issue 15.0, New Values Newsletter

1. New Values news
New Values likes to involve you in its plans and ideas. We keep you constantly informed about what we’re doing and how we’re responding to the latest market developments.

2. Jos Cozijnsen’s column
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.

3. 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.

1. New Values news

Registration for Climex starts

On 28 February the EU ETS (European Trading Scheme) market will start operation. And the same date marks the start of Climex, with online spot trading and online bilateral forward trading in European Allowances.

You can register as of Wednesday 16 February 2005 on www.climex.com.

Climex provides:

• A user-friendly online trading platform suitable for both large and small emitters;


• Risk-free closure of transactions. Climex uses the APX as its central counter party for spot trading;


• Legal, financial and administrative processing of transactions


• Low rates:
  
  
  
  • No registration charges;
  
  
  • No annual charges;
  
  
  • Pay only when you actually trade:
    
    The transaction fee for spot trading is 2% of the trading price with a maximum of € 40,000 per party per year;
    
    The transaction fee of 1% of the trading price.
    
  
  

Report on New Values Masterclass

"New Values isn't the 'master' of this 'class', you are. But you’re helping us to develop the 'master' among the emissions trading platforms." It was with these words that Axel Posthumus, the director of New Values, opened the international Masterclass on 19 January this year in Frankfurt. He was speaking before an international group of some 40 participants, including experts from industry, traders, consultants and journalists from Germany, the Netherlands, England, Belgium, Austria and France. He then passed the baton on to various expert speakers.

Christopher Grobbel (McKinsey), for instance, demonstrated that the shortage of emission rights within the EU could rise to 50 Mton, assuming a price of around 9 euros. But there are still various uncertainties in the picture, such as non-definitive allocation plans and energy prices. He also suggested that the CO2 market will be dominated by the oil industry and its particular concerns. The energy sector will be faced with a permitted emission growth of 3%, as compared to a demand which will grow by 15%. And after 2008 no more growth at all will be allowed, while demand will still be growing by 7%. This will make CO2 policy a very difficult affair.

Ingo Puhl (500PPM) gave a picture of the fragmented playing field within emissions trading: a handful of large companies with a surplus of emission rights and many smaller companies with a shortage of rights. And this is precisely the situation to which the New Values platform Climex provides the solution: bringing together supply and demand whatever the size or nature of the trading parties may be.

Interested in what speakers from such organizations as Essent, APX and Seringas had to say during the New Values Masterclass? You can find an extensive report on the New Values Masterclass on our Community. The report is in English.

Tradegrounds update

Monday 7 February saw the official start of the New Values Tradegrounds, an international CO2 emissions trading simulation and competition. To date more than 40 parties have registered. Until 24 February these will engage in fictive mutual trading and negotiation through an online trading platform. In this game every trading week represents a trading year between 2005 and 2007. On the 28 February the entire process will be concluded and prizes will be awarded for the best trading strategies.

You can follow all the developments on a special Tradegrounds page within the New Values Community. Even if you’re not taking part yourself. Take a look at: www.newvaluestradegrounds.com

2. Jos Cozijnsen’s column

Emissions trading in the long term: a possible glimpse of the future

This week the European Commission published a memorandum on climate policy after 2012. It states that sharp reductions are needed in order to keep the atmosphere in a safe state. But it doesn’t yet specify an opening negotiation offer. It plans to wait with this until just before the negotiations under the Kyoto Protocol take place, at the end of 2005.

This is a sensible tactic. It takes the wind out of the sails of the climate sceptics. It invites industry associations to show what is feasible. And it allows the USA and active states within the USA to join the discussion because no position needs to be adopted yet. And it also enables one to explain even better to developing countries that economic growth and emission reductions can go hand in hand. But the Commission does make clear that the instrument of emissions trading will be an important motor for reduction.

What does this imply for further emission ceilings for companies? Does it mean a shift from a brake on growth – which is what current policy amounts to – towards a 50% reduction? I think that most companies will not be able to manage this themselves unless climate-neutral energy is widely available. I assume that the reduction in the Netherlands for the year 2020 will be around 15%. The 30% reduction that the EU wants from the industrialized nations can then be distributed over the entire EU, and in accordance with the possibilities for higher reductions which can be achieved in the total group of EU countries.

I don’t expect that companies will be realistically able to comply with -15% ceilings. But then how could the future emissions trading system look?

• Sector emission ceilings for EU industry on the basis of benchmarking. In other words, for instance, that a ton of steel in the EU may be brought onto the market with an emission of ‘x’ tons of CO2: so EU sectors will need produce goods with increasing efficiency. This means that industry associations will have to help develop such benchmarks. But for reasons of competition they all have an interest in doing this.
• For the energy sector 'x' grams of CO2 per kWh: this stimulates energy with a lower fossil component
• Smaller companies take part as well; they can engage in pooling;
• The aluminium and chemical industries also participate as an entire sector;
• The Dutch greenhouse farming sector comes up with a CO2 ceiling;
• The automotive industry requires emission rights for 'x' grams of CO2 / litre fuel which the car uses in its lifetime;
• Aviation and shipping are also subject to sector ceilings. I would suggest combining airports, the aircraft industry and aviation under one ceiling;
• The dairy and meat industries must be assigned emission rights for agricultural emissions which are linked to the production of litres of milk and kilos of meat etc;
• Useful consumption of CO2 and CO2 storage are methods of reduction applied on a large scale;
• Trading is conducted with companies in various states of the USA which are part of a comparable emissions trading system;
• Trading is conducted with a number of the most advanced Russian companies which are part of a national emissions trading system;
• The non-CO2 emissions also count in the system: methane and N2O. The fluorocarbons are governed separately;
• Governments continue to buy up emission rights from other countries on the global emissions market.

3. Diary

• 16 February: on Emerging Issues in JI and CDM Deals, London, 8.45am until 2pm - info Laura.Farnese@Bakernet.com.
• 1-3 March: Carbon Market Insights 2005, Pointcarbon, Amsterdam.
• 19-20 April: EU climate change policy beyond Kyoto: Building a global climate change agreement, Brussel, organisatie en aanmeling: CEPS en EU.
• 19 April: Kluwer study day on Emission Rights, Park Plaza, Utrecht.