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Raw materials merchant Noble Group has entered the international carbon emissions compliance market. With one of the industry’s most successful teams joining the company from Dutch utility Nuon, Noble will immediately become a major player on the global market.

 

The carbon credits team managed by managing director Thorsten Ansorg, director, origination Olaf Kallinich and director, sales Robert de Boer has pioneered many key transactions in this market participating in some of the first-ever European Union (EU) Emissions Trading Scheme (EU ETS) carbon credit transactions.

 

In addition, the team has sealed the present largest transactions involving certified emission rights (CERs) from projects under the Kyoto Protocol-based Clean Development Mechanism for carbon emission abatement in developing countries.

 

Noble Group will ensure an efficient integration of the new carbon business through the support of two current senior directors, Vicente del Castillo and Andrew Bingham.

 

David Reschke from Calgary law firm Thackray Burgess, who has been working with the team since 2001, will continue to advise on contracts and other legal matters.

 

On January 1, 2005, the EU established a new carbon market through the implementation of the EU ETS. The EU ETS resulted in around 7,300 companies being exposed to greenhouse gas emission compliance requirements. Through legislation enacted by the local governments of the 25 EU member states, the affected companies have imposed upon them tight carbon emission restrictions.

 

The first compliance period under the EU ETS is 2005-07 which precedes the first Kyoto Protocol compliance period which starts in 2008. Under the EU ETS, many companies, and especially those in the power industry, received substantial under-allocations of emission allowances and will have to obtain credits from the market to meet their compliance requirements.

 

Non-compliance with EU ETS requirements has significant adverse financial consequences as penalties for non-compliance in the first EU ETS compliance period are €
40 per tonne of excess emissions plus the requirement that the entity still obtain the necessary emission credits (currently market priced at approximately €
20 per tonne) to be compliant.  The second emissions compliance phase in the EU runs from 2008-12 (parallel with the first Kyoto Protocol compliance period) and will bring even tighter emission allocations and higher penalties ( €
100 per tonne) for non-compliance.

 

The ratification of the Kyoto Protocol by Russia and its coming into effect on February 16, 2005 has created from 2008 onwards a worldwide emissions compliance market with many interesting opportunities. For example, countries such as Japan and Canada are expected to be “short “in respect of emission rights and accordingly such market players will have to source additional credits from the world market.

 

The existing combination of Noble’s coal and raw material portfolio, its excellent global contacts and positioning in the fast growing Asian markets, in conjunction with the new carbon credit team’s skills and market access, will allow the group to pursue many promising emission market opportunities in the future.

 

Noble expects the closing of the first large scale carbon credit transactions as early as mid-summer 2005.

 

The new carbon activities of Noble will operate from its Dublin subsidiary, Noble Carbon Credits Ltd and supported by two offices in Frankfurt and Amsterdam.  Leveraging off its current businesses and industry contacts, Noble plans to quickly expand this business worldwide and sees itself as the first player with a global sourcing, marketing and portfolio management approach to this new market.

 

The activities of the new carbon team will initially focus on the global sourcing of CERs from Kyoto’s Clean Development Mechanism projects in developing countries and the sourcing of EU allowances. Subsequently, Noble plans to become directly involved, through investment and otherwise, with greenhouse gas abatement projects.