A strategy for some companies looking ahead to a nearly certain CO2 allowance market: Buy now, in whatever markets exist now, and bank them for use in the national CO2 program that is eventually established. Ameren, a totally Midwestern utility, is doing that in part by buying allowances in the totally Northeastern CO2 allowance program.
The company's strategy is "acting early, and buying a number of options now that we think will count," Ameren's James Moore said at a Platts carbon trading conference in Houston. One of the things the company is buying, he said, are allowances in the Regional Greenhouse Gas Initiative, where power generators in the 10-state Northeastern region have to cover their emissions. Assuming the allowances are good anywhere in the future, buying now is a good deal. RGGI allowances are selling in the $3 to $4 range. Forecasts for national allowance prices go from $10 to $25 and up.
Ameren also is buying in the voluntary carbon contracts markets, where current participants are banking on future value. "We have a 70 million mt/year CO2 exposure," Moore said. "We realize we're exposed, and that our shareholders are exposed."
The company is doing other things, too -- energy efficiency measures, emissions reductions projects, including landfill gas and renewable energy, and the use of carbon offsets, Moore said. He stressed that being ahead of the game is important for emissions-intensive companies hoping to navigate an increasingly stringent maze of environmental regulation.
His advice: "Know the rules. It's no good sticking your head in the sand and waiting until the rules are made, because by then it's too late. You have to be involved in making the rules."
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