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The world is getting warmer, the weather is showing
unpredictable, extreme patterns and natural disasters are occurring
more often.
These conditions, either mostly or partly, are attributed to the
greenhouse gas emissions, which have led to the ratification of the
Kyoto Protocol by 169 countries and other government entities.
The protocol requires industrial countries to reduce their emission
levels -- which has seen the creation of the global carbon market.
Here, companies with emission reduction projects are rewarded with
tradable carbon credits and those producing emissions can buy the
credits as compensation to their polluting activities.
The awareness around global climate change has been rising and the
carbon market has in turn been continuously growing since the
establishment of EcoSecurities 10 years ago.
With a current total portfolio of 178 million tons of CO2 equivalent,
worth around US$1.78 billion, the Dublin-based firm is said to be among
one of the biggest carbon credit traders in the world.
During his short visit here recently, CEO Bruce Usher talked to The
Jakarta Post's Erwida Maulia about how carbon market -- how it
developed and how local firms here can benefit from it.
Question: What's the condition of the global carbon credit market today
after its establishment in 2005? Answer: Very exciting. There's a lot
of awareness now, a lot of demands for carbon credits, a lot of new
projects, the governments are very supportive. The market is growing by
more than 100 percent each year, very fast, actually about 10 percent
per month.
The Kyoto Protocol came into force when the Russian government approved
it in November 2004. There was no market at that time, no competition.
But, there is a lot of competitions now, which is very good.
What has EcoSecurities been doing in the market?
We work on projects that can reduce emissions of greenhouse gases.
We work with project developers to create carbon credits, buy the
credits and create cash flows for the projects. We then sell these
credits to governments and power plants as well as the companies we use
to reduce emissions to financial buyers including investment banks in
Europe and Japan.
What do you expect from your recently established partnership with
Credit Suisse and what's the relevance of the partnership with your
business activities in Indonesia?
Some projects, like geothermal and hydroelectric projects, are very
large and expensive and we don't have enough capital resources for them.
These kinds of projects, which also exist in Indonesia, require
financing from international banks -- and Credit Suisse is one the
largest. Our relationship with Credit Suisse also gives us access to
their large number of clients.
How do you see Indonesia as a developing country in the global carbon
market and with regard to its potential to produce carbon credits?
Globally, Indonesia is the fourth biggest producer of carbon credits
after China, India and Brazil. And this has a large potential to grow.
Indonesia's carbon market grew from zero in 2005 to more than 100
projects under negotiation today. Twenty projects have been approved by
the nation this year and eight are already registered in the United
Nations (UN).
And what are EcoSecurities' efforts so far to make potential companies
here well informed on carbon credits?
I think Indonesian companies already have enough knowledge about carbon
credits, much more than some other countries.
To further build awareness, we organize conferences and seminars and
our staff here have had meetings with project developers and financial
institutions to discuss carbon credits and how the market works.
How does the market actually work?
In carbon credit trading between developed and developing countries,
the over-the-counter market exists, with no exchange. Each trading,
negotiation and contract signing is individual, over the telephone or
by meeting.
In Europe, among developed countries, there's a different type of
carbon credit system, called EU allowances. These allowances are on an
exchange.
EcoSecurities only trades project-based credits. We don't trade on the
exchange.
What kinds of projects are eligible for carbon credits issuance?
First: Renewable energy projects like hydro, geothermal and biomass
plants. Second: Waste reduction projects, especially those for waste
generating methane like from palm oil, animal waste and landfills.
And, the third: Industrial efficiency projects, carried out by changing
industrial processes to reduce emissions. All of these projects must
last until 2012.
What should a local firm do to obtain carbon credits?
It's a long process, may require 12 to 18 months to complete.
First, the company has to conduct a feasibility assessment to find
whether its project is eligible for carbon credits. Second, it needs to
gather information around how the project can reduce emissions.
Third, it needs to write what we call a Project Design Document (PDD),
and this is part of our job. Then, it must bring in a third party to
run a validation, like an auditor, to ensure the project is qualified
for the CDM.
We then submit all these documentations to the UN and to the CDM
executive board. We work there to get the project registered.
Then, each year we work with the project to collect the data from the
previous year of the project performance and bring in another auditor
to review the data. Then again we submit to the UN and get the carbon
credits.
Many steps, it's our job to do all the steps.
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