Monday, April 07, 2008
Kyoto-Next Faces EU Greenhouse Gas Emissions Increase
There was the Kyoto-Next meeting in Bali, Indonesia in January and this week 1,000 delegates are meeting in Bangkok, Thailand to chat about the successor to the Kyoto Protocol. Unfortunately, greenhouse gas emissions rose 1.1% in the European Union in 2007 under the current agreement. We hope the failure of these Kyoto Protocol signatories to reach their greenhouse gas reduction targets will not prejudice 'cap-and-trade' as a mechanism for reducing global greenhouse gases. The protocol is failing because of faulty design, not inherent flaws in cap-and-trade. States in America similarly botched utilty deregulation by designing a system destined to fail. They deregulated the wholesale market but to a state maintained regulation at the retail level by freezing utility rates. Now those chickens are coming home to roost as utility company are now requesting large rate increases to make up for the freeze years. But we digress.
It is being described that too many carbon dioxide permits were issued and that devalued the motivation to retrofit plants because credits (rights to pollute) were inexpensive and plentiful. It is being reported that governments intend to tighten the allowance market to give more value to the permits. Hopefully, because the program operates between 2008 and 2012, it is not too late to influence the retrofit/allowance market. There is a healthy market, however, for selling credits. In 2007 the value of all the carbon credits traded in Europe were approximately $40 billion. The price of a carbon permit is about $37 on the European Climate Exchange. The United States, China and India are not signatories to the Kyoto Protocol but do participate in the Bush Administration-promoted Asian Pacific Partnership and Methane-to-Markets Program. We have an allowance trading house through our Carbon Mercantile Exchange (CMX) (The Wall Street Journal, 4/3/08, The Washington Times, 4/5/08)