New Carbon Trading Venture from Gazprom

Excerpts from FT.com : Gazprom launches carbon trading venture

1. What is the deal?

The joint venture between Gazprombank, part of the Gazprom Group, and Dresdner Kleinwort will invest in projects generating “carbon credits” under the Kyoto protocol, mainly in Russia and eastern Europe.

Analysts have estimated that companies could generate up to 1bn tonnes worth of credits. At current forward prices for 2008 under the European Union’s emissions trading scheme, that would be worth €15bn.

2. What will be the impact on the carbon market?

The emissions credits from Russia and eastern Europe could represent an additional supply of up to 10 per cent of the EU market, putting downward pressure on the price of carbon in the trading scheme. This would have the effect of making it cheaper for European companies to emit greenhouse gasses.

3. How will Gazprom do it?

Gazprombank had clients in the oil and gas, petrochemicals and metals industry that were interested in carbon trading.

Gazprom can benefit directly, by selling credits it has earned.

Olga Gassan-Zade, head of the Kiev office of carbon analysts Point Carbon, said Gazprom had the potential to reduce its emissions by fixing leaks and overhauling its compressors, which could generate up to €2bn through carbon credits.

4. Who will buy these credits?

Hedge funds and other institutional investors, as well as governments and companies covered by the emissions trading scheme are expected to be among the eventual buyers of the credits.

Gazprom wants to build its London-based trading arm into a full-service energy trader, dealing in oil, power and liquefied natural gas as well as carbon permits and conventional gas.