Dirty business
Canada's Andrei Marcu has just moved from a role heading up the International Emissions Trading Association to the hot-seat at the World Business Council for Sustainable Development. World Finance's Roger St. Pierre talked to him about his new role
How do you see your work differing with your move from IETA to WBCSD?
Well, in a way I haven’t moved that far! Both organisations are based in Geneva and I have actually moved back into what used to be my old IETA office before we changed our address some time ago. The biggest difference will be a much broader remit, covering the whole picture from energy usage to how we are going to deal with climate change. It’s a broad sweep, investigating and analysing all the issues for a group of very large, multinational companies who are looking at every aspect of sustainable development within the global economy.
IETA, on the other hand, is concerned with a narrower tranche of the issue, aiming at mitigating the effects of industrial emissions. I will be away from home a lot of the time, spending three weeks out of four travelling the globe. We have 209 member companies and close on 70 regional affiliate offices and my job is to help them all keep on track.
What opportunities does emissions trading represent for an institutional investor?
It is like any other market, and markets will do what markets do and people will play them to gain financial benefit. The spin-off benefits for the ecology will for many of those involved in this trading be simply a side issue but people trading to maximise their investments are quickly latching on to the additional financial advantages of being on the right side of compliance.
Of course, markets take time to evolve and in its first year ETS was not going like crazy because people needed to investigate, plan a strategy and fit it into their investment cycles. However, with the rate at 20 euros a ton, things are beginning to bite.
How is the EU’s Emissions Trading Scheme built into the Kyoto Protocol?
They are two separate things, nothing more, nothing less, but they function in tandem and trying to adhere to the Kyoto timetables is essential if we are going to make it all work. There’s a real desire on the part of the EU member states that reductions made are recognised as such and that the rewards will encourage more of it – and ETS provides a mechanism for this.
What are the key differences between the European Union and US markets?
Well, Europe has moved ahead and the experience gained from doing so holds some valuable lessons that the Americans are picking up on. There have been no major disagreements within Europe so it was relatively simple to introduce and implement ETS. The problem in the US is that the individual states have differing viewpoints but a federal level system is what is needed – and that’s what is being discussed right now.
Various proposals have been put forward. However, the current Leiberman/Warner ideas, which seem to be moving fastest, do not take into account international offsetting, and that’s a weakness that would put America at a disadvantage. At present, there’s a high level of auctioning in the US. What’s needed is a carefully thought out pricing and capping system.
What kind of growth would you expect over the next year or so?
My sense is that the market has reached a point where segmentation is taking place. Right now, the prime area for growth is likely to be the trading of allowances. I can’t really give any projections yet for market size across the world’s regions as it is all such early days but there’s no doubt that the whole planet, from the man and woman in the street right up to the politicians and industrialists at the top, is now waking up to the vast ecological problems we are facing and the market seems set to be one of the major ways in which they can be mitigated.
