U S-based global energy company Entergy Corporation and Danish electricity supplier Elsam SA have executed the first ever international trade in greenhouse gas allowances under the Danish climate change program this week. Elsam has also sold allowances to E.On of Germany which has also participated in a third transaction involving Danish power company Energi E2.
Under the first transaction, Elsam sold 10 000 Danish allowances to Entergy Corporation, which intends to remove the allowances from the market and thereby effectively eliminate 10 000 metric tons of emissions. Natsource LLC brokered the transaction.
Entergy is a global energy company with power production and distribution operations which in May announced a voluntary commitment to stabilize greenhouse gas emissions from its power plants. Elsam is a Danish electricity supply company that owns six generation plants in the Nordic region, including several wind-powered facilities. Under the Danish trading rules, power generators have emissions caps and are permitted to undertake trading.
“Entergy’s first priority is to reduce greenhouse gas pollution within our own operations,” said Entergy CEO J. Wayne Leonard. “We also believe that seeking out reductions elsewhere in the world will stimulate innovation and create incentives for finding new ways to aggressively cut pollution in the most practical, cost-effective manner possible. The purchase of Elsam’s allowances demonstrates that the global trading markets are an efficient and economical way to reduce greenhouse gas emissions.”
“Entergy’s action may however be more than a philanthropic gesture”, said Natsource broker, Albrecht von Ruffer. “Energy companies are looking at the emissions trading market as a way of hedging against the potential introduction in the future of absolute caps in CO2 emissions”.
Entergy said it is also making new investments under its voluntary climate change initiative in a variety of other projects to reduce CO2 emissions beyond its traditional power plant operations. “This emissions trade is only one of over two dozen projects the company is pursuing to achieve our emissions stabilisation commitment announced in May,” Entergy’s climate change co-ordinator Marty Smith said.
Independently verified greenhouse gas emissions reductions have been traded for several years. However, government programmes are creating allowances that are likely to be preferred instruments for complying with a greenhouse emissions limitation. The Danish CO2 Quota Act has been in force since January 2001 but this represents the first reported trade.
“This trade in Danish allowances between Elsam and Entergy marks an important development in international greenhouse gas markets,” said Michael Intrator, managing director, Global Emissions Markets at Natsource. “This is a recognition that companies can utilize the global trading market to achieve economic and environmental objectives.” Natsource brokered the transaction utilizing its network of offices in the United Kingdom, New York and Washington.
Denmark and the United Kingdom are the only nations that have developed formal greenhouse gas trading programs to date.
Yesterday two further Danish carbon dioxide (CO2) credit deals were reported, bringing the total to 160 000 tonnes.
Entergy said it had sold 100 000 tonnes to E.On in addition to the sale to Entergy. E.On have bought the allowances for compliance purposes. E.ON has interest in the pollution permits because the company owns 50 per cent of the Danish Ensted power plant in southern Jutland, which participates in the government programme. Elsam owns the other half.
Also rival power company Energi E2 has sold 50 000 tonnes certificates to E.ON, a spokesman at the Danish Energy Agency told the Reuters news agency.
Both Elsam and Energi E2 declined to reveal the value of the deals but broker von Ruffer said that the price did not exceed 40 crowns ($4.78) per tonne as that is the same as the fine companies would have to pay if they exceed their CO2 caps.
The Danish trading scheme is the forerunner to an anticipated pan-European trading basis which would be wider than the Danish arrangements, which only covers the power sector.