Brazil Claims First With Carbon Auction
RIO DE JANEIRO, Brazil — Brazil's largest city sold millions of dollars worth of carbon credits at an auction Wednesday in a deal that experts said paves the way for developing countries to make money fighting global warming.
Brazil's Mercantile and Futures Exchange called Sao Paulo's sale of $18.5 million in carbon credits to Dutch-Belgian Fortis Bank the first such sale to be held on a regulated stock market and a significant step toward institutionalizing the carbon market.
Under the Kyoto Treaty on greenhouse gases blamed for global warming, companies that generate large amounts of polluting carbon dioxide and methane can buy offsetting credits from projects that remove contaminants.
Until Wednesday's auction on the Brazil stock exchange, companies such as Fortis mostly purchased credits from individual sellers. Experts said the sale could be a major step toward creating a clearer system that could make buying and selling easier.
Fortis Bank beat out 13 competing bids to win the rights to emit 808,450 metric tons (891,163 U.S. tons) of carbon dioxide with an offer of $22.90 per metric ton, the exchange said in statement. It called it the first such sale on a regulated exchange.
"In the past these deals have been worked out in private," said Marcelo Furtado, director of Greenpeace's Brazilian campaign. "It's a victory for society to have this additional accountability."
Benjamin Vitale, Conservation International's Senior Adviser on Eco-System Markets and Finance, said he was not sure if this marked the first time such emission credits had been traded on a regulated exchange, but it certainly was a first for a developing country.
"I think the importance of this is twofold: The more developing countries' financial services sectors can be trading this kind of asset and commodity regularly, just like they trade soy in Brazil, it enables them to trade other credit like emissions from deforestation," Vitale said by telephone from Virginia.
"It also helps get out the word about climate change and why it's important for Brazil."
The World Bank says the global carbon market _ where government and industry limits on carbon dioxide emissions are traded like credits _ tripled from $7.9 billion in 2005 to $24.4 billion last year.
The auctioned credits were created for Sao Paulo's government by a project at the Bandeirantes Landfill to generate energy from the methane gas produced by the tons of solid residues it receives per day. The project is run by privately held Biogas Energia Ambiental SA.
"This is important because the city is making a significant contribution to control greenhouse gases," said Stella Goldstein, deputy secretary of the city government.
Fortis has been positioning itself as a broker in the energy market, purchasing credits and selling them to companies that need to meet European pollution standards with offset carbon credits.
In the European Union, emission permits have been trading at around $30.33 a ton, while UN certified credits like the ones sold in Sao Paulo have been trading at around $20.56.
The Kyoto Protocol caps the amount of greenhouse gases like carbon dioxide and methane produced by power plants and factories in more than two dozen countries. Such gases are believed to contribute to the warming of the Earth's atmosphere.
The United States has not signed the treaty.