Pacific Hydro, through its Fijian joint venture Sustainable Energy Limited (SEL), has negotiated the world’s first bank-intermediated carbon credit transaction involving the sale of Certified Emission Reduction (CER) credits.
Under the terms of the sale, SEL – which is jointly owned by Pacific Hydro and the Fiji Electricity Authoruty – will sell all of the CERs created by its two hydroelectric power projects in Fiji to ABN AMRO over the next seven years. ABN AMRO has in turn contracted to sell all these CERs to Accord Energy Limited, the trading arm of energy and home services provider, Centrica.
The two power projects involved are the 6.5MW Wainikasou hydro plant, and the soon to be completed 3MW Vaturu project.
‘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,’ said Jeff Harding, Pacific Hydro managing director. ‘Kyoto initiatives that were proposals and theories are now commercial opportunities and economic realities.’
Under the Kyoto Protocol, carbon trading is permitted to enable industries in developed countries to off-set their emissions of carbon dioxide by investing in alternative and cleaner energy projects, referred to as Clean Development Mechanism (CDM) projects, in developing countries. SEL is in the final stage of CDM registration for its two hydro projects, which is a condition of the sale of CERs.
The burgeoning carbon credit market has seen the yearly volume of transaction grow strongly since 2001, from nearly 13 million tonnes to more than 100 million tonnes of C02 equivalent by the end of 2004.
‘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,’ said Vincent Chevance, global head of global commodity sales at ABN-AMRO. ‘This deal is the first from a healthy pipeline of transactions that we expect to bring to the market in the near future.’
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