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  Business Times 24 Sep 2007
Complex regulations a barrier to carbon trading
Few companies have the resources to handle projects: AES AgriVerde official
By Matthew Phan

(SINGAPORE) Singapore has made clear its aim to be a hub for carbon trading, an industry already worth billions of dollars and set to keep growing.

But sheer complexity of regulations and the speed at which the sector, still in its infancy, is changing mean few companies yet have the resources to really make an impact, says Mark Leslie, vice-president of South-east and East Asia for AES AgriVerde.

AgriVerde, a subsidiary of US-based utilities giant AES, has been allocated US$325 million to invest in carbon-reducing projects worldwide, with some US$100 million targeted at projects in South-east Asia.

Credits are earned via a lengthy process which involves a company submitting a document outlining the project, getting it validated and registered with the United Nations (UN), monitoring and verifying that emissions are genuinely reduced, and finally, obtaining a certificate from the UN.

Along the way, the firm must perform feasibility studies, obtain financing, construct and operate the infrastructure that will reduce emissions, and so on.

A glance at the website of the UNEP Risoe Centre on Energy, Climate and Sustainable Development, which publishes updated data on projects worldwide, will reveal over 70 different project categories, from animal waste management to incineration of potent chemical streams, and over 90 approved methods of measuring reductions, with more on the way to being approved.

What's worse, each methodology has different monitoring requirements, says Mr Leslie. 'It's the UN's job to be as conservative as possible and put in measures that you cannot get around. Their credibility has been questioned over other programmes, like Oil for Food, so they're trying to be very conservative about their approach.'

That's why it's hard for smaller developers, because they change the rules three times a year, he points out.

For instance, last year, the UN decided that flares have to prove they are burning at over 500 degrees Celsius for 30 minutes or more. So project managers had to install thermal couplers calibrated to local temperatures, linked to a data logger.

'If someone didn't know that, all the CERs earned from that time period would be lost,' Mr Leslie says. 'You have to be so on top of the regulatory aspects so that you can stay compliant. Without the infrastructure, it's difficult to do that for small projects.'

So AgriVerde bundles together hundreds of these small projects to mitigate the risk.

Its strategy is to generate tens of thousands of credits from each of a couple hundred sites, such as palm oil mills located 2 to 3 kilometres from each other - together, these could generate as many credits as a giant landfill project.

Its US$325 million fund could sponsor over a thousand projects worldwide, Mr Leslie says. It currently operates in Singapore, Malaysia, Indonesia, China, Korea, Taiwan, Poland, Ukraine, Russia, Morocco and Egypt.

In South-east Asia, it is mostly Malaysia and Indonesia, and mostly in palm oil or pig farms. AgriVerde expects to register about 50 projects by year-end in Malaysia alone, generating an average of 50,000 credits per site.

In China - where Mr Leslie says, with some awe, that there are 700 million pigs - it has signed about 300 or so letters of intent for projects to cut gases from animal waste and landfills.

AgriVerde is not yet especially active in Singapore, but the AES group - under which portfolio are projects requiring higher technology such as in energy efficiency or alternative energy - could soon be, says Mr Leslie.

For example, AES has developed technology that reduces heat and demand for air-conditioning in data servers, thereby consuming less power. This is not commercialised yet, but could be 'very relevant' for service economies with heavy reliance on data systems, he says.
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