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[greenyes] Kyoto Takes Effect and Carbon Trading Begins

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

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.

Peter Anderson, President
4513 Vernon Blvd. Suite 15
Madison, WI 53705-4964
Ph: (608) 231-1100
Fax: (608) 233-0011
Cell: (608) 698-1314
eMail: anderson@no.address

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