Greenhouse gas emissions traders polled on price expectations

Greenhouse gas emissions market participants expect prices to average $5/tonne of CO2e until 2005 and will average $11/tonne of CO2e by 2010.

By OGJ editors

HOUSTON, Aug. 16 -- The emerging greenhouse gas (GHG) emissions market is anticipated to have a robust future, with market participants expecting prices to average slightly more than $5/tonne of CO2 equivalent (CO2e) until 2005, before the Kyoto Protocol on Climate Change—yet to be ratified—enters into force. Prices are expected to reach an average of $11/tonne of CO2e by 2010, once the protocol is initiated.

This was one of the findings in a recent analysis released last month by emissions broker Natsource LLC, New York. Natsource conducted the survey along with Ottawa, Ont.-based Global Change Strategies International Inc. (GCSI), which Natsouce agreed to acquire in June. Natsource and GCSI polled 35 market participants, including companies with operations in Canada, the US, Japan, the European Union, and Russia. The firms were polled on their views of the future of GHG reduction prices, the economic exposure to climate change policies, and the strategies to mitigate risk.

Interest in GHG emissions trading has intensified since November 2001 after climate change delegates met in Marrakesh, Morrocco, to negotiate rules for international emissions trading under the Kyoto Protocol (OGJ Online, Feb. 18, 2002).

"This report provides value to those interested in the (GHG) market by exploring views of key market participants," said Jack Cogen, Natsource president. "The report is designed to assist firms and policy-makers as they make plans to mitigate potential risk and assess costs resulting from climate policy," he added.

Report findings
Most of the companies interviewed, Natsource said, reckon that the Kyoto Protocol will enter into force this year. Those polled also expressed that the US would not join the first protocol compliance period, "although some modest amount of demand will be present from US state and local programs and/or a national power plant carbon reduction program," the report said.

Participants also expressed "concerns about obstacles that could prevent prices from becoming fully efficient, such as poorly harmonized or delayed national policies, the potential transaction costs of the Clean Development Mechanism projects, and national pressure to take more action 'at home,'" the report stated.

In comparison to the Kyoto Protocol's economic modeling estimates, respondents in the private sector said they viewed prices falling at the low to mid-range of the modeling results, the report said. "These model results show a range of $0-24(/tonne of CO2e) for a fully efficient market and $7-45(/tonne of CO2e) in a restricted market?."

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