Merrill Lynch investing in emissions reduction projects
US Investment Bank, Merrill Lynch, has established a US$ 200-million alliance with the Russian Carbon Fund, based in Copenhagen, to fund emissions reductions projects in the Russian Federation and the CIS:
“The money will be used to get emissions reductions projects off the ground in a move that gives Merrill access to a carbon trading market analysts estimate could be worth up to €15bn ($19.7bn). According to data on its website, RCF could generate revenues from selling “carbon credits” of more than €2bn in the four years from 2008.
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RCF invests in projects such as mending leaking gas distribution pipelines, to reduce emissions. Such projects are awarded a credit for each tonne of carbon dioxide saved under the Kyoto treaty.
These credits, known as emission reduction units (ERUs), can be sold to other Kyoto signatories such as European Union member states that need to reduce their emissions under the agreement.
Companies covered by the EU’s emissions trading scheme will be able to buy these credits in the second phase of the scheme, from 2008 to 2012, if they need to produce more emissions than they were allocated under the scheme.
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As part of the deal, Merrill’s commodities trading arm gets a significant offtake contract for ERUs from a portfolio of joint projects that RCF is undertaking with companies such as Rosgas, the state-controlled pipeline business.
RCF has 82 projects with the potential to produce upwards of 140m tons of emissions reductions in the 2008-12 period, according to its website. At current prices in the forward trading market, that could be worth more than €2bn.”