Is carbon still following oil?

Posted in Climate Change with tags , , , , on August 23, 2009 by Dan

In January I looked at European oil and carbon prices to show how they were reacting to the economic recession. Today I had another look at these two markets to see what’s happened over the past six months.

The graph below (click to expand) shows the December 2009 EUA contract (from ECX) and the Europe Brent spot price (from the Energy Information Adminstration, converted in Euros using currency data from OAndA). The prices have been indexed to January 2007. Historically, carbon has largely followed oil.

In 2009 the trend seems unclear. While daily trading news is full of headlines like “carbon nudges higher on strong energy complex”, carbon seems have recovered less than oil. In January 2009, the nominal prices of oil and carbon were both around 70% of January 2007. At the end of last week, oil was at 110%, while carbon was at 80%.

Performance of EUAs vs crude oil

Performance of EUAs vs crude oil

I don’t have any clear commentary to offer just now. Glancing at the graph, it looks like carbon has fallen behind oil by about three weeks, but that doesn’t feel like a very plausible theory. I’d be interested to hear any thoughts.


Why does carbon offsetting struggle with its reputation?

Posted in Climate Change with tags , , , , , , , , , on August 23, 2009 by Dan

Carbon offsetting has a reputation problem. Some parts of the ‘carbon’ industry act dishonestly or are not environmentally motivated, and people outside the industry tend to lump the diverse organisations involved in carbon trading together. When an exposé story appears in the media, we all suffer.

This week there was a story about suspected VAT fraud in carbon markets. Dodgy brokers were buying carbon credits abroad (which does not attract VAT), and then selling them in the UK and applying VAT. They are thought to have made £38m. It’s called carousel fraud or ‘missing trader’ fraud (because the broker disappears with the tax). One funny thing about this story is that none of the coverage says which market the fraud was in. Were these CDM credits (the carbon offsets that the UN allows governments to use)?

Twitter was full of people saying that this story confirmed carbon trading to be a con. Several newspapers referred to “so-called carbon credits”. Why “so-called”?

Another example is the campaigns by NGOs like Friends of the Earth and WWF against the use of offsets in statutory carbon trading schemes. Under the Kyoto Protocol, governments of rich countries can offset some of their emissions by funding projects in the developing world. The NGOs feel this allows them to wriggle out of their responsibilities.

Friends of the Earth said:

Dangerous climate change will be unavoidable if the UK, EU and USA succeed in increasing the use of carbon offsetting, Friends of the Earth is warning in a new report released today [Tuesday 2 June 2009] that exposes carbon offsetting as ineffective and damaging.


The problem with carbon offsetting is that at best it robs Peter to pay Paul – with no net benefit for the planet. All too often, offsetting is simply used to justify business-as-usual behaviour in the UK and other countries.

These charities are referring to the CDM or whatever succeeds it when the Kyoto Protocol expires in 2012. While both have misgivings about voluntary carbon offsetting, neither would object to its use by a company or individual who is doing all they can to reduce their own footprint. Unfortunately most people are not aware of the difference between voluntary and statutory carbon markets and articles like the above cast the whole sector in a poor light.

The challenge for organisations involved in carbon trading is to help their market understand what happens to their money. No customer can be expected to spend their money if they believe it will be appropriated by fraudsters.

Do young people care about climate change less than everyone else?

Posted in Climate Change with tags , , , on August 19, 2009 by Dan

I just ran a workshop on climate change with  120 bright and articulate Quakers aged 13 – 20. Some of the results of the discussion were so interesting that I thought they were worth sharing.

In one session, I asked the young people whether they agreed or disagreed with various statements. The results looked like this:

Agree Don’t know Disagree
I like marmite 48% 3% 49%
I support a football team 40% 0% 60%
Twitter is a good idea 8% 46% 46%
Climate change should concern everyone 98% 0% 2%
It’s hard to know what to do about climate change 70% 0% 30%
Climate change and how we respond to it are among the biggest issues I worry about today 5% 45% 50%
I am personally making a significant effort to help reduce climate change through how I live my life today 15% 35% 35%

The last two of these questions were lifted from HSBC’s annual ‘climate confidence’ survey (pdf). Here’s how the data compare.

% of young people that agreed in the workshop (from table above) % of UK that agrees (from HSBC survey 2008)
Climate change and how we respond to it are among the biggest issues I worry about today 5% 26%
I am personally making a significant effort to help reduce climate change through how I live my life today 15% 26%

What’s going on there? How come this group of well-informed (most of them knew where Mozambique is, which was more that I could say) and thoughtful world-inheritors cares less about climate change than the general population? I put this to them, and the two most common answers were:

We’re being more honest. In the national survey, people were probably trying to look good.

(that’s my theory)

Teenagers are focused on problems closer to home. Climate change is too abstract to concern young people.

In another session, I asked the young people to rank the effectiveness of various actions in terms of addressing climate change. The picture below shows how they stack up (each column represents the consensus of a group of around 12, with the top action rated most effective – click to expand).

  • Red = Go vegetarian
  • Yellow = Stay in the UK instead of flying abroad on holiday
  • Orange = Discuss climate change with your friends
  • Blue = Write to a supermarket to tell them to be greener
  • Green = Write to your local politician to ask them to do more about climate change
  • Purple = Join a campaigning NGO
Results from the Quaker workshop

Results from the session with young Quakers

The clearest message is the variation, and the groups said that people don’t have the information to understand the effectiveness of actions like these. But to force a crude ranking, where the top rated action scores 6, the second scores 5 and so on, the order from most to least effective is:

  • Stay in the UK instead of flying abroad on holiday (47)
  • Join a campaigning NGO (40)
  • Write to your local politician to ask them to do more about climate change (38.5)
  • Go vegetarian (31.5)
  • Write to a supermarket to tell them to be greener (31)
  • Discuss climate change with your friends (22)

One thing is for sure – young Quakers prefer Marmite to Twitter.

Thanks to Yorkshire Friends Holiday School for inviting me to talk.

Suspect carbon offsetting

Posted in Offsetting with tags , on May 13, 2009 by Dan

I recently received a press release from a company called My Emissions Exchange. I get lots of press releases – mostly about ethical shampoo and that sort of thing – but this one caught my eye.

‘MyEEX’ (no relation to German energy exchange EEX I assume) sells carbon offsets. The ‘projects’ behind the carbon offsets are individuals who reduce their home energy bills. You can sign up to MyEEX, enter your baseline bill, reduce your energy use, enter your new bill and MyEEX will create carbon credits that represent the reductions. They will then sell the credits on voluntary offset market – not sure who to – and return some proportion of the money to the individual.

For those of you familiar with the concept of additionality, alarm bells will be ringing. How do we know the baseline bill is not unusually high? How do we know the individual would not have reduced their energy use anyway (making the carbon offsets irrelevant)? Why do people need to be paid to reduce their bills? Who are the buyers anyway?

When I saw this I assumed it was an enterprising but poorly conceived project that probably wouldn’t get that far, but today I spotted a very promotional article in The Times!

“People really want to make a difference by cutting down their carbon emissions, but at the moment it’s all very woolly and they’re not seeing anything concrete from their efforts,” said Paul Herrgesell, the company’s project manager.

“This will let people actively track their energy usage and make money at the same time, both of which will motivate people and make them more aware of their carbon emissions.”

Herrgesell said the firm is hoping to expand the website to measure all types of personal carbon emissions, but is using households bills as a starting point.

“Our vision is to cover personal carbon footprints produced by car and air travel, and even, eventually, food and services,” said Herrgesell.


EU 2008 Carbon Dioxide Emissions Exceed Permits by 25 Percent

Posted in Carbon markets with tags , , , , , on April 1, 2009 by Dan

The EC has published verified emissions data.


Power plants and factories in the European Union’s emissions trading program produced 25 percent more carbon dioxide than the amount of permits they received, according to Bloomberg calculations based on European Commission data.

The data is 91 percent complete, Stavros Dimas, the environment commissioner, said today in Brussels. The comparison between verified emissions and the allowances total is a like for like comparison, using only figures for installations that data is available for.

EU ETS: “No longer as short”

Posted in Carbon markets with tags , , , , on March 31, 2009 by Dan

Point Carbon has just published its annual survey of people working in carbon markets. It’s full of useful insights and I can email you a copy if you want one.

In particular, I was interested in a chart on the expected trading positions of participants representing companies in the EU ETS (below). The proportion of companies with surplus EUAs has jumped about 10 ppts between 2008 and 2009, from 15% to 25%. The proportion that need more EUAs or CERs is something like half (the top four categories).


This tells a clear story: as recession bites, demand for carbon credits will be lower. But by this metric (which admittedly is a bit crude – it’s just the proportion of people who report being short/long and doesn’t account for the volume of emissions they represent), the movement is not so predicted to be big enough to sink the market.

Hot air deals should be linked to CDM

Posted in Carbon markets on March 24, 2009 by Dan

Last week Reuters reported the first ‘hot air’ deal, in which Ukraine sold 30 million AAUs to Japan. The cost was not disclosed. AAUs are the credits created under the Kyoto Protocol – if a country has a target of 1 million tonnes then it will be given 1 million AAUs by the UN.

Eastern European countries have far more AAUs than they need because their targets under the Kyoto Protocol are based on their emissions in 1990, before the Soviet Union collapsed and took Easten European industry with it. The chart below (courtesy of Global Warming Art) shows carbon dioxide emissions by region – you can see how emissions in Eastern Europe have declined since 1990.


This leaves the bloc with many more AAUs than they need – hence they are able to sell them to countries that find their targets more challenging, like Japan. These AAUs are often called ‘hot air’ and trades are felt to be immoral by environmentalists because they allow rich countries to buy themselves out of meaningful reductions.

Hot air deals are unavoidable under the Kyoto system. While Ukraine has pledged to spend the revenue on “six specific environmental measures”, the impact on emissions of these projects is very ambiguous.

Where AAUs are traded between countries, the revenue should go into projects that reduce emissions to the same extent as the AAUs, using the same rules as the CDM. This would allow AAU trades to continue without underminining the environmental integrity of the Kyoto system (at least to the extent that the CDM’s additionality test works), but would not necessarily inflate the AAU cost to the CER cost (if the seller was able to find cheap projects to spend the money on).