Firms delay CO2 cap technology

Companies in the UAE are delaying their investments into technologies that help cap carbon dioxide emissions by three years, insiders of the carbon trade industry told Emirates Business.

The Middle East carbon trade potential is estimated to be worth $5 billion (Dh18.3bn) annually. Carbon trade market in Europe is estimated to be worth €100bn (Dh499.8bn) and is expected to grow to €800bn by 2020.

An uncertainty over the regime that would replace the Kyoto Protocol – the rather loose UN framework which dictates carbon trade – is forcing these companies to delay their decisions, industry insiders said.

The Kyoto protocol, a framework of the UN Framework Convention on Climate Change, came into effect in 2005 after being adopted in 1997. It expires at the end of 2012. No replacement for the protocol has yet been suggested for the system.

There are indications of regional mandates replacing the protocol. The GCC, one of the largest per capita emitters of CO2 in the world, is expected to emerge with a mandate after 2020.

"The Kyoto Protocol is likely to continue after 2012, but the markets for trading carbon credits may change," said Philip Moss, Manager of Carbon Trading and Finance at Abu Dhabi-based Masdar.

Masdar, a unit of Abu Dhabi's state-owned Muba-dala Development Company, recently announced a joint venture with German company E.ON to trade carbon credits in Asia and Africa. The company called E.ON Masdar Integrated Carbon will launch later this year.

UAE-based companies such as Adnoc, Emal and Dubal are said to be considering clean development mechanism (CDM) projects that make way for dealing in Certified Emission Reductions (CERs) that trade on exchanges. Each CER is equivalent to a reduction of one tonne of carbon emission. The CERs are traded on three exchanges in Europe.

"There is some hesitation in the markets regarding what would replace the Kyoto protocol. It may be too late for companies to enter the CDM markets now," said Hans Bolscher, special advisor (Climate and Energy Issues), Ministry of Environment, Netherlands.

Companies like Shell are going on with their investments, said Maha Abdul Majeed the Environment Products Originator (Middle East) with Shell Trading.

Svend Soeyland, an advisor with Bellona Foundation, said companies should continue with their investment now as the cost of CDM projects will rise in future.

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