The Coalition for Responsible Fire Protection September Conference

CCAs jump 7 pct as nuclear power plant to stay shut

SAN FRANCISCO, June 21 | Thu Jun 21, 2012 6:48pm EDT

SAN FRANCISCO, June 21 (Reuters Point Carbon) - California carbon allowances (CCAs) for delivery in 2013 closed at $16.75 per tonne on Thursday, up $1.10 from one week ago on a

growing belief that the shutdown of a California nuclear power plant will boost carbon emissions due to higher fossil fuel use.

The bustling carbon market saw 155,000 CCA forwards clear on the IntercontinentalExchange (ICE) this week, with 85,000 of the permits trading on Thursday, the busiest single day for the market since April 20.

A deal for 5,000 CCAs at $17.60 per tonne on Thursday marked the highest price for the benchmark contract since November 14.

Profit-taking quickly brought the price back below $17/tonne, market sources said.

A flurry of $20 call options that cleared on ICE Thursday underlined the market's bullish sentiment, as participants paid premiums of between $2 and $2.50 for the right to purchase a total of 160,000 CCAs next year.

"People are protecting themselves against the price going above $22, which is a very bullish play," one market source said.

Traders and brokers agreed that news that there was no timeline for the restart of the San Onofre nuclear power plant was the primary driver of prices this week.

The plant, which generates 8 percent of the electricity used in the state, has been closed since January when a small radiation leak was discovered.

At a meeting in Orange County in southern California this week, federal regulators investigating the leak described the problem with one of the unit's steam generators as "serious and significant."

Southern California Edison, the plant's operator, could not say when San Onofre would begin producing electricity again, although it has said it will not be back online this summer.

The market is responding to the possibility that the plant could be offline during 2013, the program's first compliance year, sources said.

SCE, an investor-owned utility, has one of the largest compliance obligations under California's future carbon trading program.

Initial reports from an ongoing investigation have pinned the blame on the testing and assembly of the generator, which was made by Mitsubishi Heavy Industries.

No trades were reported this week in the market for Regional Greenhouse Gas Initiative (RGGI) allowances.

The benchmark 2012 contract was bid at $1.92 with an asking price of $1.95 in the over-the-counter market, unchanged from one week ago.

Texas Climate & Carbon Exchange Opens for Global Trading

I know, this almost sounds like a punch line to a bad joke, or perhaps an oxymoron. Many people tend to think of Texans as backward-looking, conservative, entrenched in the status quo and not at all interested in talking about climate change, except maybe to argue that it doesn’t exist. And they didn’t come by that reputation by accident, either. After all, it is the home of George W. Bush and Rick Perry, both of whom have been known to censor information about global warming. But there are two things that Texans understand, perhaps better than most of us and those are: energy and money. And, to a certain extent, in Texas, these issues seem to rise above ideological boundaries. That is why, for instance, Texas is the #1 state in the US in wind power, producing 6,527,850 GWh/yr (as of 2010) almost twice as much as its nearest competitor, Kansas.

Substituting windmills for oil wells is one thing, but carbon trading? One could argue that wind power makes sense here, because of the wide, open prairies and strong steady winds. But carbon trading could be done in Brooklyn. One could argue that because there are so many carbon credits available for trading here from all that wind power, it makes sense to locate it nearby. Or it could just be that Texans, understanding energy and money as they do, saw the opportunity and jumped on it first.

According to Nathan Rockliff, co-founder of Carbon Trade Exchange (CTX), parent company of the newly formed Texas Climate & Carbon Exchange (TCCX), “Carbon Trade Exchange is proud to establish its first USA trading relationship from a central and strategic market such as Texas. We see the U.S. market as one of the fastest growing for Carbon in the world over the next decade.”

CTX, which is located in Sydney, Australia, has 150 members located in 22 different countries. You can think of it as a kind of stock exchange for the global electronic trading of emissions offsets, also known as carbon credits. TCCX, whose slogan is, “a new environmentality” is located in Austin and is the sole licensee for the Carbon Trade Exchange for the United States, Canada and Mexico.

According to the CTX website, “Our platform allows businesses to meet their compliance obligations under the EU Emissions Trading Scheme and voluntarily offset residual carbon emissions to become carbon neutral.”

Emissions trading is already well established in Europe.

Carbon offsets, which can be mandatory, under a cap-and-trade scheme, or voluntary, depending on the jurisdiction, provide a marketplace in which carbon-reduction activities can be purchased by entities to reduce their net effective carbon footprint. While this does not eliminate the carbon emissions from the entity, it does encourage activities which, will, since greenhouse gas emission is a global phenomenon, reduce the overall global carbon footprint. If these exchanges are set up correctly, carbon credits will help lower the costs of renewable and low-carbon technologies as well as assisting in green technology transfer to developing countries.

Critics of cap-and-trade systems include economist Thomas Crocker, who originally devised the scheme fifty years ago, to deal with local pollution that could be tied to specific sources. Crocker believes that an outright carbon tax would be preferable, “because it would be easier to enforce and provide needed flexibility to deal with the problem.”

Especially, he told the WSJ, back in 2009, when it comes to carbon, a pollutant that is inherently global in nature, “It is not clear to me how you would enforce a permit system internationally. There are no institutions right now that have that power.”

CTX and its licensees support the trading of carbon credits that are originated under both the United Nations Clean Development Mechanism (CERs) and independent voluntary standards (VERs).

The World Bank estimates the carbon trading industry will exceed a market value of $1 trillion by 2025, as more and more municipalities, states and countries begin to require cap and trade schemes. The Canadian province of Quebec, just recently joined with California in a joint cap and trade market.

Representatives of the utility, local government and environmental groups were present for the announcement, as well as executives from TCCX, and CTX.

[Image credit: jmtimages, Flickr]
RP Siegel, PE, is the President of Rain Mountain LLC. He is also the co-author of the eco-thriller Vapor Trails, the first in a series covering the human side of various sustainability issues including energy, food, and water in an exciting and entertaining format

Analysis: Brazil struggles to cash in on carbon credits

By Marcelo Teixeira

RIO DE JANEIRO, June 19 (Reuters Point Carbon) - A patchwork of regional legislation and complex rules governing land ownership have so far kept Brazil from cashing in on what could potentially be the world's biggest carbon offset market.
The country, home to the much of the planet's rain forest, has struggled to come up with a national strategy to make money protecting its vast ecosystem with projects that Reduce Emissions from Deforestation and Degradation, also known as REDD.

Although not an official theme of the United Nations' Conference on Sustainable Development, REDD has been a hot topic this week in Rio de Janeiro, where policymakers from more than 190 nations are meeting to discuss environmental sustainability.

The idea is to get the private sector and governments to pay to reduce deforestation, which accounts for up to 17 percent of global greenhouse gas emissions.

Advocates say REDD is needed to keep the planet from heating up and causing widespread famine and drought, a key objective at U.N. climate conferences.

"You cannot address climate change without including REDD," says Arild Angelsen, an environmental economist with the Center for International Forestry Research and a professor at the Norwegian University of Life Sciences.

But Brazil, which could potentially produce 58 percent of global REDD credits according to the World Bank, risks falling behind African and Asian nations in attracting private and public investment.

"We have some 19 state-level legislations on climate and REDD and we will have to find a way to harmonize these rules under a national strategy," Brazilian Climate Change Secretary Carlos Klink said. "We know there is great potential, but also a huge difficulty to move ahead."

Emission reductions from anti-deforestation projects are not eligible for carbon credits under the international U.N. framework. They are also not allowed in mandatory emissions trading programs in Europe and New Zealand.

Currently, only Japan and the U.S. state of California have said they might accept REDD credits for compliance with their carbon reduction programs.

In 2010, the U.N. asked countries to develop national strategies, baselines and monitoring systems, while discussions continued to include these credits in a new climate regime that could take effect in the next decade.

That triggered a rush in some nations, such as Malaysia, Indonesia and Congo, which were quick to map out national strategies to attract large corporate buyers seeking greener images who want reduce their carbon footprints.

BURNED
Marco Antonio Fujihara, a consultant with Key Associados, manages two low-carbon funds in Brazil and said financial resources for the few REDD projects that exist have so far originated from donations. When this money runs out, the number of projects will decrease, unless private-sector buyers can be found.

But some investors seeking to buy up land rights lasting decades have in the past been caught short by Brazil's complex land laws. Earlier this year, Brazil moved to cancel more than 30 such deals unless they had the express permission of the government.

Plinio Ribeiro, executive director of trading and consulting company Biofilica, said investors need clarity or they will stay away.

"The risk is pretty high right now to invest in REDD projects in Brazil," he said. "A national strategy that is linked to a future national emissions market and that deals with the land ownership issue, would greatly reduce risk and attract a lot of people to these initiatives."

ROUND OF TALKS
In a bid to get things moving, the Brazilian government announced this week a new round of meetings between officials from states that already have some REDD legislation, such as Acre, Amazonas, Pará and Mato Grosso.

Acre has one of the most-advanced policies and has already clinched a deal with California to trade future carbon credits from its cap-and-trade scheme, which is scheduled to start next year.
Said Monica de los Rios from Acre's Climate Change Institute: "We spent the last two years defining legal structures in the state, but now we run the risk of not fitting in a future national framework."
(Editing by Andrew Allan and Andre Grenon)

CCAs trade lower in light weekly volume

SAN FRANCISCO- June 7 (Reuters Point Carbon) - California carbon allowances (CCAs) for delivery in 2013 slid 5 cents from their close one week ago to end Thursday at $15.50 per tonne in the lightest weekly trading volume so far this year.

Just 10,000 CCAs changed hands in two trades this week on the IntercontinentalExchange (ICE), with all of the action taking place on Thursday.

In the over-the-counter market, CCAs were bid at $15.25/t and offered at $15.75/t, one broker said.
"It seems like the market is just waiting for time to pass and for more people to get into the game," a second broker said Thursday. "The same people can only trade so much with each other until others get in on the fun."

Many in the market believe there will not be any significant trading volume or price swings until after the November allowance auction.

OFFSETS
No trades were reported for California carbon offsets (CCOs), where buyers and sellers are engaged in a standoff over credit prices.

Bids for offsets derived from the destruction of ozone-depleting substances (ODS), the most popular type of compliance-grade credit, have recently inched up from $6.50/t to $7.25/t, but sellers have refused to meet buyers at any price lower than $7.50/t, a broker said.

"The sellers have drawn a line in the sand and are content to sit at the $7.50/t level," he said.
Sellers have said that a price less than $7.50/t they would be approaching the cost of producing the credits, the broker added, although he said they may just be posturing.

Other sellers believe that offset credits, which are supposed to serve as a lower-price compliance instrument, should not be selling at a discount greater than 50 percent of an allowance.

RGGI
No trades were reported for allowances in the northeast's Regional Greenhouse Gas Initiative (RGGI) this week, market sources said.

RGGI allowances for delivery in December 2012 were bid at $1.93 and offered at $2.00 in the over-the-counter market this week, unchanged from a week ago, sources said.

RGGI auctioned 36.4 million 2012 allowances on Wednesday.

The number of allowances sold and the clearing price for those permits will be announced on Friday, a RGGI spokesperson said.

Brokers in the market expect the allowances to clear around the program's reserve price of $1.93/t. (Reporting by Rory Carroll; editing by Bob Burgdorfer and M.D. Golan)