UK: July 23, 2008
LONDON - At the age of 25, Dan Lewer is going into retirement -- carbon
emissions retirement that is.
Lewer is co-founder of a new online carbon offset company called Carbon
Retirement (www.carbonretirement.com), which launched on July 15.
Carbon Retirement offers consumers and companies a novel approach to
offsetting their carbon footprint by letting them dip into the European
Union's Emissions Trading Scheme, the 27-nation bloc's flagship weapon in
fighting climate change.
Now in its second phase running from 2008-2012, the EU scheme sets an
emissions cap for its heavy industry and allocates a fixed number of
permits, called EUAs, each allowing the bearer to pollute or trade the
equivalent of one tonne of carbon dioxide (CO2).
While traditional offset vendors sell verified emission reduction credits
generated by clean energy projects like hydro dams and wind farms, often in
developing countries, Carbon Retirement buys and "retires" EU permits on
behalf of its clients.
By retiring the EUAs, Carbon Retirement removes them from the market,
rendering them unusable by the heavy-polluting companies. This equates to
one less tonne of CO2 that the 12,000 or so participating installations are
able to emit.
The idea for Carbon Retirement was conceived late last year when Lewer and
his friends were planning a ski trip to France. The group looked into
offsetting the emissions from their flights with the traditional offset
certificates. "We are environmentalists, the kind of customers of a typical
carbon offset company," Lewer told Reuters.
"But we found that although most offsets seemed environmentally-sound, the
market as a whole seemed really complex and difficult to evaluate."
Although global trade in voluntary offets more than tripled in 2007 to 65
million tonnes of CO2 sold for some US$330 million, accusations of poor
quality offsets and double-counting continue to plague the market.
"It struck us that the EUA retirement process was one that could address all
these problems," Lewer said.
HOW IT WORKS
After an offset purchase is made on its website, Carbon Retirement buys the
corresponding EUAs on the spot market, from CO2 exchanges like EXAA in
Austria and Climex in the Netherlands. Spot EUAs currently trade around
24.50 euros (US$38.93) a tonne.
Carbon Retirement charges a 10 percent premium on spot EUA prices to cover
costs, and an additional five percent for unexpected price volatility
between the initial sale and when Carbon Retirement buys them from the
market.
"If the price rises in that time, we lose money, but if it drops
significantly, we use any windfall profits to retire more EUAs ... The 10
percent mark-up is all we keep," Lewer said.
In the first phase of the EU's scheme (2005-2007), the market was long,
meaning too many permits were allocated to participants. The EUA market
crashed as a result.
"Had we launched this in phase 1, any EUAs sold would have been
environmentally worthless," Lewer said.
Carbon market analysts collectively forecast a short market in the second
phase based on tighter caps set last year by the European Commission, a view
also shared by Lewer.
"(We) have a fairly high degree of confidence that phase 2 will be short ...
and with every EUA we retire, we're helping to make it even shorter."
With tighter supply comes higher prices, and analysts estimate that EUAs,
which are also closely correlated to oil and power, could rise as high as
100 euros a tonne of CO2 if energy prices continue to climb.
Traditional offsets command between three and seven euros.
"If EUAs get a lot more expensive, it obviously makes it a more difficult
sell for us, particularly to our corporate clients," Lewer said.
"If you look at our business model, it's evident that we're never going to
make millions out of this. This is predominantly an
environmentally-motivated project."
Lewer would not say how many EUAs Carbon Retirement has sold so far, nor
would he predict how many it is expecting to sell.
"Our ult
Story by Michael Szabo
REUTERS NEWS SERVICE
