A U.S. carbon market could learn from Europe -IETA
19 Apr 2007 21:41:09 GMT Source: Reuters
By Timothy Gardner NEW YORK, April 19 (Reuters) - The United States has an opportunity to learn from mistakes made in the Europe Union's carbon trade, but the longer it waits to create a market on greenhouse emissions, the more it stands to loose, board members of a global emissions carbon trading group said. "The U.S. has a chance to catch up and learn from the mistakes that were made in the European Union and I think that is a tremendous opportunity," Patrick Verhagen, a vice president of cement maker Holcim, and a board member of the International Emissions Trading Association, told reporters. The emissions group met on Thursday in part to discuss the opening of an office in Washington, D.C., its first in the United States, to lobby the government on the possible creation of a greenhouse gas market. The United States, the world's top greenhouse gas emitter, does not regulate the gases, but corporate and environmental group pressure to do so is growing. The debate is heating up in U.S. Congress on how to use market mechanisms, such as cap and trade, or a straight carbon tax, on the gases scientists link to global warming. The European Union's cap and trade market, which allows companies that cut emissions under a set baseline to sell credits to ones that do not, cut kicked off in 2005. Prices collapsed last year when it became apparent that industries had been given too many carbon allocations by the European Union. The over-allocation meant there was little need for companies to buy credits to meet the baseline. One debate lawmakers in Congress and officials in regional markets forming in California and the Northeast are hashing out is whether carbon allocations should be given to industry, as they were in Europe, or auctioned. Many analysts say auctions would distribute allocations better as industries that really needed them to meet the baseline would be the highest bidders. Several states in Northeast are pushing for 100 percent auction of allocations. Proceeds from the auctions, they say, could help cut emissions because they would be spent on funding clean energy like solar and wind power. IETA members also debate the use of auctions. "Dollars in companies would be transferred to the government to make decisions. We don't think that makes sense," said Bruce Braine, a vice president for strategic policy at power utility American Electric Power Service Corp. <AEP.N>. He said auctions would effectively work as a tax on utilities and could push up power prices. How to involve rapidly developing countries like China in a global emissions market is also a debate within IETA. Braine said that if the United States regulated emissions but China did not, one way to deal with that could be to penalize the Asian giant within a trade group, such as the World Trade Organization. David Hone, an IETA board member and the climate advisor at oil major Royal Dutch Shell <RDSa.L>, said China was doing more on emissions than many give them credit for, particularly on auto emissions. He said one day auto emissions credits could trade between China and the developing California market. All of the board members said U.S. hesitation in forming a market is costly on several levels. "The center of emissions trading is in London," said Jack Cogen, president and CEO of carbon asset manager Natsource LLC. "There is an infrastructure being built up, they have an emissions futures market, it's leaving the U.S. financial markets behind." Shell's Hone said emissions trade "leaves you with a much more strategic approach to energy and that is happening in Europe. Adding climate change to the mix really pushes that along."
