Australian Carbon Credits Explained March 25, 2009

AEU´s, AAU´s EUA´s CER´s….blah blah blah, whats it all mean? Well in terms of the Australian market due to start on 1st July 2010, lets try to shed some light on the greenhouse, so to speak…

AEU´s = Australian Energy Units. With all the various type of carbon markets now functioning in many disperse parts of the world a Unit or Credit is always equal to 1 tonne of CO2. For Australia this is the unit being used to trade carbon and represents tonnes of carbon dioxide emitted into the atmosphere.

Each unit has a value, like a share, which moves up and down for various reasons. Just like shares too!! The current market price is A$17.00 per unit, or per tonne of carbon dioxide. Still with me??

Ok so each affected industry, those that emit large quantities of carbon, will be given a yearly limit of units. e.g. I am a coal producer that has been given a limit of 200 tonnes of carbon dioxide emissions p/year by the govt. Now if indeed I emit 250 tonnes, the only way I can comply with my obligations is to buy the extra 50 tonnes in the Australian Energy Unit market (carbon credit market), at a cost.

Hence we now have a carbon market of buyers and sellers (sellers are those companies that emit less then the 200 tonne limit for example and therefore have “extra” units to sell). Effectively capitalising carbon dioxide emissions.

The politics and environmental arguments about the various merits of the Australain system I will leave for another time, at the very least Australia will now have a transparent system of managing polluters and producers of greenhouse gases.

It’s a start! Please email me if you would like to discuss the topic further… Or of course join the blog discussion.

The Future for Bio-fuels v´s Crude Oil March 17, 2009

Is the future for bio-fuels less certain now that crude has fallen to below $50.00 a barrel?

Forgetting for a minute all the arguments about replacing food crops with bio-fuel crops and possible reducing world food production, let’s just focus on the pure economic considerations of Bio-fuels. Given that the cost of production for many bio-fuels is between $30-$80, you could be forgiven for thinking that without a crude oil price above the $70-80 dollar range; many bio-fuels are going to struggle to be competitive.

The one huge factor, we all need to take into account is government subsidies for bio-fuels and alternative energy. Industry experts believe alternative fuels like jatropha (used in aviation fuel, much like ethanol is used in gasoline for cars), are still 5 years away from a sufficient supply level to be an economically viable alternative, and until then will need government subsidies to compete on price with crude oil.

However, the Brazilian example with ethanol should prove the way forward ( Brazil is considered to have the world’s first sustainable bio-fuels economy and the bio-fuel industry leader , as after some years under government subsidies, the sugar cane (ethanol) industry is now not only self-sufficient in Brazil but is exporting much of its product to the United States and Europe.

This is the solution, short term government subsidies to achieve the long-term desired goal of energy self-sufficiency and sustainability. Eliminating the reliance on fossil fuels, and therefore much of the human environmental impact on the environment, is in my view the number one battle in the fight to win the climate change war. Lets be clear about one thing, this is a war…..both to change social, political, and environmental views and stimulate real change in how we move forward  from here.

There are many bio-fuels and other alternative energy options available out there. Companies like Terasol Energy are focusing on plant science and developing crops like ” jatropha (jatropha curcas) and next generation short cycle crops, such as crambe, that maximize the use of degraded or marginal lands that are otherwise unsuitable for food crop cultivation”…   All we need to do is support these efforts; directly or indirectly through our pressure on governments and local politicians to continue the push toward alternative energy and economically viable bio-fuels.

Sound like an environmental campaigner on a soapbox? Far from it; I am an ex-banker with bail-out fatigue. If we are going to support or bail-out anything these days it needs to be our future…..the green economy.

Bio-fuels are one part of the solution, regardless of the price of crude, we need to focus our efforts on sustainable alternatives which will provide the jobs and economic growth we so desperately need.  The high price of crude stimulated the search for alternatives….lets find the solutions before the price rises again.

Cap and Trade v´s Carbon Taxes March 10, 2009

Carbon emission regulations are here to stay. Companies that understand how the various disparate national systems work will be ahead of the game in terms of competition and management strategies.

Europe, Australia, NZ, Japan and many other countries already have some sort of emissions restriction system in place, we are all just waiting to see what the United States will do. Will it be a Cap and Trade system or a simpler tax on carbon emissions?  Looks like the cap and trade will win the day.

What is cap and trade ? Lets look at both terms

CAP = a limit placed on industry in terms of carbon emissions. e.g  a pulp mill is designated (normally by government) an emission limit of 100 tonnes of carbon dioxide per/year.

TRADE = If the above mentioned pulp mill only emits 80 tonnes during the year, that means it has 20 tonnes of CO2 left over to sell into the market, or trade. Of course the reverse would apply the pul mill emitted 130 tonnes of CO2, meaning it would need to buy back the excess 30 tonnes from the market, or trade them with another company that is under the cap.

Whereas a simple tax on carbon emissions means, all emitters of CO2 will pay a tax of some sort based on the amount of carbon emitted each year. I prefer this system as its far simpler and less open for, lets say coercion. However it appears the Obama government will continue with its plans for a Cap and Trade system after all.

In any case, be it Cap and Trade or a carbon tax, we are all about to come into a new era of environmental regulation and comliance.  It will begin by affecting the large polluters, but eventually will affect all of us.

Are you, your company, or your accountant ready for the new economy?

Green (not greed) is good!

Taking the “HEAT” out of the Global Warming debate March 7, 2009

The phrase global warming has become a misleading headline for the debate on the subject….The “warming” part is not necessarily the short-term result of climate change.

The key words are indeed “CLIMATE CHANGE”, because that is what happens in the short term. We loose our well defined seasons, we get crazy weather patterns, colder winters, warmer summers, polar ice melts, and snow in Madrid etc  a global “WARMING” as such is not evident in every corner of the earth all the time.

The naysayers on climate change, latch onto this misnomer of short term warming and try to explain away dramatic climate changes as natural short term events, while pointing to recent cold weather in the US and Europe as being contradictory signs, and certainly not warming at all….

Let´s be a bit smarter, and understand that global warming is only the catch phrase for the Climate Change debate, focusing on semantics is only a distraction. “Warming” may not be visible in the short term, and as such may not be the indicator of climate change.

However, erratic weather patterns and polar ice melts are indeed signs of long-term climate shifts and a warming by degree´s in the earth´s core atmosphere….lets end the debate, lets start acting on real issue´s now.

When talking about the subject we should use the term climate change, because that fact is self-evident, the climate is indeed changing.

Stay Green…