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Pioneering deal for emissions trading

A ground breaking agreement to trade greenhouse gas emission credits across the border between Canada and the United States has been signed by Suncor Energy Inc and utility Niagara Mohawk Power Corporation. The deal, announced last month, could be worth as much as C$10 million over the next decade. Canadian company Suncor, which recently invested in wind power in the province of Alberta, has agreed to buy 100,000 metric tonnes of greenhouse gas emissions reductions from US utility Niagara Mohawk.

In addition, Suncor has the option to buy another 10 million metric tonnes of emission reductions from Niagara Mohawk over ten years. The deal is already being heralded as an example of a market based approach to cutting dangerous greenhouse gases. The creation of a global market for such "joint implementation" deals is expected to be significant for wind power as it is likely to lead to the development of clean energy plants whose output will be used as international trading chips.

Calgary based Suncor Energy says the agreement will allow it to meet Canada's voluntary emission reduction targets. For its part, Niagara Mohawk will get more money for new projects or programs that will help cut greenhouse gases. A minimum of 70% of the proceeds from the sale will be re-invested in such projects, possibly including alternative energy plant. A request for proposals will most likely be issued to solicit the "greenhouse proposals," says a Niagara Mohawk spokesman.

"Suncor Energy intends to be a leader in encouraging greenhouse gas reduction efforts in Canada, the United States and around the world," says Rick George, Suncor Energy's president and chief executive officer. "Our emission reduction purchase is just one part of a multi-faceted strategy to reduce our own emissions, develop alternative energy opportunities, and invest in authenticated greenhouse gas emission reductions."

To implement the agreement, Niagara Mohawk's emission reductions will be documented and deposited into an account administered by the Environmental Resources Trust (ERT), a non-profit environmental organisation founded by the well respected Environmental Defense Fund (EDF).

Post Kyoto example

"Coming just after the historic Kyoto climate agreement, these companies are offering an actual example of international greenhouse gas emissions reduction trading -- one of the most critical elements of the climate agreement, yet one that is not widely understood in many quarters," says ERT board member Daniel Dudek.

"Our agreement with Niagara Mohawk is part of Suncor Energy's broad based action plan to address the risk of global climate change," adds Suncor's George. "Our first priority is to manage our own greenhouse gas emissions, and we have a solid track record in this area. But to meet the Kyoto targets we need the flexibility to pursue actions outside of our operations in Canada and internationally that reduce greenhouse gases in the atmosphere."

Suncor Energy's agreement with Niagara Mohawk follows its investment in a forest conservation program in Belize and in wind power in Alberta. Two months ago the oil company joined the list of customers for tradable renewable energy credits being sold by wind developer Vision Quest Windelectric Inc of Calgary (Windpower Monthly, March 1998).

"This is a pioneering agreement," says Niagara Mohawk's chairman and chief executive officer William Davis. "In the wake of the Kyoto conference, many have questioned whether economically efficient approaches such as this will work to address the risk of global climate change. By making this international trade, Niagara Mohawk and Suncor Energy are helping to forge a new market place that will help make those options viable."

Niagara Mohawk has reduced its own greenhouse gas emissions significantly below 1990 levels through energy efficiency improvements, use of less polluting fuels, and the development of renewable energy resources. The company has also been an early participant in emissions reduction trades, re-investing the proceeds in projects that result in further emission reductions. An agreement with Arizona Public Service, of Phoenix, for example, led to reductions of both CO2 and sulphur dioxide SO2 emissions.

Niagara Mohawk is an investor owned energy services company based in Syracuse in New York state providing electricity to more than 1.5 million customers. Suncor Energy is primarily involved in oil in western Canada.

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