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Emissions trade pilot results destined for UN

EURELECTRIC, the European electricity industry union, says an obligation on power consumers to buy a percentage of their electricity from renewable generators is a more effective way of achieving "significant levels of renewable energy" in the medium to long term than relying on subsidised payments for renewables output. The organisation advocates abandoning fixed-price support of renewables in favour of a system of cross border trading in green power certificates. Such trade is essential to ensure a market big enough to achieve sufficient liquidity from the outset, it says, though only a few countries should be in at the start. EURELECTRIC's recommendations follow a decision to present the conclusions of a European experiment in greenhouse gas emissions trading for discussion at September's UN Framework Convention on Climate Change, prior to a full presentation at the Sixth Conference of the Parties to the Kyoto Protocol (COP 6) at the Hague in November. The experiment, launched in February by Price WaterhouseCoopers (PWC) for EURELECTRIC, is known as GETS 2, Greenhouse & Energy Trading Simulation. It involves a total of 35 European utilities and other companies which generate or use energy intensively. GETS 2 built upon the experience of GETS 1, which involved electricity companies only and had less complex parameters. The program operates via the creation of "virtual" companies trading in energy and emissions permits using an electronic trading infrastructure provided by Paris Stock Exchange operator ParisBourse SA. The virtual companies are split into two divisions, one group operating under an absolute emissions ceiling or "cap" and the other pursuing trading strategies based on specific emissions targets. The exercise is designed to test different assumptions and features, such as "grandfathering" emissions -- a transition that allows a company to operate under previous, less strict rules for a period -- versus auctioning.

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