other natural decomposition processes make a substantial contribution. If there were no natural mechanism for removing such greenhouse gases from the atmosphere, then the Earth would slowly but surely warm up by itself.

In fact, our planet benefits from a balance that has arisen over billions of years, in which CO2 is absorbed by, among other things, forests and other vegetation and oceans. Natural removers of carbon dioxide are known as Carbon Sinks. Mature forests retain CO2 for a period, and so we call these reservoirs. In addition, it is possible to store CO2 in water-bearing strata, in empty gas and oil fields or salt domes. This is known as sequestration. The storage potential is huge. The creation of Carbon Sinks and CO2 storage thus also forms a way of acquiring emission rights or saving emission rights.