Sunday, October 07, 2007

First Carbon Sale in Developing Market

If a company is required or wants to hit a certain emissions target but can’t, it still has a few options. One is to buy carbon credits from a company that has cut emissions further than required and so has extra allowable carbon credits that they are selling, or they can buy carbon offsets from projects that are removing or replacing carbon dioxide (CO2) pollution (like a wind farm).

The first sale of carbon offsets on a developing world’s regulated stock exchange took place recently when Sao Paulo, Brazil sold USD $18.5 million dollars worth of carbon credits at auction on the Mercantile and Futures Exchange. This got a lot of investors excited, and experts say it’s an important first step for institutionalizing a carbon marking and for showing that developing economies can make money fighting climate change.

Benjamin Vitale, Conservation International's Senior Adviser on Eco-System Markets and Finance, explained further:

"I think the importance of this is twofold: The more developing countries' financial services sectors can be trading this kind of asset and commodity regularly, just like they trade soy in Brazil, it enables them to trade other credit like emissions from deforestation. It also helps get out the word about climate change and why it's important for Brazil."
The purchaser of the credits was Dutch-Belgian Fortis Bank, which beat 13 other bids to purchase the offsets and buy the rights to emit 891,163 US tons of CO2 for $22.90 per metric ton.

Under the Kyoto Protocol, companies that emit CO2 and methane can buy carbon offsets to lower their emissions. The carbon credits are from Brazil’s Bandeirantes Landfill project to produce energy from the methane released from tons of solid waste that arrives each day.

According to the
Associated Press, Fortis has been positioning itself as a broker of carbon credits; buying them and then selling them to European companies that need to make emissions targets. In Europe, emission permits have traded for around $30.33 a ton, so Fortis apparently got a good deal. On average, UN-certified credits like the ones sold in Brazil trade for around $20.56.

The World Bank says the global carbon trading market tripled from $7.9 billion in 2005 to $24.4 billion in 2006.

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