Royal Haskoning active in international emissions trading – Carbon Management
One of the important objectives of the Kyoto Protocol signed by the industrialised nations is to reduce CO2 emissions. The fact that, aside from emission reduction, signatories may also achieve a part of their reduction by environmentally-favourable measures abroad or by buying emission rights is also well known. What is new is that the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) have commissioned Royal Haskoning to act as Carbon Manager and supervise the entire process of this international emissions trading from A to Z. Carbon manager Jos Braam and carbon expert Henk Oosterdijk commented, ‘Instead of being concerned exclusively with the development and engineering of CO2 reduction projects, we are now also involved in the trading itself.’
Every EU country is drawing up a National Allocation Plan which will be approved by the European Commission. It states the quantity of greenhouse gases large energy users may emit. These harmful gases are then converted into the impact of the emission of carbon dioxide. This creates one unit of account for almost all of these harmful greenhouse gases: the Carbon Credit. Companies are allocated their emission rights by their own government. Consideration is now being given to the sale of some or all of these rights in the future. The UK and Germany are already making preparations for it. The expectation is that the other EU countries will follow suit.
The climate always benefits
Jos Braam went on, ‘Companies that emit more than their allowance can do three things: pay the fine (€100 per ton of CO2), invest in the reduction of CO2 emissions from their own plant or invest in CO2 reduction projects in EU and non-EU countries by buying carbon credits.’ Emission rights can be bought through a stock exchange or from projects. It is estimated that the trade in carbon credits already amounts to around €60 billion per year. Like shares, the price fluctuates according to the risks attached and market conditions. ‘This system works reasonably well,’ said Jos. ‘Each purchase of carbon credits results in emission reduction somewhere in the world, so that the climate always benefits.’
Multilateral Carbon Credit Fund
The EBRD and the EIB jointly manage a fund (the Multilateral Carbon Credit Fund) of €150 million to buy credits for large companies and countries. Royal Haskoning has drawn on this fund to develop projects, to set up the structure that is needed and for the negotiations about the purchase contract for projects in the new EU countries. Royal Haskoning has wide experience in drawing up all the technical reports that are required for qualification under the terms of the UNFCCC requirements. These reports are checked by independent auditors such as TÜV. However Royal Haskoning is now also working as the carbon manager for the purchase and sale of carbon credits. Jos Braam continued, ‘As the carbon manager, Royal Haskoning negotiates with the selling party. Not just about the price, but also about aspects such as advances, delivery guarantees and liabilities. So we are now involved in the whole process of project development, including technical execution and finalising a contract.’
The climate always benefits
Two foundations were established for the fund. They enter into the contracts with the sellers and look after the transfer of carbon credits and the purchase price. This means there is no direct contact between the end buyer (a country with an emission reduction objective or a company that is emitting above its allocation) and the seller. The Netherlands was chosen as the legal domicile because the Netherlands has signed agreements for the purchase and sale of carbon credits with many countries. The day to day running of both foundations is in the hands of Fortis, which is advised by Royal Haskoning.
Contact: Jos Braam
+31 (0)24 3284 308
j.braam@royalhaskoning.com
