Today’s Point Carbon North America Newsletter features commentary from World Energy’s Ken Ivanic on the advantages of an utilizing an online auction system in today’s markets, especially the uncertain green energy market.

In particular, Ken discusses the benefits for regulatory compliance and price discovery:

“Having a visible price discovery mechanism is of particular importance in today’s ‘green markets’ due to the uncertainty of future legislation and the lack of fungible commodities. This is especially true in voluntary carbon markets where the value is placed not only on the carbon offset, but also the protocols and standards used.”

Would you agree with such online auction benefits?

Grist is featuring an interview with Phil Adams, World Energy’s President and COO, discussing the World Green Exchange launch, the current state of and the future of the carbon market. Grist’s Mark Pawlosky tapped Phil for insight on how the exchanges serving the market differ, as well as the growing number of states that are implementing renewable energy portfolio standards in the absence of a federal standard. Also discussed is the popularity of a cap-and-trade program:

Grist: A market-driven exchange solution has the unique distinction of being favored by both Democrats and Republicans, but there is growing support for a carbon tax — which its proponents claim is more equitable. Is it possible — indeed necessary — for an exchange, carbon tax, and other legislated solutions to live side by side to effectively reduce carbon emissions?

Adams: It seems to me that there should be one model in place, and given how well cap-and-trade has done with acid rain over the last couple of decades, and since it’s been adopted for Kyoto, I’m willing to believe that cap-and-trade is here to stay.

Also, World Energy’s been at Carbon Forum America in San Francisco this week. If you’re still around, we’re in booth #414, so stop by and let us know what you think about the World Green Exchange!

Today’s Globe and Mail discusses how the Canadian carbon market is taking off, with Alberta and now British Columbia having carbon legislation in place. The World Green Exchange’s auction with Verdant Energy was featured as a successful example of this growing market:

In Calgary, Blue Source Canada, formerly Baseline Emissions Management Inc., last year started marketing offsets in Alberta and has a supply of more than 10 million credits, from areas such as biomass and renewable energy. In January, it worked with World Energy Solutions Inc., which has an auction system, to help Calgary’s biomass power company Verdant Energy Ltd. sell 80,000 credits for roughly $1-million.

Also discussed is the fluctuating price of carbon due to uncertainty in the market; however, even with this uncertainty, the international market continues to expand rapidly.

We’d love to hear your thoughts on the future of the Canadian carbon market.

Reuters reports that Japan is looking into a compulsory cap and trade scheme instead of allowing companies to set their own targets and self-monitor for compliance. The Ministry of Economy, Trade and Industry has set up an informal panel to research a mandatory program.

The International Herald Tribune posts the AP’s interview with executive secretary of the U.N. Framework Convention for Climate Change, Yvo de Boer, discussing the role private investors play in cutting the production of greenhouse gases. De Boer predicts that private investment will soon surpass government investments to combat global warming.

We also wanted to share some additional coverage from the launch of the World Green Exchange:
Denver Post
Earthtimes
Energy Current
Restructuring Today

We wanted to share the Wall Street Journal’s thoughts on yesterday’s launch of the World Green Exchange. Keith Johnson, who talked with CEO Rich Domaleski, blogs about the exchange on the WSJ’s Environmental Capital blog:

Trading Places: A New Carbon Market
Posted by Keith Johnson

The increasingly crowed club of climate exchanges has a new member. The big question now: How and when will the U.S. carbon market really materialize?

World Green Exchange, an offshoot of an existing electricity-and-gas trading platform, officially launched operations Wednesday. To compete against the established, and much larger, climate-change exchanges out there, WGE brings a twist to the table: It runs auctions.

That brings buyers and sellers together directly, sort of a regulated e-Bay for trades of natural gas, electricity—or greenhouse-gas emission permits. World Energy started with electricity sales, but has been quietly selling renewable-energy certificates and “green” power since 2003, such as for states that need to ensure a certain part of their electricity mix comes from sources like wind farms.

We’d love to hear your thoughts about Keith’s take on the World Green Exchange.

Today we announced the launch of the World Green Exchange, a marketplace to buy or sell green power, RECs, VERs and carbon offsets. The full press release can be found here, but here are some of the news highlights:

Since 2003, World Energy has transacted nearly 1 billion kilowatt hours of green power over its award winning World Energy Exchange. Seeing the need for an auction platform for environmental commodities, World Energy has adapted its World Energy Exchange auction technology and proven process to create the World Green Exchange, which, in the past months, has successfully completed several pioneering transactions in the renewable energy, green credit and carbon markets space:

• Green power – A reverse auction for renewable energy yielded a 17 percent greening of the State of Connecticut’s overall energy portfolio, causing the EPA to cite the state government as one of the greenest in the country.
• Renewable Energy Certificates – For a Midwest utility, World Energy sourced RECs at an 8% discount to the utility’s price target.
• Solar Renewable Energy Certificates - MMA Renewable Ventures ran a forward auction for 1500 solar renewable energy certificates, earning a premium over prevailing bid-ask prices.
• Voluntary Emission Reductions-Atmosclear, an organization committed to providing offsets to help consumers and businesses reduce their contribution to global warming, was able to sell 75,000 metric tonnes of VERs at a 20% premium in a forward auction
• Carbon emission compliance-Verdant Energy, a leading Canadian power supplier, auctioned off 80,000 metric tonnes of carbon offsets under the recently established Alberta Offset System-the first compliance-based auction of carbon offsets in North America. The forward auction yielded a price significantly higher than prices quoted to Verdant before the auction.

Point Carbon discusses the announcement with a focus on the increased results yielded with an online auctions process as opposed to bilaterally-brokered transactions, bid-ask exchanges or paper RFPs. The article also looks to the recent Alberta auction as one of the World Green Exchange’s recent successes.

We’d love to hear your thoughts regarding the exchange.

Reuters looks at the $10 billion pledge from U.S. institutional investors to go, over the next two years, toward technologies that reduce greenhouse gas emissions and to have companies disclose risks associated with climate change.

The Houston Chronicle looks at the new energy bill that House Democrats are planning on introducing. The bill will extend tax credits for renewable and clean energy programs in order to encourage wind and solar power as well as the development of plug-in hybrid vehicles. To offset these credits the bill also proposes changing the manufacturer’s deduction for oil companies and repealing tax deductions outright for the major integrated oil companies.

Another Reuters article discusses Bank of America’s creation of an environmental banking group, which is set to finance ways to conserve and reduce global warming. The announcement comes at the same time as the company’s CEO, Kenneth Lewis, called on Congress to create a carbon cap-and-trade program.

With New Hampshire still debating on if and how to participate in the Regional Greenhouse Gas Initiative (RGGI), the Nashua Telegraph takes a further look at RGGI and the regulations the initiative will put into place. The first RGGI auction is scheduled for June 2 with New York, New Jersey, Connecticut, Massachusetts and Maine participating, but New Hampshire is still debating based partly on the probable increase in electric rates. However, that increase may be offset by rebates and/or conservation.

World Energy President and Chief Operating Officer Phil Adams is speaking on the keynote panel at today’s Voluntary Carbon Markets conference in New York City, which is the premiere US event focused solely on the market. The panel kicks off the conference’s focus on the past, present and future of the US voluntary market.

The Wall Street Journal discusses how top US investment banks, including Citigroup, JP Morgan Chase & Co. and Morgan Stanley are anticipating government caps on greenhouse-gas emissions and are setting environmental standards for companies trying to acquire financing for coal-fired power plants. In a move to reduce debt risk, the banks will require these companies to prove their viability under the possible regulations before receiving financing.

This article from The Times discusses how the European Union might limit the ability to trade Certified Emission Reduction credits after 2012 if a successor treaty to the Kyoto Protocol, which will create a wider market for carbon, is not agreed upon. This could potentially harm a United Nations plan that promotes carbon-reducing power projects in poor countries.

Reuters looks at a new report from a Canadian government-commissioned panel which suggests the Canadian governments should spend C$2 billion to encourage the implementation of technologies to capture and store carbon. The panel estimates that the aid could help get three to five capture and storage projects operational by 2015. There is concern, however, that carbon capture will replace initiatives that reduce greenhouse gases.

The article in the Washington Post on the House’s recent purchase of VERs illustrates a key issue in the emerging VER market – and omits others.

The article clearly identifies the additionality issue. Did our taxpayer dollars actually change anything? Or did we pay for something that already happened or would have happened anyway?

This, of course, begs the question as to why the market structure causes such ambiguity in the first place. Clearly regulations and the establishment of a single verification standard would go a long way to help here.

And further, we might ask about the implementation of the transaction itself. Was sufficient product information disclosed to the buyer? Was there sufficient liquidity in the market to create a robust pricing event? Was the bid-ask price discovery method the most efficient?

Clearly bid-ask exchanges have been an extremely successful form of price discovery, as the worldwide financial markets use bid-ask exchanges to conduct the vast majority of today’s equity transactions, but we submit that they might not be the most efficient means of transacting in today’s emerging environmental markets.

We believe that because of the significant information component associated with these transactions (project type, verification standards, additionality, etc), lack of liquidity and lack of price transparency, structured auction events make much more sense in leveling the playing field for both buyers and sellers, enabling the true forces of market competition to deliver the efficient pricing result. Our recent transaction in Alberta is a good example of where a structured auction event yielded an optimal outcome for both buyers and sellers.

-Phil

Some quick hit pieces of news today:

Climate Plans by New York, Florida Prod U.S. on Global Accord

President George W. Bush is pressing allies in Europe for a global warming agreement based on voluntary targets for pollution reduction. State officials in the U.S. have already left him behind. Twenty-two U.S. states with about 145 million people are exploring mandatory carbon-dioxide caps and emission-credit markets similar to one in the European Union. The proposals are pressuring Congress to pass legislation that would supersede the state and regional programs with a single national plan.

U.S. Senator supports measure to establish federal oversight for new US carbon emissions trading market

U.S. Senator Olympia Snowe (R-Maine) has announced her support for a measure sponsored by Senator Dianne Feinstein (D-Calif.) to establish federal oversight for new carbon emissions trading markets.

The measure also has the support of public utilities in California and across the country, as well as a number of consumer groups. The legislation, introduced on December 6, 2007, is designed to prevent future Enron-like fraud and manipulation in greenhouse gas emissions credit markets – billion-dollar markets that are expected to develop once Congress approves comprehensive climate change legislation that includes a cap-and-trade system for the trading of emissions credits.

Climate-Control Talks to Address Barriers to Green-Technology Profit

Diplomats from some of the world’s biggest economies will gather in Hawaii today for a new round of talks aimed at hashing out an international agreement to succeed the Kyoto Protocol, which sets caps on greenhouse-gas emissions but expires in 2012. The meeting isn’t expected to produce any major breakthrough. But it comes as the U.S. and other industrialized countries are pushing developing nations to scrap tariffs and other trade barriers they now impose on clean-energy technology — a push backed by Western companies such as General Electric Co., which see sales of those goods in the developing world as a hot business.