Home' Trinidad and Tobago Guardian : December 19th 2013 Contents DECEMBER 2013 • WEEK THREE www.guardian.co.tt BUSINESS GUARDIAN
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The markets for CO2 have had
about as good a year as Oba-
trading system (ETS), the world's
largest carbon market, collapsed
in April. Australia's new government is killing
off that country's fledgling market.
Even so, companies are blithe. "Internal
carbon price," the price of a tonne of CO2
used for planning purposes within firms, is
becoming an increasingly common business
tool. Perhaps firms know something that
markets and politicians do not.
A study by CDP, a research group, asked
large firms based or operating in the United
States what tools they had for managing risk,
and 29 said that they used an internal carbon
price. Anecdotally, more apply such a price
but did not mention it as a risk-mitigation
This is the first economy-wide picture of
how far internal carbon pricing has gone and
what it is used for.
The prices range from US$6 to US$7 a
tonne of carbon dioxide at Microsoft to US$60
a tonne at Exxon Mobil. The span is not sur-
prising, since companies use carbon prices
for different purposes. As a rule, those such
as oil companies, whose assets have a long
productive life and which might be affected
by green policies far into the future, use higher
prices than consumer-goods firms whose
products are influenced mainly by current
For many companies the aim is to prepare
themselves for future environmental legis-
lation. AEP, a power supplier, says that it
uses the system because "it assumes a price
of carbon ... will begin in the US by roughly
2020." Delta Air Lines says it uses a price for
evaluating flights to Europe "in anticipation
of compliance with EU ETS."
This is not the only reason. Many firms
use an internal carbon price to calculate the
value of future projects and to guide invest-
ment decisions. Conoco Phillips, an oil firm,
requires that capital projects worth more than
US$75 million calculate the cost of emissions
based on a price of between US$8 and US$46
a tonnene, depending on the life of the project.
The forecast value of a new oil field would
be calculated by multiplying its estimated
output by the estimated future oil price minus
development costs and carbon emissions.
Shell, another oil company, applies a carbon
price of US$40 a tonne to some current oper-
ations, not only to future ones. The idea is
to identify "tall poppies," units with dispro-
portionate pollution. The price implies that
existing projects could spend as much as
US$40 to reduce a tonne of CO2 through
measures such as energy efficiency.
"We apply the carbon price as much to
spur mitigation as to quantify risks," says
Angus Gillespie, Shell's vice president for
Disney, a media conglomerate, goes further
still. It invests in plans to offset or reduce
carbon emissions and charges the cost of
these to business units in proportion to how
much they contribute to the company's overall
emissions. In effect this works like an internal
Perhaps the most intriguing thing about
the prices, though, is how high some of them
are. The market price of carbon is US$6.70
per tonne of CO2 in the European Union and
US$11.50 in California, but big oil companies
charge US$34 or more. That is closer to the
"social cost of carbon," the cost of the damage
from an extra tonne of CO2, than to the mar-
ket price. The Obama administration recently
estimated the social cost at US$37 a tonne.
These prices change behaviour. A huge
amount of attention is paid to government
action, but the sort of carbon price some
companies are using for planning would, if
it became a market price, have a much bigger
impact than any of the policies that govern-
ments are now talking about.
@2013 Economist Newspaper Ltd. (Distributed
by the New York Times Syndicate)
Paying today for tomorrow's carbon
The Mexican Congress has approved con-
troversial legislation that opens the state-
controlled oil sector to foreign investment.
The new energy law allows private oil and
gas companies to drill for oil and gas with
the state-run firm Pemex in exchange for a
share of the profits.
It has been approved by the Chamber of
Deputies a day after being passed by the
upper house, the Senate.
Opposition lawmakers protested vigorously
against the bill.
The Chamber of Deputies voted 354 to
134 to give general approval to the bill.
President Enrique Pena Nieto says private
investment is needed to modernise the energy
"The energy reform is a fundamental trans-
formation, which will enable Mexico to
strengthen its sovereignty and energy secu-
rity," Mr Pena Nieto posted on his Twitter
account after the vote.
He said the new legislation "will also boost
economic growth and the creation of new
jobs" in the country.
Private firms will be allowed for the first
time since 1938, when the sector was nation-
alised, to explore and extract oil and gas with
state-run firm Pemex - and take a share of
Pena Nieto presents the bill in August 2013
The proposal to change the Constitution and
shake up the Mexican energy sector was
tabled by Pena Nieto four months ago
'Stripping the nation'
The opposition said the new legislation
would damage the national interests of Mex-
ico.The were scuffles during the long debate
in the lower house of the Mexican Congress.
Landy Berzunza of the governing PRI party
was taken to hospital with a scratched retina
after an altercation with opposition MP Karen
Throughout the debate members of the
opposition Democratic Revolution Party (PRD)
tried to disrupt the proceedings to prevent
the passage of the bill.
Some occupied the podium in the main
Others barricaded the chamber's entrances
to prevent MPs from the PRI, PAN and Nueva
Alianza parties, who backed the reform, from
MP Antonio Garcia Conejo, from the PRD,
stripped down to his underwear to show his
rejection of the bill.
Anti-energy reform protester in Mexico
City Riot police were deployed outside the
Chamber of Deputies in Mexico City
"This is how you're stripping the nation.
Where is the benefit? I'm not ashamed, what
you're doing is a shame!" he said as he
dropped his trousers and removed his socks.
Left-wing lawmaker Ricardo Monreal took
to the podium with a thermos can, saying
it was a time capsule in which he would put
the names of the "traitors of the fatherland"
who had voted for the reform bill.
Shouts of "ruffians" and "traitors" could
be heard throughout the debate, while some
MPs made obscene gestures at others who
had interrupted them.
Members of the governing PRI party said
the bill was crucial to drive Mexico's economy
forward and to better exploit Mexico's oil
Oil production in Mexico has dropped from
3.4 million barrels per day in 2004 to the
current rate of 2.5 million barrels per day.
The bill is a key part of President Enrique
Pena Nieto's drive to reform the Mexican
It still needs to be approved by 17 of Mex-
ico's 32 federal entities - the District Federal
and 31 states. (BBC)
Mexican Congress approves
controversial oil and gas bill
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