Clean Development Mechanism world premier as ABN AMRO bank acts as intermediary in carbon trading deal with Australian power company and UK's Centrica
Australia’s Pacific Hydro, acting through its Fijian joint venture Sustainable Energy Limited, has negotiated the world’s first bank-intermediated carbon credit transaction involving the sale of Certified Emission Reduction (CER) credits, created through the Kyoto Protocol. Ironically, Australia is not a signatory to the Kyoto agreement and is even an outspoken critic of its mechanisms.
ABN AMRO is contracted to purchase all of the CERs created from two hydroelectric projects owned and operated by Sustainable Energy Limited, itself jointly owned by Pacific Hydro and the Fiji Electricity Authority. The contract will run over the next seven years for about 25,000 tonnes of certified emission reduction credits.
ABN AMRO in turn is contracted to sell the credits to Accord Energy Ltd, the trading arm of the UK’s Centrica, which owns British Gas.
The two power projects are the 6. 5 MW Wainikasou plant and the 3 MW Vaturu project which is nearly complete.
“We have seen carbon credits trading on the European market since January this year, but this transaction means the initiatives developed through the Kyoto Protocol are now a business reality. Kyoto initiatives that were proposals and theories are now commercial opportunities and economic realities,” said Jeff Harding, Pacific Hydro managing director.
Under the terms of Kyoto, carbon trading is permitted as a mechanism to encourage investment in alternative and cleaner energy projects in developing countries, the so-called Clean Development Mechanism (CDM).
Vincent Chevance, head of global commodity sales at ABN said of the deal, “It is likely we will see a growing demand for carbon trades as more energy providers adopt CER trading as an integral part of their emission reduction compliance management.”
The burgeoning carbon credit market has seen the yearly volume of transactions grow from nearly 13 million tonnes in 2001 to more than 100 million tonnes by the end of 2004.