Sun, 01/05/2005 - 02:00 | by admin
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A U.S. company has helped Chile achieve a pole position in the world’s emerging carbon bond market, allowing local companies to cash in on international efforts to reduce greenhouse gases.
Where there's muck there's brass. That old saying could well be inscribed over the door of food producer Agrosuper, whose vast pools of pig slurry have suddenly become lucrative.
Today's environmentally-conscious world may seem topsy-turvy to the layman but not to Sergio Vives, vice president for Latin America of CO2e.com, the greenhouse gas emissions broker that has helped Agrosuper turn its slurry into cash.
It was the Kyoto Protocol on climate change that made reducing emissions of greenhouse gases a profitable business. The industrialized countries that are signatories to the agreement have undertaken to lower their emissions by 5.2%, taking 1990 as their base year.
Gases containing carbon, such as carbon dioxide, carbon monoxide and methane, are produced by many industrial processes, especially those which burn fossil fuels. The build-up of these gases traps heat in the earth's atmosphere in the same way as heat is trapped in a greenhouse. Many scientists blame global warming on these "greenhouse" gases and fear catastrophic consequences.
Pushed by the United States, which later withdrew from the agreement, the protocol concluded that, for individual countries, meeting emissions targets could be prohibitively expensive. Instead, they are allowed to buy the necessary reductions, often from developing countries which, under the Kyoto Protocol, do not need to lower emissions.
The logic behind carbon trading is that climate change is a global problem. It does not matter if reductions take place in Asia, Africa, or America. Every bit counts. And CO2e.com - named for carbon dioxide equivalent - is a broker in this emerging market.
In Chile, Agrosuper, encouraged by Vives, spotted the Kyoto opportunity early. They installed US$30 million worth of technology to handle the waste of 100,000 pigs.
Pig slurry produces copious quantities of methane, a gas 20 times more potent than carbon dioxide. But Agrosuper covered its slurry pits and the methane is drawn off either to burn or to use in farm generators.
Agrosuper earns 20 certified emission reductions (CERs) for every ton of gas it deals with in this environmentally-friendly way. The entire project enables the company to earn 400,000 CERs per year, which have been sold to Japanese and Canadian electricity companies.
A credit currently retails at around US$7, having increased from just US$1 in 2000. Although the details of Agrosuper's deal have not been disclosed, with a little mental arithmetic, one can imagine that the pigs' wastes have emerged as a tidy earner.
"At the beginning, most businesses thought the concept was very strange and would never work," says Vives. "Generally if you talk about environmental issues, it means spending a lot of money."
But with Vives' energetic encouragement and the lead of a few emblematic examples such as Agrosuper, Chilean businesses have caught on fast. And Chile is now ranked as the second most attractive country in the world in which to do this type of deal, behind India.
Big names such as Nestlé and Watt’s, a locally-owned agribusiness company, have already taken advantage of the new possibilities, helping Chile to reach third place on the list of total projects sold. However, Vives concedes it is inevitable that, in terms of volume, Chile will soon be superseded.
"Chile is attractive because it has political, economic and legal stability and the government has supported us," says Vives. But he does, under cross questioning, admit the importance of his own role. "When I worked in the Foreign Ministry, I was negotiating environmental issues on behalf of Chile and many people approached me saying that Chile would be an interesting place to develop these projects," he recalls.
Leaving the Ministry in 2000, Vives was convinced this was a growth area. "I pushed and pushed until I found companies who wanted to do this seriously; first it was Metrogas, then Agrosuper, and then came the Chacabuquito hydropower project with the World Bank,” he says. “All this demonstrated to companies in Chile that the concept did work," he adds.
Growth prospects
CO2e.com, officially launched in November 2000, is a subsidiary of U.S.-based financial broker Cantor Fitzgerald, which became tragically famous after nearly 400 of its staff were killed in the September 11 attacks on the World Trade Center in New York. The fledgling CO2e.com, which shared Cantor's offices, lost its entire staff, including the chief executive, and subsequently moved its head offices to London.
Cantor Fitzgerald already owned Los Angeles-based Cantor Environmental Brokerage, which had been involved in emissions trading programs that successfully helped fight acid rain. "They decided to take that experience and make it global," says Vives.
Chile was chosen as location for CO2e.com's Latin American office because of the country’s stability and also because of the close relationship the company had with Vives.
Since the company's launch, the Kyoto Protocol has been ratified, but only just. To come into force it needed ratification by industrialized nations accounting for at least 55% of total emissions. When the United States and Australia did not sign, the position of Russia became crucial but, after a tense wait, Russia came on board, and the treaty became legally binding on February 16 of this year, seven years after it was originally brokered.
Despite the uncertainty, Vives maintains he was always confident that emissions trading would be a success. "Clearly the fact that Kyoto was ratified gives tranquility to the market but, with or without Kyoto, there were many signs that the system was going to work,” he says. The European Union had, he notes, already adopted its own trading system based on Kyoto commitments and was going ahead, as were Japan and Canada.
Moreover, U.S. multinational companies have to fulfill Kyoto's obligations around the world and some individual states have been moving to create their own systems of reducing emissions, notably California. "This would be very attractive," says Vives. "It would be a huge economy coming into the market."
As it is, CO2e.com is growing convincingly in Chile. It currently brokers around 600,000 tons of emissions a year, with projects in the pipeline which it hopes will bring the total to 1,000,000 tons. Although reluctant to name the companies involved in these projects, Vives says CO2e.com is targeting electricity generation, forestry and landfill sites.
In some forestry projects, trees are planted to capture carbon dioxide, but others simply involve burning the unused branches and twigs in a generator as opposed to leaving them to rot and generate methane. Similarly, landfill sites can be equipped to collect the methane from the decomposing waste, to either burn or use for electricity generation.
It turns out that Sergio Vives, a lawyer by training, is both a shrewd businessman and a committed environmentalist. "I am doing this because the system has a lot of logic," he says. "Reducing greenhouse gases is expensive; through carbon trading, it can be done in a cost-efficient way."
He also believes in the inherent benefits it will bring to developing nations. "Fresh money from industrialized countries will improve the quality of life in poorer nations; they will develop more renewable energy sources and learn to be more energy efficient, and their landfill sites will be properly managed with state-of-the-art technology," he predicts.
CO2e.com and Sergio Vives find themselves in a very attractive position. They can help make the world a better place as they increase their own profits. It is indeed, as Vives says, "a win-win situation".
A Carbon Bond Pioneer
By By Sophie HarrisonPrintSend to friend
A U.S. company has helped Chile achieve a pole position in the world’s emerging carbon bond market, allowing local companies to cash in on international efforts to reduce greenhouse gases.
Where there's muck there's brass. That old saying could well be inscribed over the door of food producer Agrosuper, whose vast pools of pig slurry have suddenly become lucrative.
Today's environmentally-conscious world may seem topsy-turvy to the layman but not to Sergio Vives, vice president for Latin America of CO2e.com, the greenhouse gas emissions broker that has helped Agrosuper turn its slurry into cash.
It was the Kyoto Protocol on climate change that made reducing emissions of greenhouse gases a profitable business. The industrialized countries that are signatories to the agreement have undertaken to lower their emissions by 5.2%, taking 1990 as their base year.
Gases containing carbon, such as carbon dioxide, carbon monoxide and methane, are produced by many industrial processes, especially those which burn fossil fuels. The build-up of these gases traps heat in the earth's atmosphere in the same way as heat is trapped in a greenhouse. Many scientists blame global warming on these "greenhouse" gases and fear catastrophic consequences.
Pushed by the United States, which later withdrew from the agreement, the protocol concluded that, for individual countries, meeting emissions targets could be prohibitively expensive. Instead, they are allowed to buy the necessary reductions, often from developing countries which, under the Kyoto Protocol, do not need to lower emissions.
The logic behind carbon trading is that climate change is a global problem. It does not matter if reductions take place in Asia, Africa, or America. Every bit counts. And CO2e.com - named for carbon dioxide equivalent - is a broker in this emerging market.
In Chile, Agrosuper, encouraged by Vives, spotted the Kyoto opportunity early. They installed US$30 million worth of technology to handle the waste of 100,000 pigs.
Pig slurry produces copious quantities of methane, a gas 20 times more potent than carbon dioxide. But Agrosuper covered its slurry pits and the methane is drawn off either to burn or to use in farm generators.
Agrosuper earns 20 certified emission reductions (CERs) for every ton of gas it deals with in this environmentally-friendly way. The entire project enables the company to earn 400,000 CERs per year, which have been sold to Japanese and Canadian electricity companies.
A credit currently retails at around US$7, having increased from just US$1 in 2000. Although the details of Agrosuper's deal have not been disclosed, with a little mental arithmetic, one can imagine that the pigs' wastes have emerged as a tidy earner.
"At the beginning, most businesses thought the concept was very strange and would never work," says Vives. "Generally if you talk about environmental issues, it means spending a lot of money."
But with Vives' energetic encouragement and the lead of a few emblematic examples such as Agrosuper, Chilean businesses have caught on fast. And Chile is now ranked as the second most attractive country in the world in which to do this type of deal, behind India.
Big names such as Nestlé and Watt’s, a locally-owned agribusiness company, have already taken advantage of the new possibilities, helping Chile to reach third place on the list of total projects sold. However, Vives concedes it is inevitable that, in terms of volume, Chile will soon be superseded.
"Chile is attractive because it has political, economic and legal stability and the government has supported us," says Vives. But he does, under cross questioning, admit the importance of his own role. "When I worked in the Foreign Ministry, I was negotiating environmental issues on behalf of Chile and many people approached me saying that Chile would be an interesting place to develop these projects," he recalls.
Leaving the Ministry in 2000, Vives was convinced this was a growth area. "I pushed and pushed until I found companies who wanted to do this seriously; first it was Metrogas, then Agrosuper, and then came the Chacabuquito hydropower project with the World Bank,” he says. “All this demonstrated to companies in Chile that the concept did work," he adds.
Growth prospects
CO2e.com, officially launched in November 2000, is a subsidiary of U.S.-based financial broker Cantor Fitzgerald, which became tragically famous after nearly 400 of its staff were killed in the September 11 attacks on the World Trade Center in New York. The fledgling CO2e.com, which shared Cantor's offices, lost its entire staff, including the chief executive, and subsequently moved its head offices to London.
Cantor Fitzgerald already owned Los Angeles-based Cantor Environmental Brokerage, which had been involved in emissions trading programs that successfully helped fight acid rain. "They decided to take that experience and make it global," says Vives.
Chile was chosen as location for CO2e.com's Latin American office because of the country’s stability and also because of the close relationship the company had with Vives.
Since the company's launch, the Kyoto Protocol has been ratified, but only just. To come into force it needed ratification by industrialized nations accounting for at least 55% of total emissions. When the United States and Australia did not sign, the position of Russia became crucial but, after a tense wait, Russia came on board, and the treaty became legally binding on February 16 of this year, seven years after it was originally brokered.
Despite the uncertainty, Vives maintains he was always confident that emissions trading would be a success. "Clearly the fact that Kyoto was ratified gives tranquility to the market but, with or without Kyoto, there were many signs that the system was going to work,” he says. The European Union had, he notes, already adopted its own trading system based on Kyoto commitments and was going ahead, as were Japan and Canada.
Moreover, U.S. multinational companies have to fulfill Kyoto's obligations around the world and some individual states have been moving to create their own systems of reducing emissions, notably California. "This would be very attractive," says Vives. "It would be a huge economy coming into the market."
As it is, CO2e.com is growing convincingly in Chile. It currently brokers around 600,000 tons of emissions a year, with projects in the pipeline which it hopes will bring the total to 1,000,000 tons. Although reluctant to name the companies involved in these projects, Vives says CO2e.com is targeting electricity generation, forestry and landfill sites.
In some forestry projects, trees are planted to capture carbon dioxide, but others simply involve burning the unused branches and twigs in a generator as opposed to leaving them to rot and generate methane. Similarly, landfill sites can be equipped to collect the methane from the decomposing waste, to either burn or use for electricity generation.
It turns out that Sergio Vives, a lawyer by training, is both a shrewd businessman and a committed environmentalist. "I am doing this because the system has a lot of logic," he says. "Reducing greenhouse gases is expensive; through carbon trading, it can be done in a cost-efficient way."
He also believes in the inherent benefits it will bring to developing nations. "Fresh money from industrialized countries will improve the quality of life in poorer nations; they will develop more renewable energy sources and learn to be more energy efficient, and their landfill sites will be properly managed with state-of-the-art technology," he predicts.
CO2e.com and Sergio Vives find themselves in a very attractive position. They can help make the world a better place as they increase their own profits. It is indeed, as Vives says, "a win-win situation". 
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