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BGC Environmental Brokerage Services
Survey - CO2e.comsm Trading Simulation in Tokyo provides a window into the future of the greenhouse gas (GHG) emissions trading market, August, 23, 2001
A Survey of Participants Reveals 83% Believe Emissions Trading Is an Important Part of Their Corporate Environmental Strategy
NEW YORK, August 23, 2001: The first emissions trading seminar for Japanese industry, hosted by CO2e.com, LLC and Mitsui & Co., Ltd., allowed participants to explore key drivers, opportunities and threats for business within the emerging GHG emissions trading market.
On July 27th 2001 in Tokyo, just three days after an accord for ratification of the Kyoto Protocol was reached at the recent Climate Change talks (COP6.5) in Bonn, 37 participants from Japanese industry and research institutions engaged in a hands-on trading simulation designed by CO2e.com, LLC to test different GHG emission trading market designs.
This CO2e.comsm Trading Simulation was based on a combination of the Kyoto Protocol approach (with the first commitment period of 2008 to 2012) with a domestic trading scheme in a fictitious country representative of the Japanese marketplace. Credits were traded with companies in fictitious countries representing the Former Soviet Union, China and the rest of the developing world.
Each participant was assigned a set of specific data that defined a company facing a particular business problem. Industrial companies, for example, were provided with information regarding their forecast future emissions, cash position, and internal abatement cost curve, and had an expectation of the emission allowances that would be allocated.
“Over 90% of the participants agreed the seminar and CO2e.com Trading Simulation helped them to understand emissions trading and to experience the decision-making process required by a GHG emissions trading scheme,” noted Carlton Bartels, CEO, CO2e.com, LLC. Indeed, the CO2e.com Trading Simulation demonstrated the clear economic logic of emissions trading – allowing industry participants, bound by emission caps, to transfer emission allowances between high and low valued users with the total economic costs decreasing substantially.
This virtual Japanese emissions trading market mirrored in many respects the early stages of market development witnessed in certain emissions trading markets in the United States. The market trend showed participants rallying a cost curve from initial low levels, to a quick spike in the average market price, to a gradual trail off as over compliance was recognized and participants sought to offload credits in the market.
As witnessed in the current GHG marketplace, some simulation participants were unwilling to act ahead of firm legislation and market uncertainty. However, this lack of early action in the simulation translated into some participants being caught short of compliance.
Marketplace news also played an important part in assisting participants in their forecasting of the impacts of policy risks on the value of their portfolio. Participants with a balanced portfolio fared well, and those with an over-reliance on one type of credit were damaged.
“We, Mitsui, strive to respond to the requirements of our customers, who are preparing for the future implications of emissions trading,” said a Mitsui spokesperson. “We think this seminar and simulation have provided the participating Japanese companies with an ideal environment to visualize how GHG emission reduction trading works. We have teamed with CO2e.com because of their long history in pioneering the development of emissions trading”.
In a survey of 56 participants following the seminar and simulation, 83% believed that emissions trading formed an important or very important part of their corporate strategy. 57% already intend to reduce GHG emissions and over 35% have already decided on measures or have internal policies in place to promote emissions reduction.
Questions regarding a GHG carbon constrained future illustrated that 24% of the participants feel threatened by the possible imposition of an obligation to greatly reduce emissions, while 38% of participants regard GHG regulation as an opportunity to expand or reform their business. Interestingly, 30% anticipate working together with other companies to propose drafts of regulations to Government.
EDITOR’S NOTES
Upcoming Simulations
CO2e.com, LLC has already deployed the CO2e.comsm Trading Simulation at industry-based seminars held in Hamburg, Germany and Tokyo, Japan and will be holding the following upcoming simulations:
Alberta Greenhouse Gas Emissions Trading Simulation,
Alberta, Canada
5-6th September 2001
www.climatechangecentral.com.
CO2e.com Carbon Trading Simulation
Rio de Janeiro, Brazil
20th September, 2001
CO2 Emissions Trading Simulation
Berlin, Germany
1st-2nd October, 2001
www.euroforum.de
Please contact info@CO2e.com or +1 212 938 8700 for further details.
About the CO2e.com Trading Simulation
The CO2e.com Trading Simulation is designed to educate participants in emissions trading and to explore different GHG market designs. It is run on eSpeedsm trading software.
The CO2e.com Trading Simulation is a web-based interactive simulation that models the impacts of key policy decisions that are currently in the regulatory debate and demonstrates how companies need to adapt to best participate in the developing greenhouse gas emission trading market. However, the CO2e.com Trading Simulation does not provide either a conclusive prediction of the clearing price of carbon, or an analysis of the macro-economic impacts of the Kyoto flexibility mechanisms.
The “First Tokyo” Simulation provided insights into the workings of the future GHG market in Japan and abroad. The position and actions of a selection of the fictitious participatory companies are described together with an overview of the simulation from the point of view of the simulation moderators - CO2e.com – at www.CO2e.com/tools.
About CO2e.com, LLC
CO2e.com, LLC is a member of the Cantor Fitzgerald Group. Founded in November 2000 as an offshoot of its successful Environmental Brokerage Services (EBS) division of Cantor Fitzgerald Brokerage, L.P., CO2e.com has offices in New York, London and Toronto and provides GHG trading and support services orldwide. CO2e.com was developed in association with PricewaterhouseCoopers. The CO2e.comsm Associates include EcoSecurities Ltd., PricewaterhouseCoopers, Baker & McKenzie, The Environmental Resources Trust (ERT), URS Corporation, CH2M Hill, ICF Consulting, Van Ness Feldman, Innovest and Aon Corporation.
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