Romania: Is Carbon the Asset to Trade?

By Yacong Yuan

Edited by: Alexandru Cristea

Carbon trading could turn into a financial resource for Romania in the future.

The Kyoto Protocol set up an international joint effort to limit greenhouse effect by reducing carbon dioxide emissions and a treaty to allow the exchange of carbon emission as a commodity. Poland successfully sold 15 million euros ($22 million) worth of carbon credits to Ireland in November 2009. Hungary signed an agreement with Japan to transfer carbon credits in December, 2007 with permits to sell on government-level emission under Kyoto Protocol. Their neighbor, Romania, may be the best example of how developing countries juggle with economic growth and climate change towards carbon trading.

“Political instability in recent years and the economic crisis have made environmental protection a formal problem,” said Silviu Secrieru, an editor at Romanian National Television Network, TVR in Bucharest.

“Currently, Romania is concerned to secure a piece of bread, not to protect the environment. Lack of funds, civic awareness programs, volunteering makes environmental protection a problem that exists only on paper.”

Under the Kyoto Protocol, Romania has to reduce gas emissions by 8% based on figures for its 1989 industrial output. This means between 2008 and 2012, Romania has the right to emit 1,279 billion tonnes of CO2 equivalent. In 2009, Romania industries emitted 40 percent less CO2 than its Assigned Amount Units (AAUs) of CO2 emission. For every tone of carbon allowances Romania didn’t use, it can be traded for money. Within the European Union, the largest multi-country, multi-sector Greenhouse Gas Emission Trading System world-wide, European Union Greenhouse Gas Emission Trading System (EU ETS) came into operation since January 2005.

There are two channels to trade carbon allowances, one is through companies and the other is through trade between governments.

On the country-to-country carbon trade level, Romania could cash out 1 billion euro each year. The money gained from AAUs must be used for developing green energy to reduce carbon emissions, such as rehabilitating coal based power plants or wind energy projects. If Romania didn’t cash out its surplus carbon credit, these allowances will automatically expire by 2012. However, Romania, a country with a negative 7.9 percent GDP growth in 2009, heavily dependent on funds from IMF and EU is not going to act so fast on this issue.

“Already, the Minister of Economy and Energy, has propelled Videanu brother in the business of green energy rehabilitation projects. This is about more than 100 million, and corruption in Romania is just icing on the cake to the deterioration of environment,” said Secrieru.

The measurement of carbon emission allowances might be wrong.

“A Romanian pollutes an average of 9.2 tonnes of carbon dioxide per year, with two tons more than the European average,” said Secrieru.

“In this respect, Romania aims to meet EU standards, that by 2020 to reduce CO2 emissions and energy consumption by 20 percent.”

The problem is, the carbon allowances EU ETS issued are far more than the amount actually been consumed. This has resulted in low price of carbon credit and easy purchase of carbon credit. Currently, no carbon trade has been done on the government level in Romania, yet some companies already take their step onto the global carbon market.

In December 2009, a Romanian utility company Elcen sold 2.5 million credits, a large share of its EUA (EU Allowance of CO2) allocation in a bid to raise cash. Elcen is a state-owned, joint-stock company, producing almost 60% of Romania’s household electricity.

“We are the public media, as far as I know, no one in our department has worked on this issue”, according to a journalist refused to give his name from Radio Romania International English Department in Bucharest.

However, this doesn’t mean there are no activities under the market. Since the beginning of 2009, Romanian companies have traded 40 million carbon credits, according to a recent report by The Diplomat, a Bucharest-based magazine. One of the leading Romanian brokers in carbon trading, KDF Energy, helped trade around 200 million Euro.

“The reasoning was that poor EU states are not ready to finance other poor states outside of the EU to solve a problem that they themselves are struggling with”, said Cosmin Briciu, an environmental consultant from Green Partners during an interview with The Diplomat this month.

To trade its carbon credit, Romania also has to follow regulations from European Commission under the EU Emission Trading Scheme (EU ETS). Similar to Kyoto Protocol, heavy-polluted industries must reduce their carbon emissions and adopting new technologies for alternative energies. For instance, one of the three largest power plants in Romania, Turceni, a state owned facility, has received 170 million Euros in loans from European Bank of Reconstruction and Development (EBRD) since July, 2009.

Romania has been part of the EU’s scheme for carbon trading since 2009, where up to 12,000 industrial and energy polluters buy and sell their carbon emissions. Instead of AUUs, these carbon credits take the form of European Union Allowances (EUA)s, which can be sold on international stock exchange market like Climex in Amsterdam or Bluenext in Paris, according to The Diplomat.

Right now, both local stock exchange markets and power operators in Romania are opt to a legalized local carbon trading system. The state-owned power market operator (Opcom) intends to set up a new platform as early as this year, while the Bucharest Stock Exchange (BSE) has also expressed interest in opening a facility for trading CO2 emissions credits, according to a report released by The Diplomat last week.

Photos courtesy of ro-am.net and newsbusters.org