Credit flows when business takes care of environmental matters
T HE GROWING bulk of scientific evidence that greenhouse emissions are harmful to our environment presents all
enterprises with a business risk, regardless of their size and the specific nature of their business. One mechanism
available to assist business to manage this risk is carbon-credits trading.
The European Parliament, incorporating 25 member states, will go ahead with an emissions-trading scheme from January
1 next year, whether the Kyoto Protocol comes into effect or not. The EU scheme is compatible with the Protocol, but
independent of it. It limits emissions from more than 10,000 plants operating in a broad range of industries, such as
power generation, and places them within a regulatory framework. The financial penalty for non-compliance is Euro40 per
tonne of CO2-equivalent emissions for 2005-07 and Euro100/ tonne for 2008-12. The EU emissions trading scheme may also
be extended to include other developed countries which have ratified the Kyoto Protocol. Of 39 developed countries which
have agreed a target for their greenhouse emissions, only three have not ratified - the United States, Russia and
Australia.
The World Bank has reported that the volume of greenhouse emissions exchanged on the global carbon market has more
than doubled since 2002, with more than 70 million tonnes of emissions traded in the first 10 months of 2003. The
majority of this volume was Kyoto- compliant and exchanged through project-based transactions. Buyers are governments,
public-private partnerships such as the World Bank Prototype Carbon Fund and, increasingly, private companies,
especially from Japan. Prices for these emission reduction credits range from $US2 to $US6.50.
Unrelated to the Kyoto Protocol, a growing number of major enterprises have made public declarations that they will
reduce emissions within their group by amounts far exceeding the Kyoto targets - if any - accepted by the countries in
which those enterprises operate. For example, DuPont reports a 68 per cent reduction in emissions since 1990 and expects
to achieve a 65 per cent reduction by 2010. This compares with the US Kyoto target of a 7 per cent reduction. (Kyoto
targets range from minus 8 per cent compared with 1990 for 27 countries, to plus 10 per cent for Iceland.
Australia's Kyoto target allows an 8 per cent increase on 1990 levels).
In Australia, an emissions trading market is in place in the NSW electricity sector, with other states exploring
trading options. Federal government market programs are also in place, such as the Greenhouse Gas Abatement Program, the
Greenhouse Friendly Scheme and the Mandatory Renewable Energy Target scheme.
In February, Mitsui Australia announced a significant forward purchase of up to 500,000 tonnes of emission-reduction
credits from the GRD Group, through its subsidiary Global Renewables, over a three-year period from 2010. Global
Renewables will own and operate the Urban Resource - Reduction, Recovery and Recycling Facility under construction at
Eastern Creek in Sydney. This facility will process up to 10 per cent of Sydney's domestic waste and generate about
350,000 tonnes of emission-reduction credits a year.
Mitsui Australia has taken a position on carbon credits with the longer term in mind and as a potential service to
its overseas clients who are major buyers of Australian minerals. Some of those clients may need assistance in managing
their environmental position in future.
As a global company, Mitsui has a philosophy for the global environment. This stresses the importance of contributing
to environmental protection through its business activities as some of those activities may have an impact on local and
global environments.
In 1999 Mitsui was a foundation investor in the World Bank Prototype Carbon Fund and in 2000 Mitsui joined other
foundation investors in the European Bank for Reconstruction and Development's Energy Conservation Promotion
Fund.
In 2002 Mitsui formed an alliance with CO2e.com - an international broker of greenhouse emissions - in which Mitsui
became an equity partner. Mitsui has also invested in forestry as a means to generate greenhouse-emission credits.
Mitsui is the fourth largest private owner of forests in Japan - both native forests and plantations - and over the past
decade it has invested in plantations in three Australian states.
Most of Mitsui Australia's overseas clients are Japanese. The Japanese Government has ratified the Kyoto
Protocol and Japanese industry, divided into 27 sectors, is following that lead by voluntarily working hard to reduce
emissions. The Japanese Government will review industry's progress this year and introduce mandatory reductions if
it considers more needs to be done to reach Japan's target of a 6 per cent reduction from 1990 emission levels by
2012. It is anticipated the Government may announce revisions to its greenhouse policy next month because of an increase
in emissions. Mitsui Australia and GRD, through its subsidiary Global Carbon, intend to investigate and consider
alternative opportunities to provide market-based carbon credits and other environmental commodities to overseas clients
who might require assistance with their environmental positions. With other Australian companies, Mitsui Australia is
looking also at opportunities to invest in projects with the potential to generate carbon credits.
Environmental management is an increasingly important global issue that business must address - as a risk- management
issue and an area of new business opportunities. Working with governments and within internationally agreed frameworks,
business should support efforts to harness market forces to bring about a reduction in greenhouse- gas emissions. John
McKindley is general manager of the external-affairs division of Mitsui & Co (Australia) Ltd.
www.mitsui.com.au
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