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Eurocarbon LTD operates within three regulatory
market-based and project-based mechanisms (Emissions trading, JI
and CDM) as well as the voluntary market and is aimed at achieving
cost effective emissions reductions whilst at the same time contributing
to sustainable development. Carbon transactions can be grouped in
two main categories:
Allowance-based transactions,
in which the buyer purchases emissions allowances created and allocated
(or auctioned) by regulators under cap-and-trade regimes, such as
Assigned Amount Units (AAUs) under the Kyoto Protocol, or EU Allowances
(EUAs) under the EU ETS.
Project-based transactions,
in which the buyer purchases emission credits from a project that
reduces GHG emissions compared with what would have happened otherwise.
Some project-based transactions are conducted to meet voluntary
targets, but most are ultimately intended for compliance with the
Kyoto Protocol or other regulatory regimes.
In cap-and-trade regimes, project-based transactions
allow for the creation of new assets that can be used for compliance,
above and beyond the initial supply of allowances. For example,
Emission Reduction Units (ERUs) created through JI projects and
Certified Emission Reductions (CERs) created through CDM projects
can both be used to meet obligations under the Kyoto Protocol, in
addition to AAUs. There is thus no fundamental difference in quality
between allowances and project-based credits, once the latter are
issued.
Our expertise in the new low carbon economy market helps
developers to generate carbon credits and emitters to manage and
purchase carbon credits.
AAUs + CERs + ERUs + RMUs + ECs + VERs = Compliance
& Trading opportunities
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The International Emissions Trading (IET) and The European
Union Emissions Trading Scheme (EU ETS) are cap and trade
programs that specify the level of emission reductions, the
deadlines, and methodologies that signatory countries are
to achieve. Each government can allocate parts of their Assigned
Amount Units (AAUs) to individual companies or sectors; these
are termed Emissions Rights, Emissions Quota or Emission Allowances.
When a company emits less than it is allocated, that company
can trade the surplus of emission rights to other companies,
that have a shortage of rights or on the market. Do
you want to know more about AUUs?
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The CDM is a project-based emission reduction programe designed
to meet two main objectives: to address the sustainable development
needs of the host country, and to increase the opportunities
available to parties (developed countries) to meet their reduction
commitments. CDM reductions are called Certified Emission Reductions
(CERs). The only emission reduction credits
that may be used to offset emissions or banked throughout phase
1 and phase 2 of the EU ETS are CERs arising from CDM projects.
Do
you want to know more about CERs?
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JI is a project-based mechanism developed under the Kyoto
Protocol, designed to assist developed countries in meeting
their emission reduction targets through joint projects with
other developed countries, meaning that JI projects can only
be implemented between capped industrialised countries. One
or more investors (governments, companies, funds, etc.) will
agree with partners in a host country to participate in project
activities which generate Emission Reduction Units (ERUs),
in order to use them for compliance with targets under the
Kyoto Protocol and the IET scheme. The EU ETS will
introduce tradable ERUs in the second phase 2008-2010, at
the moment they can only be banked. Do
you want to know more about ERUs?
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Removal Units (RMUs). These are emissions stored in forest
projects and can be generated and traded under CDM or JI.
The EU ETS applies a total restriction or bar on any RMUs,
ERUs or CERs generated by projects based on Land Use, Land
Use Change & Forestry (LULUCF) activities at least for
the 2005-2007 period.
Do
you want to know more about RMUs?
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Emission Credits (ECs) are a special type of credit that can,
in some national systems, be generated by a company or project
developer through the implementation of an emission reduction
or savings project, without having an emission obligation.
This is the case in the UK. These ECs can be traded nationally
and not automatically on the international market. Do
you want to know more about ECs?
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Voluntary markets for emissions reductions that are not compliant
with the Kyoto protocol, are available for sale to corporations
and individuals who want to offset their emissions for non-regulatory
purposes. Emission offsets in this latter category are verified
by independent agents, but are not certified by a regulatory
authority for use as a compliance instrument, and are commonly
referred to as Verified Emission Reductions (VERs).
These carry only the possibility, but not a guarantee, that
governments will allow them to be applied against future emission
reduction requirements. These so-called "verified emission
reductions" (VERs) are not a standardized commodity.
While they may eventually become CERs or ERUs, many of these
reductions have no secondary market benefits outside of their
embedded "green image value" or speculative value.
Do
you want to know more about VERs?
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Joint Implementation and CDM programs are driven
by the understanding that climate change is a global problem, and
therefore it does not matter where the emissions reductions are
physically achieved. The key consideration is that they occur and
are achieved in the most cost- effective way.
If you would like practical help or strategic advice about carbon
trading, please contact us at info@eurocarbonltd.com
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