[greenyes] Kyoto Takes Effect and Carbon Trading Begins

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November 8, 2004

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As Kyoto Protocol Comes Alive,
So Do Pollution-Permit Markets
Funds Handling Trades
For Emissions Credits Grow
As Russia Signs Agreement

By JEFFREY BALL
Staff Reporter of THE WALL STREET JOURNAL
November 8, 2004; Page A2

The market for hot air is suddenly heating up.
Russian President Vladimir Putin signed the Kyoto Protocol, a move that will 
put into effect the international treaty forcing industrialized countries to 
cut emissions of the gases believed to cause global warming. Russia's 
ratification of the treaty amounts to a warning shot to companies throughout 
the industrialized world, signaling they will have to either reduce 
emissions of carbon dioxide and other suspected global-warming gases or 
start paying for the right to cough them out. As a result, Mr. Putin's move 
sounds the starting bell for a new international financial market in which 
companies buy and sell what amount to global-warming pollution permits.
For more than a year, in anticipation of Kyoto, small numbers of these 
permits have been traded on a handful of fledgling markets around the world. 
Now, with the official ratification of the treaty, the buying and selling is 
ramping up fast.

Institutions ranging from the World Bank to Japanese electricity producers 
to French lender Caisse des Depots & Consignations are cobbling together 
investment funds totaling more than $700 million to acquire 
global-warming-emissions credits. Fund organizers said they expect the size 
of the investment pools to grow significantly during the next year.
How big the so-called carbon market might get is largely a guess. Point 
Carbon, an Oslo-based consultant, estimates it could reach $10 billion by 
the time the Kyoto Protocol's mandates kick in at the start of 2008.
The Kyoto treaty mandates emissions reductions only from industrialized 
countries. But it lets those countries -- and the companies in them --  
generate credits toward their quotas by bankrolling projects that reduce 
emissions far from their own smokestacks, in the developing world. The 
theory is that, since global warming is global, the atmosphere doesn't care 
whether emissions occur in, say, Germany or China. For a German company, 
however, financing an emissions-reduction project in China is likely to be a 
lot cheaper than doing so at home, because in Germany, the cheap emissions 
improvements already have been made.
Among the more active buyers of emissions credits is TransAlta Corp., a 
large Canadian utility that is that country's second-biggest carbon-dioxide 
emitter and that also produces electricity in the U.S., Mexico and 
Australia. TransAlta has contracted to buy 1.75 million global-warming 
credits over 10 years by investing in a project to reduce methane emissions 
from decomposing pig manure at a massive swine farm in Chile.



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