issue 16.0, 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

New Values teams up with SENDECO₂

SENDECO2, the leading Spanish CO2 emission allowances market, and New Values, a Climate Exchange with presence in the Netherlands, Germany and United Kingdom, have announced today the signature of Memorandum of Understanding to form a Strategic Alliance to create a Pan-European Spot market for EU Carbon Dioxide Emission Allowances.

Through this Alliance, New Values and SENDECO2 join forces to create a single European emissions market not only to interlink their countries of origin Germany, The Netherlands, United Kingdom and Spain, but also to expand their reach to other countries such us Belgium, France, Italy and Portugal, thus, properly connecting the likely surplus of the northern European participants to the likely shortage of the southern European participants.

With this Alliance, European participants will benefit from cross access to both New Values and SENDECO2 markets therefore creating a single, more transparent, and efficient pool of liquidity. Pan-European seamless market access will be achieved by progressively coordinating and harmonizing efforts in areas such as marketing, participant on-boarding, liquidity and credit risk management, operations and technology.

Report on New Values Tradegrounds

Between 7 and 24 February 2005 a full-scale emissions trading competition took place on the New Values Tradegrounds. For three weeks international parties engaged in fictive trading and negotiation with each other via our online trading platform. Within this framework, each week represented a year of trading between 2005 and 2007. On 28 February the simulation game drew to a close and it became clear that not only the traders but also New Values itself had learned a number of valuable lessons.

A total of 45 traders from 7 countries took part in the New Values Tradegrounds. Of these, some 30 traders were truly present and active on the trading platform. We have compiled a few trading statistics from the SPOT market for you:

2005 – 58 transactions, total volume: 614,501 tons, average price: 7.58
2006 – 51 transactions, total volume: 400,566 tons, average price: 7.52
2007 – 25 transactions, total volume: 263,320 tons, average price: 4.87

The transactions were mostly for European Allowances (EUA). In the Tradegrounds participants could make investments in technology projects and CDM projects with which Kyoto Certificates (CER) could be obtained. In this way 5 CER transactions were also realized, with a total volume of 55,500 tons and an average price of 6.96.

In the last weeks, 2006 and 2007, it was also possible to conclude transactions as Bilateral Forwards EUA or CER. As expected, however, the traders concentrated on the SPOT market.

The major lessons that New Values learned from the simulation game relate chiefly to the back office. The Tradegrounds have clearly shown which reports the traders need in addition to the current overviews. The large number of participants also brought us useful insights into the various technical environments with which traders work (different internet browsers, router settings, trusted sites etc.). As a result, the New Values Service Desk now has answers ready for future users. This way, we can make our trading platform ever more user friendly and continually speed up the administrative processes. We would like to thank everyone who participated actively in the New Values Tradegrounds!

Results

On Friday 11 March all Tradegrounds participants will be mailed their personal results. Moreover, everyone will receive a New Values Tradegrounds certificate. You will soon be able to read a report on the complete trading period on the Tradegrounds-section of the New Values Community.

Report on IETA workshop

On 21 February this year the London-based International Emissions Trading Association (IETA) organized the workshop Market Functioning, issues critical to the EU Emissions Trading Scheme. As a member of the IETA, New Values was there as well. During the workshop various parties, including four different trading platforms, were given the opportunity to present themselves. And this is precisely the moment when the various pros and cons of the different platforms were revealed. For New Values it became clear that we stand out in three areas: user friendliness, low-threshold membership (no charges!) – and most importantly that we fulfil an outstanding bridging function between small to medium and large organizations.

Are you interested in the New Values presentation given during the IETA workshop? Then click on www.ieta.org for a summary.

Registering with Climex

After processing our own test results and of course the feedback from participants in the New Value Tradegrounds, the Climex CO2 trading platform is now ready for use. The platform facilitates trading in EU Allowances (EUA) as defined in accordance with the EU Emissions Trading Scheme. As soon as traders have acquired these, they will be followed by CER rights (emission rights as defined in the Kyoto Protocol).

Climex allows for conclusion of both Bilateral Forward transactions and SPOT transactions. (take a look at www.climex.com for more information on the various types of contract). In the case of SPOT trading the APX acts as central counter party. If you wish to register with Climex for SPOT trading then this means that you are automatically registered with the APX as well. In addition you must also be in possession of an operator holding account or be recognized by the local financial supervisory body as a Professional. If you meet one or other of these requirements you can start the Climex registration procedure. You will be sent all documentation after registration.

You can register via www.climex.com

2. Jos Cozijnsen’s column

Emissions market divided into three camps

The PointCarbon conference held in Amsterdam from 1 to 3 March this year clearly showed that the emissions trading world is currently divided into three camps. In the first camp we find such companies as Essent and Shell. They lose no time at all in testing the emissions market and the facilities, such as emission registers and platforms.
(See also: http://community.newvalues.net/international/000680.shtml)

Essent shows that it can reap benefits by paying more attention to emissions. Shell can save energy expenditure and emission rights per site by taking a closer look at inefficiency at its installations. So we’re talking about two companies in the Dutch top three in terms of allocation of emission rights. Other refineries and energy companies with a broad fuel mix within the EU present a similar picture.

In the second camp we also find companies with the highest emission rights quotas. But these organizations are pulling a sour face: a steel company such as Corus says that no reduction of process emissions is possible. In addition, there are a large number of energy companies with more limited fuel options. These major players want more emission rights. Moreover, this group complains about energy companies which, without saving energy, simply add the cost of their emission rights to their energy prices; the energy companies in this group still aren’t investing enough in reducing emissions, but they could do it at a later date.

In the third camp we find the majority of players on the emissions market: the thousands of companies with less than 0.5 megatons of CO2 per year. If these companies were to save 3 percent annually then we’re talking about a sum of 30,000 euros. They feel this amount is too small to justify investment and it does not weigh up against the costs. They will not enter the emissions market until the end of 2007. The Netherlands has excluded the smallest installations of all, with less than 25,000 tons CO2/year, from the trading system.

I believe that this categorization shows us how the emissions market can work, what could be improved in its design and what needs to be changed in the way people think about emissions trading. Because energy companies shouldn’t pass on CO2 costs to their customers in the electricity prices if these are not set off against CO2 reductions. The example of Essent shows how a company can indeed reduce its CO2 costs. Companies in the second group should realize that they must pay for emissions policy, but certainly less than they would without emissions trading. And I as a consumer am prepared to pay a little more for climate policy, but this extra amount should be as small as possible. With regard to the smaller companies: a platform like Climex demonstrates a good proposition – a process that involves low costs and little effort, and still generates income.

3. Diary

12 April, Practice day for emission rights, F&B, Hilversum
introduction, Maycroft and Cozijnsen (http://www.fbbv.nl for more information)

13-14 April, Euromoney, 'Renewables & CO2 trade', Hannover;

13-15 April: High Level conference 'EU CO2 capture and storage conference - towards Zero Emission Power Plants, Brussels
info: sabine.huygens@cec.eu.int

19-20 April, EU climate change policy beyond Kyoto: Building a global climate change agreement, Brussels,
organization and registration: CEPS and EU.