Isramart : ERA Carbon Offsets Poised for Significant Growth

Isramart news:
ERA Carbon Offsets Ltd. (TSX.V:ESR) has already established itself as a cutting edge innovator in the field of carbon offset generation through reforestation and ecosystem bio-remediation. But what readers of MidasLetter.com have been consistently asking is “How big could this thing get.” After another month of research and interviews, we are pleased to respond with our conclusion: Very big indeed.

Consider the company’s recent agreement with HEAG Südhessische Energie AG (HSE), one of Germany’s largest suppliers of electrical and natural gas energy. ERA closed a deal worth a total of CA$4.25 million by contracting with HSE to sell 500,000 tonnes of “Verified Emissions Reductions” ( or ‘VERs’)in tranches ending in the 1st quarter of 2010.

HSE’s subsidiary, Entega Vertrieb GmbH & Co. KG (Entega) is focused on the provision of modern, sustainable energy to retail clients throughout Germany. With these VERs, Entega will utilize the offsets to create a CO2-neutral energy product for its customers throughout Germany.

Dr. Robert Falls, CEO of ERA commented “We are pleased to be delivering this second tranche of offsets to our clients at HSE/Entega. We believe they stand at the forefront of environmental stewardship as they have made a conscious effort to support the critical role forests play in climate change. We look forward to working closely with them through the remainder of our delivery schedule and beyond.”

Just the Beginning
ERA has now sold and delivered VERs to Shell Canada, one of the world’s major suppliers of petroleum products, HSE, and many other smaller entities, all of which points to an evolving business model that is gaining acceptance internationally as the world accepts carbon emissions ‘cap and trade’ strategies as one way to attempt global carbon dioxide emissions reduction. But the real elephant in the room is the United States market. The U.S. is blamed for nearly 6 billion tonnes of CO2 emissions annually, and is the largest emitter by far than any other country on the planet. The next closest is China, with 3.5 billion tonnes emitted annually.

Thus far, the U.S. has been slow to evolve a legislative framework that would force major industrial emitters onto some kind of schedule that would see any sort of reductions in emissions. That would appear to be on the verge of change, however, as two bills now working their way through the process edge closer and closer to becoming law.

The Senate environment committee approved the Kerry-Boxer cap-and-trade bill on 5 November in a vote that pleased supporters but also emphasized how partisan the issue of climate change has become in Congress.

Democratic environment committee Chair Barbara Boxer proceeded to a vote despite a boycott by all of the committee’s Republican members, who claimed the Environmental Protection

Agency had not completed a full economic analysis – a charge Boxer and other Democrats denied.

Seperately, A group of senators led by Michigan Democrat Debbie Stabenow yesterday released the Clean Energy Partnership Act, which will be added to the Kerry-Boxer cap-and-trade bill making its way through Congress.

The new bill establishes rules for the creation of an agricultural and forestry offset program in the US.

It also contains provisions for offsets generated from reduced emissions from deforestation and forest degradation (Redd) projects in developing countries. Co-sponsors of the bill include moderate Democrats who represent rural and manufacturing states. Their support is considered essential to the passage of Kerry-Boxer.

These senators include Montana Democrat Max Baucus, the only Democrat on the environment committee to vote against passing the Kerry-Boxer bill out of the committee on 5 November.

Other key senators supporting the bill are Democrats Sherrod Brown, Mark Begich, and Tom Harkin.

“There are a number of noteworthy co-sponsors that you ultimately need to attract to pass a bill in the Senate,” said Kyle Danish, counsel to the Coalition for Emission Reduction Projects.

The coalition praised the bill, claiming it will help to provide sufficient supply of offsets in a federal cap-and- trade system.

The bill lists specific eligible offset types. They include:

* coalmine methane, landfill gas and fugitive emissions from the oil and gas sector;
* projects involving afforestation or reforestation of acreage not forested as of 1 January 2009;
* forest management and reduced deforestation;
* carbon capture and storage;
* recycling and waste minimization projects;
* projects relating to agricultural, grassland and rangeland management;
* animal management practices;
* urban tree-planting.

The bill also allows offsets for international reduced deforestation projects that started after 1 January 2001 and are registered no later than 2 years after the start of an offset program.

The international deforestation project provisions were not present in an earlier version of the bill and reflect a strong push from offset organizations to get early action Redd projects included in the bill, said Danish.

The legislation also allows a broad range of offset programmes that qualify for registering projects, said Danish.

Qualifying programs would likely include the Climate Action Reserve, the Voluntary Carbon Standard and the American Carbon Registry, he said.

In a previous version of the bill, preference was given to state-run programmes, such as the Regional Greenhouse Gas Initiative and California’s AB 32.

“The bill sets a clearer pathway for voluntary programmes,” said Danish.

The legislation provides a 10-year crediting period for projects that go back as far as 1 January 2001.

It provides a 1 to 1 fungibility for these pre-2009 offsets, as long as they meet the standard eligibility requirements for offsets.

Unlike the Kerry-Boxer bill, the amendment allows for both the US Environmental Protection Agency (EPA) and the US Department of Agriculture (USDA) to administer offsets. The National Farmers Union also voiced support for the bill.

Big Emitters will be Big Customers for ERA
A study by Point Carbon research analysts examined which companies face the greatest financial burden under an emissions-trading system (ETS) outlined in the Senate’s Kerry-Boxer bill.

The report focused on the power and oil sectors, which together account for nearly 40 per cent of covered emissions under the bill’s proposed carbon market. Although top US emitter ExxonMobil accounts for over 6 per cent of the country’s total greenhouse gas emissions, its annual operating income would be only mildly affected by cap and trade.

This is because oil companies will be able to recover most of their carbon costs through raising gasoline prices 5 per cent, Point Carbon analysts said.

They estimated allowances would cost $15 during the first few years of a cap-and-trade scheme, which would begin in 2012.

US carbon caps under Kerry-Boxer are set at 20 per cent below 2005 levels by 2020. ExxonMobil would have a final carbon cost of $277 million, as the oil giant would need to buy $5.9 billion worth of allowances each year to comply with caps, or 8 per cent of its operating income.