Evergreen Energy Inc EEE

Carbon Trading = C-Lock:

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CLIMATE: Carbon traders press for int'l offsets market in U.S. (02/27/2008) Colin Sullivan, Greenwire West Coast reporter SAN FRANCISCO -- Carbon market experts gathered here from around the world urged Congress yesterday to accept international offset projects under a U.S. cap-and-trade regime for regulating greenhouse-gas emissions. The financial movers, many from banks in London and New York, said limiting carbon offsets to U.S. sources would erase a natural safety valve that could protect against volatile swings in the price of carbon. They also agreed that price caps are not the answer and asked policymakers to keep their market design clear and simple. "If you limit availability of credits, you're going to reduce the emissions you can achieve," said Kedin Kilgore, who heads JP Morgan's North American environmental markets division. "That stunts investment." Kilgore added that most of his clients would have to comply with future mandated emissions cuts and need every available option to do so. This point was echoed by Lenny Hochschild of Evolution Markets, who said U.S. politicians are so focused on protecting their base they could get the offsets equation all wrong. "Don't underestimate the U.S. Congress to make the wrong decisions," Hochschild said. "If the U.S. Congress does not allow a large portion of international offsets to apply, in the name of creating local jobs and increasing their tax base, I think it's going to be problematic." Karan Capoor, a senior financial specialist at the World Bank, likewise counseled against price caps or protectionist carbon credit measures. He said projects developed under the Kyoto Protocol's Clean Development Mechanism (CDM) have encouraged developing countries like India and China to see opportunity in the market, develop new technologies and get experience early on -- as opposed to sitting back and viewing the Kyoto targets through a "doom-and-gloom" periscope. "Flexibility is the best insurance," Capoor said. "It's about opportunity. That's been the biggest lesson of the market so far." The groundswell against limiting a future U.S. market to domestic offset projects reflects a concern among many market participants that climate change legislation working its way through Congress could defer to parochial concerns rather than global. The Senate Environment and Public Works Committee last year passed a bill from Sens. Joe Lieberman (I-Conn.) and John Warner (R-Va.) that would let U.S. polluters satisfy 15 percent of their compliance with international offsets. But others present at the Carbon Forum America conference here were less concerned and predicted Congress would adjust its thinking. Indeed, new Capitol Hill lobbying groups -- some with members experienced in European emissions markets -- have formed in the hopes of helping shape a U.S. cap-and-trade system (Greenwire, Feb. 21). Said Guy Turner, the director of New Carbon Finance, of the Lieberman-Warner offsets provision: "I feel that will be relaxed." Cutting carbon prices Natsource CEO Jack Cogen and Henry Derwent, the president of the International Emissions Trading Association, also sought to hammer the issue and cited a New Carbon Finance study released this month that found the United States could hold the price of carbon to $15 per ton with help from cheaper foreign offset projects. Cogen admitted his line of reasoning is somewhat self-serving as his company makes money off the CDM system. But he and Derwent insisted foreign projects have suppressed costs in Europe and helped ease the transition to a carbon-constrained economy. "We have a system that the international regime has agreed upon," said Derwent, who questioned some of the "suspicious" media reporting on the authenticity of offset projects. "What actually is wrong here that needs to be set right?" New Carbon Finance predicts the price of carbon would rise to about $30-$35 per ton by 2015 under the Lieberman-Warner bill. With international offset projects given free reign, that price drops to $15 per ton for the first five years of operation, said Milo Sjardin of New Carbon Finance. That's a cost savings of $145 billion over the first five years of a U.S. market starting in 2012, Sjardin added. $60B market Capoor also offered a peek into the World Bank's forthcoming analysis of how the global carbon market grew in 2007. The market, worth roughly $30 billion in transactions in 2006, has doubled to well over $60 billion and will continue that growth in the years ahead, he said. The credit offsets market also doubled, he added, from $2.4 billion in 2006 to about $4.8 billion in 2007. China was the leading participant in the CDM offsets program, with about 45 percent of total available reduction credits. Point Carbon, a Norway-based market analyst, issued a report yesterday showing global traders on pace to buy and sell 4.2 billion tons of carbon emissions this year, a 56 percent increase over 2007. At today's prices, the market would be worth about $92 billion, the report says. Evolution Markets' Hochschild credited the growth to a resilient market that reacted well to bad press about project verification and authenticity. He said "a flight to quality" followed some negative media coverage that served the sector well. "These projects are now focused on being on the cover of BusinessWeek for the right reasons, not the wrong reasons," he said. Farther out, the New Carbon Finance study anticipates a $1 trillion carbon emissions market in the United States by 2020 if Washington passes a cap-and-trade system. Experts agreed that the United States' entry into a global trading system would make for a unprecedented shift, assuming policymakers send clear signals via legislation and subsequent regulation. "Once those regulations come in, this market will explode," said Brian Prusnek, vice president of U.S. development at Climate Change Capital.