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29.05.2007 » Pressrelease » Solar Energy
3C in Point Carbon: German companies unlikely to use full CDM/JI quota
German companies covered by Europe's carbon trading scheme will most likely not buy as many Kyoto offset credits as they are allowed to surrender for compliance, according to observers.
Project developers and consultants talking to Point Carbon say that German companies have been slow to engage in credit-yielding projects under the Kyoto Protocol's clean development mechanism (CDM) and joint implementation (JI).
"The general feeling is that German companies are a little bit behind in CDM and JI," Bernhard Zander, first vice president of the government-owned bank KfW's carbon fund, told Point Carbon.
"RWE is building up a serious portfolio, but besides that there is not much," Zander said
In the country's national allocation plan for the 2008-2012 second trading period of the EU emissions trading scheme, the limit on the use of credits from CDM and JI projects was set at 20 per cent of the companies' allocation in late December 2006. The original proposal was a limit of 12 per cent.
The increased access to cheaper credits from investing in emissions reductions in other countries has not led to more companies engaging in the project market, although experienced companies quickly eyed opportunities.
"Our experience is that companies that have been involved with CDM and JI before realised that there was a larger potential, and most of them reacted quickly to try to secure more credits," said Stefan Kleeberg of carbon asset manager 3C.
Kleeberg did not believe the credit limit would be fully utilised among German companies. The 20 per cent limit translates into an import potential of 90 million credits per year, as Germany's total allocation of EU allowances was set at 453.1 million per year by the European commission.
"The companies that have not been involved have not been responding to the new limits," he said.
Felix Nickel of project developers Futurecamp agreed that companies had not come forward to try and secure project credits after the limit was increased, although he saw a growing awareness on the subject.
Kleeberg said that an important factor that could increase the use of project credits were the availability of banks and consultancies that could inform and guide smaller companies. One option that could be popular with smaller companies would be to swap EU allowances for CDM credits, he said.
"It's a more simple trade and easier to understand," he said, adding that one obstacle could be to establish confidence necessary to close such deals.
Zander said one of the reasons German companies were a bit behind in their involvement in the project mechanisms could be that there is no governmental procurement programme in Germany.
"In countries where you have that there is a general feeling that CDM and JI is a positive thing," he said, adding that the increased limit on the use of CDM and JI credits could turn the trend, as it was a "clear, political signal that CDM and JI is wanted."
Positive response to carbon fund targeting smaller firms
Last week, KfW and the European Investment Bank invited participation in a €100 million fund that would seek to generate credits through CDM and JI and sell these on to small- and medium-sized companies.
Zander said the response had been in line with expectations, and that a Spanish company had offered to be an intermediary for small Spanish companies.
"We are quite confident that we have met a demand in the market," he said.
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