28 February 2003 - Shell Trading and Nuon Energy Trade and Wholesale announced Thursday the completion of the first ever trade of carbon dioxide emissions allowances to be allocated by governments within the European Union Emissions Trading Scheme (ETS).
The trade marks the beginning of potentially the largest market in government-devolved property rights for emissions of greenhouse gases.
Shell Trading agreed to sell a significant volume of first compliance year EU allowances to Nuon on a forward basis. The ETS is currently undergoing a second reading by the European Parliament, with the first compliance year currently scheduled as 2005. Should the ETS not proceed, the terms of the trade between Shell Trading and Nuon will be renegotiated.
The European Commission's ETS proposal would cover emissions from 2005 to 2012 from some 6000 facilities throughout the EU, such as refineries, power stations and cement manufacturing plants. These facilities currently have combined emissions of over 500 million tonnes of carbon dioxide per year.
Each facility would be allocated tradable emissions allowances by its national government, with one allowance equal to one metric ton of carbon dioxide emissions. At the end of each compliance year, each facility would have to hold allowances equal to or greater than the volume of its emissions, or face a financial penalty. Throughout the year facilities emitting fewer emissions than target will be able to sell allowances, while facilities emitting more will have to buy more.
Shell and Nuon each have facilities around Europe which would face compliance targets under the proposed EU scheme. Nuon has recently acquired Reliant Europe, including 3500 MW of installed power generating capacity. Both companies have active global environmental products trading operations.
Shell Trading is a leader in environmental products trading with positions in over 15 environmental markets around the world, including the UK Emissions Trading Scheme which started in April 2002, other global emissions-based markets including US SO2 and NOx and Danish CO2, various Renewable Energy Certificate based markets in Europe, USA and Australia, and markets for instruments defined within the Kyoto Protocol such as Certified Emissions Reductions from South America, South-East Asia and Africa.
The environmental products desk of Nuon Energy Trade and Wholesale focuses primarily on green power sourcing and trading across North Western Europe and the upcoming EU Emissions Trading Scheme, though also undertaking activities under the various Kyoto Mechanisms and in the UK Emissions Trading Scheme.