Natsource becomes largest private-sector manager of GHG emissions assets
Natsource Asset Management Corp (NAMC), a subsidiary of Natsource LLC, has closed its Greenhouse Gas Credit Aggregation Pool (GG-CAP), with total commitments of $550 million (U.S.) (455 million euros) from 26 participants. The GG-CAP is the first private-sector initiative to provide a cost-effective means for companies to meet their greenhouse gas (GHG) emission reduction requirements under the European Union Emissions Trading Scheme and the Kyoto Protocol.
"The closure of GG-CAP, the first private-sector credit aggregation pool, is a watershed in the development of the greenhouse gas market," said Jack Cogen, president of Natsource LLC. "The participation of so many highly regarded companies from around the world demonstrates the viability of this approach for meeting emissions reduction targets."
The 26 participants in the program are among the largest consumer product, manufacturing, energy and utility companies in North America, Europe and Japan, with a combined market capitalization of more than $300 billion (U.S.). The program reflects a substantial Canadian presence, counting the Calgary utility Epcor among its participants and with Paul Vickers, formerly of TransAlta's carbon market initiative, serving as GG-CAP manager.
"Our involvement with GG-CAP builds on the climate change strategy Epcor initiated in 1996," said Dr David Lewin, Epcor's senior vice president of environment. "This strategy led to our early participation in the emission credit marketplace and the development of renewable energy projects fueled by the wind, small hydro, biomass and the sun. Epcor has also invested millions in clean air technology at our generation facilities in order to further strengthen our overall environmental performance."
The GG-CAP functions as a "buyers pool" that will combine the purchasing power of the 26 participants to acquire and manage the delivery of a large volume of compliance instruments created by the project-based mechanisms included in the Kyoto Protocol.
These instruments are formally known as Certified Emission Reductions (CERs), and are generated through Clean Development Mechanism (CDM) projects and Emission Reduction Units (ERUs), created by Joint Implementation projects (JI). They can be used by participants to comply with emission reduction requirements from 2005-2012 imposed by the European Union Emissions Trading Scheme.
Nations such as Canada and Japan can also use CERs as a way to meet their commitments under the Kyoto Protocol from 2008-2012. Natsource estimates that these countries will be approximately 3.75 billion tonnes short of their Kyoto Protocol emissions reduction obligations from 2008-2012, based on current emissions trends.
NAMC will seek out, evaluate, purchase, and manage delivery of reductions that buyers can use for compliance. Through the GG-CAP, companies will benefit from pooling large-scale demand to secure cost-effective compliance. They will also benefit from GG-CAP's use of risk management techniques to guard against under-delivery of contracted volumes. These techniques include diversification, reserve margins, risk management contracts and insurance products.
The result will be a highly-valued portfolio of compliance instruments that participants can use as a component of their overall compliance strategies. It is important to note that the use of these instruments for compliance is supplemental to the participants' domestic efforts to reduce their emissions.
"We have developed GG-CAP over the past two years with the input of many companies that were seeking an efficient way to gain access to emission reduction projects around the world," Vickers noted. "We are actively seeking and assessing reduction projects that meet our cost and risk requirements, and will use our size to develop a diversified portfolio of high quality CERs and ERUs that participants can count on for compliance."
Among the other participants are: Chugoku Electric Power; Electricity Supply Board (Ireland); Endesa Generacion; E ON UK; Hokkaido Electric; Iberdrola; Norsk Hydro; Okinawa Electric; Public Power Corporation SA; Repsol YPF; Suntory; and Tokyo Gas.
Natsource LLP provides asset management services, transaction services and advisory and research services in emissions and renewable energy markets for corporate clients worldwide. The company draws upon its regulatory, market and trading expertise to help private firms manage environmental risk, at the same time providing positive returns to investors by taking advantage of opportunities in local, regional, and global emissions and renewable energy markets.
Based in New York, Natsource also has offices in Calgary, La Paz, London, Ottawa, Tokyo and Washington, DC. More information is available from Doug Russell, managing director of Natsource's, Ottawa office, 613/232-7979, E-mail firstname.lastname@example.org, Web site www.natsource.com.