Air Pollution Control Equipment Services, Emissions

Natsource® reports significant increase in greenhouse gas trading

Washington DC, Oct. 21, 2002 — New analysis released Friday by Natsource and the World Bank reports that greenhouse gas market activity between 2001 and June 2002 significantly increased in volume when compared to the previous 5 years.

The analysis of the greenhouse gas market was conducted by Natsource® LLC and commissioned by PCFplus, the research arm of the World Bank’s Prototype Carbon Fund. Natsource provided a similar analysis in 2001 that reviewed market activity from 1996 to 2001.

“Many factors contributed to this significant increase in trading,” said Jack Cogen, President of Natsource. “The progress made in recent international negotiations and imminent entry into force of the Kyoto Protocol are driving demand as Parties develop trading systems to reduce greenhouse gas emissions. The first trade of compliance tools in Denmark and the United Kingdom were also important market developments.” Cogen noted that continued development of trading systems at the regional level such as the one being developed by the European Union and national and sub-national emission reduction requirements will further increase trading activity.

Key conclusions from the report include:
* Trading Volume: Natsource estimates that trading volume increased 40 million metric tons traded between 2001 and June 2002. This compares to the 55 million metric tons that Natsource estimates was transacted between 1996 and 2001. Trading increased in both voluntary and regulatory markets.

* Allowance Trading: The first trades of greenhouse gas compliance instruments occurred in the UK and Danish markets.

* Market Diversification: Project-based emissions trading diversified in geography and technology type. Trading of reductions generated from projects undertaken in Latin America, Asia, and Africa increased. The number of reductions generated by fuel switching, energy efficiency, and renewable energy also increased.

* Price Signals: Verified Emission Reductions (VERs) traded in the range of US$1 and $5 per metric ton of carbon dioxide equivalent. The range in price is attributable to differences in the terms of each transaction, the potential that the reductions can be used for compliance with an emissions limitation, and seller creditworthiness. Prices for UK allowances were substantially higher reaching US$18.60 (£12) per metric ton of carbon dioxide equivalent.

A presentation summarizing the World Bank’s findings is publicly available on Natsource’s website www.natsource.com. Other Natsource reports available on the website include the recent greenhouse gas pricing study completed for Environment Canada; the Pew Center on Global Climate Change report The Emerging International Greenhouse Gas Market; and the first greenhouse gas market assessment completed for PCFplus.