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Special report: Carbon capping
The Middle East’s cap and trade system could mean big money for regional companies, but first both they – and governments – need to embrace it.
May 7, 2010 9:54 by Emily Meredith
But green efforts in the region are frequently seen as either the responsibility of ruling governments or a public relations stunt by private firms. Some companies in the UAE have done things like creating swamps from treated sewage effluent, growing reeds that filter out the waste and then using the water to grow vegetables. “People are doing things for the environmentally right reason but they use the cost to sell it to their boards,” the director of EcoVentures, Armen Vartanian, says.
Even when there are companies that comprise a community interested in making reductions to their carbon footprint, Vartanian says that they only have a few years to recoup its costs in order to get board-level buy-in. “Typically, the payback has to be less than four years, which removes the fancy stuff – the solar PV,” Vartanian says, referring to the photovoltaic cells which generate electricity from the sun. “Look at how much infrastructure is needed to run these [CDM programs],” he adds, estimating that a company can spend $50,000 on administrative costs to ensure compliance. For businesses trying to make money on a carbon exchange, the money made from trading has to outpace the administrative costs. That limits the markets to large companies that have bigger gains to make. With such an uncertain system, businesses have little incentive to try to take advantage of CDMs under the Kyoto Protocol.
It will take more than just corporate good will to establish the infrastructure for many companies in the region to profit from the CDM structure, Birley says. “I think you have to step back and remember that the system that we are part of exists because Europe is the only place in the world that has instituted the mandatory caps,” he says.