A Critical Conversation on Climate Change ... - Green Choices

92 development dialogue september 2006 – carbon trading• According to UBS Investment Research, the first phase of the EUETS ‘has probably contributed to €10–20/megawatt-hour higherpower prices with a very significant redistribution of value fromconsumers to producers and between companies.’ In May 2006,Estonian Energy declared a €74 million pre-tax profit from net salesof emissions rights in 2005, more than a third of its total profits.Based on the company’s own environmental reporting, only €6–9million can be explained by ‘real emissions reductions’. 89• In the very first publicised spot trade of EU allowances in February2005, Danish power utility Energi E2 was able to sell a blockof rights it had been granted free by its government to Shell simplybecause a spell of mild temperatures had happened to keep theutility’s carbon emissions slightly below expected levels. 90 The followingyear, Norway’s Fortum Corporation bagged usd 25 millionfrom selling carbon dioxide allowances due to the fact that thereservoirs behind its hydropower dams happened to be exceptionallyfull in 2005. 91• In Australia, New South Wales taxpayers are being charged millionsof dollars by a state government trading scheme that ‘aims tocut greenhouse gases but has done little other than provide windfallgains for some of Australia’s dirtiest power stations’. 92None of this should have been a surprise. Under Los Angeles’sRECLAIM pollution trading scheme as well, high prices of nitrogenoxides (NO x ) credits contributed to large increases in wholesaleelectricity prices. 93 Liberalised energy markets made the US sulphurdioxide programme vulnerable to a similar problem. Looking furtherback, members of the Organisation of Petroleum Exporting Countriesgarnered windfall profits by limiting carbon extraction in the1970s.But don’t power utilities have to buy at least a few permits in order to continuebusiness as usual?Often they do – particularly utilities dependent on coal. But, as IPAEnergy consultants found in a detailed report done for the UK government,large utilities are being allowed to ‘over-recover carbon costs’by charging customers for the extra emissions permits that would beneeded if their ‘baseline’ generating capacity were carbon-intensivecoal plants rather than the less polluting mixture of technologies theyactually use. (Coal’s ratio of carbon content to heat production in kilogrammesof carbon dioxide to million British Thermal Units is 94, asopposed to oil’s 78 and natural gas’s 53. Production of carbon dioxideper megawatt-hour is 698–975 kilogrammes for coal, 470–820 for oil,