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ČR may sell CO2 credits to six states

Swap could net country 16.7 billion Kč in an unprecedented deal

By Riva Froymovich
Staff Writer, The Prague Post
April 18th, 2007 issue

The Czech Republic is negotiating a monumental sale of its surplus greenhouse gas emissions under the Kyoto Protocol with six other governments, a deal that could be worth an estimated $800 million (16.7 billion Kč).

The Environment Ministry has signed memorandums of understanding for likely transactions with Finland, Japan, the Netherlands, Portugal, Slovenia and Spain, said Pavel Zámyslický, a member of the negotiating team at the Environment Ministry’s department of climate change.
“This would definitely be a large-scale deal if it indeed goes through,” said Henrik Hasselknippe, director of EU emissions trading analysis at Point Carbon, a global carbon market analyst based in Oslo.
Hasselknippe has not seen any similar deals in which countries agree to sell surplus emissions under Kyoto. Instead, most emissions trading occurs between companies on the European Union Emissions Trading Scheme (EU-ETS), Hasselknippe said.
The Czech Republic’s total surplus is an estimated 75 million to 100 million assigned amount units, or metric tons, of carbon dioxide (CO2) for 2008 to 2012, Zámyslický said.
The amount of CO2 units that will be sold to each country is not yet clear, he said.
Zámyslický guessed that the price for each ton would be between $3 and $8. Should the country sell all of its excess emissions allowances, the return could be valued at $800 million.
Members of the Kyoto Protocol have committed to reducing their national CO2 emissions by adhering to limits set by the United Nations Framework Convention on Climate Change. If a country does not use all of its allotted emissions, it may sell them to another nation.
The emissions levels set by Kyoto were based on trends from 1990. Since then, many countries in Central and Eastern Europe have experienced strong economic growth and modernized their industries. The result is lower emissions and a greater surplus — until the growth of industry catches up.
“The government would like to reinvest earnings [from the sale into] future emissions-reduction projects in the Czech Republic,” Zámyslický said.
However, before any sale can occur, the Environment Ministry must win Parliament’s approval ofan amendment to the country’s emissions trading law. The ministry hopes to bring its proposal, called the Green Investment Scheme, to the floor in May, Zámyslický said.
Carbon copying
The proposed CO2 sales come as the government debates whether to oppose much stricter CO2 limits set by the European Commission (EC) last month.
Industry and Trade Minister Martin Říman has said he may advocate legal action against a new set of commitments leveled at the Czech Republic by the EC, which decided to decrease the country’s CO2 emissions allowances for the 2008–12 trading period to 86.8 million metric tons (95.7 million short tons) — 14.8 percent lower than the country proposed.
The EC’s figure was based on the country’s 2005 emissions, which were 82.5 million metric tons, and then adjusted for expected economic growth.
Říman claimed the decision disregards the country’s rapid economic growth, which may result in higher emissions.
The cap proposed by the EC is intended for domestic industry, like manufacturing plants and factories, while the Kyoto guidelines set limits for countries overall. Companies that require more emissions than allowed under the trading scheme may buy permits from firms that don’t use all their carbon credits, creating economic incentives for efficient manufacturing and the overall reduction of carbon emissions.
The Cabinet will meet April 23 to debate the EU decree. The official decision on whether to accept the new limits or sue the EC must be made within two months, said Tomáš Bartovský, spokesman for the Industry and Trade Ministry.
The Environment Ministry has thrown its support behind the tighter restrictions, which will create an opportunity for industry to modernize, bolster economic opportunities in carbon trading and aid the environment, said Environment Minister Martin Bursík at a press conference.
“We consider it a great success,” he said. “[The] Czech government will adopt [the plan].”
“Bursík is not the only member of the government,” Bartovský said. “That’s his opinion.”
“It’s a matter of principle. If you have a look at the distribution of permits between the old and new member states, there are striking differences,” he said. “The commission has significantly cut the allocation plans of countries that have carried out their obligations to the Kyoto Protocol while still facing significant economic growth,” which could lead to increased emissions.
The Industry and Trade Ministry is preparing for the meeting and has not officially decided whether to launch a challenge against the EU limits, Bartovský said.
“The EU target will definitely be stricter” than Kyoto because it is based on more recent figures, said Hasselknippe of Point Carbon. “The EU says that even if you have this surplus under Kyoto, that doesn’t mean your companies should have that surplus.”
“Others might argue differently,” he added.
— Hela Balínová and Naďa Černá contributed to this report.

Riva Froymovich can be reached at rfroymovich@praguepost.com


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