Jamaica is known for having one of the highest energy intensity rates in Latin America and the Caribbean with an unsustainable reliance on imported petroleum to satisfy over 90% of its energy needs. It is not surprising therefore that the Country’s high cost of energy has inhibited the competitiveness of the manufacturing industry which has the potential to make a more significant contribution to Gross Domestic Product (GDP) as it did in times past. To illustrate the significance of energy costs to Jamaica, in the first quarter of 2010, the Country narrowed its current account deficit by close to half a billion dollars as a result of a USD 564mm reduction in the cost of fuel imports.While this is an improvement, Jamaica’s oil bill remains a significant part of its hefty import bill. Consequently, the Country’s leaders and industry players have been aggressively exploring measures to “go green” by implementing energy efficiency projects and focusing on alternative sources of energy such as solar power, wind energy, ethanol and potentially Liquefied Natural Gas (LNG). However, throughout this endeavor, the potential benefits of carbon markets should not be overlooked. |
Carbon markets were created from the trading of carbon emission allowances to encourage Countries and Companies to limit their carbon dioxide (CO2) emissions. The success of carbon markets that originated under the Kyoto Protocol is hinged on the premise that if Firms have to pay for the right to pollute the atmosphere they will pollute less. Under a system known as a “cap-and-trade” scheme, Firms that expect to exceed their quota of emissions can buy carbon credits from another party which has successfully reduced its carbon emissions to a level below its limit. These credits can be bought from a broker (such as a Bank), a United Nations Clean Development Mechanism (CDM) or a Joint Implementation developer or through an exchange such as the EU Emissions Trading Scheme (ETS).
While carbon markets have been expanding globally in the past five years, carbon trading still remains relatively limited in the US and China, the world’s biggest emitters of carbon dioxide, who interestingly have not signed the Kyoto Protocol. Furthermore, the US has yet to develop a mandatory trading programme for greenhouse gas emissions, though environmentalists have been lobbying for the approval of a clean-energy bill for some time. Environmentalists hope to transform the US industry with the introduction of a cap-and-trade system - forcing the biggest Companies to calculate the amounts of greenhouse gases they emit and then pay for them accordingly.
Locally, though carbon trading also remains underdeveloped, the Government of Jamaica (GOJ) has been involved with carbon trading for five years via the Wigton Wind Farm Ltd, a subsidiary of statutory organization, the Petroleum Corporation of Jamaica. Wigton is registered by the United Nations' Framework Convention on Climate Change, and has been trading carbon credits under an Emissions Reduction Purchase Agreement with the Dutch Government since 2005. Recently, ground broke in Manchester for Wigton Wind Farm Ltd’s US$50 million expansion project that will further reduce carbon emissions, significantly increase electricity production and save the country millions of dollars. The expansion of the wind farm will also assist Jamaica in meeting its renewable energy target of 15 percent by 2020. Currently, only 5 percent of Jamaica's energy comes from renewable sources.
As an entrepreneur or Chief Executive Officer (CEO) reading this article, you may be wondering how the use of carbon credits can translate directly to your Firm’s bottom line. A material example will illustrate the potential advantages that reducing your Company’s carbon footprint can have. US automaker, Ford Motor Co (NYSE: F) has been making strides in achieving its goal of lowering CO2 emissions of new US and European vehicles by 30 percent by 2020, compared with 2006. The automaker, which is a founding member of the Chicago Climate Exchange (the biggest voluntary exchange that trades carbon credits in the US) reduced its emissions by 12 per cent in 2009, resulting in savings of US$1.2mm. When combined with its other efficiency efforts including the increased use of recycled renewable and lightweight materials, the Firm recorded savings of USD 15mm in 2009, contributing to a 25% decline in Total Operating Expenses to USD 119.72mm.
The World’s biggest search engine operator Google Inc (NASDAQ: GOOG) is also hoping to cash in from its green campaign. GOOG recently inked a deal with alternative energy Company, NextEra Energy which will see its energy division, Google Energy purchase 114 megawatts of energy per year over the next 20 years. GOOG will not use the wind energy directly but will instead resell it to the main grid, thereby boosting the amount of safe and clean energy on the market. The proceeds from that sale will then be used by Google to buy Renewable Energy Credits also known as “green tags” to help offset its carbon footprint. Apart from helping the environment, GOOG has locked in a portion of its energy bill and is positioned to benefit financially as energy prices are expected to continue to climb in the long-term.
In Jamaica, a few Firms have already shown their commitment when it comes to making the Country a safer place and also increasing shareholder value. For example, Jamaica Broilers Group Ltd’s (JBG) recent foray into ethanol production, not only provides the Firm with a diverse revenue stream, but has also resulted in cost savings and the generation of fewer greenhouse gases. The Jamaica Public Service Co (JPS) has also partnered with the PCJ, in an effort to utilize Renewable Energy Technologies (RET). JPS purchases in excess of 20 megawatts of energy from the Wigton Wind Farm, an amount that is expected to increase to 38.7 megawatts with the completion of the wind farm’s expansion this July. Early this year, the power Company also recommissioned its first hydro plant back into service, investing USD 1mm to add 0.77 megawatt of capacity to the grid.
Additionally, Caribbean Cement Co Ltd (CCC) has recognized the importance of reducing the pollution that arises from its manufacturing of cement. When the Firm undertook its recently completed expansion and modernization programme it focused on installing energy efficient equipment, not only to save costs but also to contribute to a safer, cleaner environment for the community in which it operates.
Undoubtedly, reducing carbon emissions is not only good for the environment as it contributes to sustainable development, but it also makes good business sense. This budding phenomenon sets a platform for businesses to utilize an alternative energy efficiency measure to reduce costs and increase shareholder value in the long run.
While carbon markets have been expanding globally in the past five years, carbon trading still remains relatively limited in the US and China, the world’s biggest emitters of carbon dioxide, who interestingly have not signed the Kyoto Protocol. Furthermore, the US has yet to develop a mandatory trading programme for greenhouse gas emissions, though environmentalists have been lobbying for the approval of a clean-energy bill for some time. Environmentalists hope to transform the US industry with the introduction of a cap-and-trade system - forcing the biggest Companies to calculate the amounts of greenhouse gases they emit and then pay for them accordingly.
Locally, though carbon trading also remains underdeveloped, the Government of Jamaica (GOJ) has been involved with carbon trading for five years via the Wigton Wind Farm Ltd, a subsidiary of statutory organization, the Petroleum Corporation of Jamaica. Wigton is registered by the United Nations' Framework Convention on Climate Change, and has been trading carbon credits under an Emissions Reduction Purchase Agreement with the Dutch Government since 2005. Recently, ground broke in Manchester for Wigton Wind Farm Ltd’s US$50 million expansion project that will further reduce carbon emissions, significantly increase electricity production and save the country millions of dollars. The expansion of the wind farm will also assist Jamaica in meeting its renewable energy target of 15 percent by 2020. Currently, only 5 percent of Jamaica's energy comes from renewable sources.
As an entrepreneur or Chief Executive Officer (CEO) reading this article, you may be wondering how the use of carbon credits can translate directly to your Firm’s bottom line. A material example will illustrate the potential advantages that reducing your Company’s carbon footprint can have. US automaker, Ford Motor Co (NYSE: F) has been making strides in achieving its goal of lowering CO2 emissions of new US and European vehicles by 30 percent by 2020, compared with 2006. The automaker, which is a founding member of the Chicago Climate Exchange (the biggest voluntary exchange that trades carbon credits in the US) reduced its emissions by 12 per cent in 2009, resulting in savings of US$1.2mm. When combined with its other efficiency efforts including the increased use of recycled renewable and lightweight materials, the Firm recorded savings of USD 15mm in 2009, contributing to a 25% decline in Total Operating Expenses to USD 119.72mm.
The World’s biggest search engine operator Google Inc (NASDAQ: GOOG) is also hoping to cash in from its green campaign. GOOG recently inked a deal with alternative energy Company, NextEra Energy which will see its energy division, Google Energy purchase 114 megawatts of energy per year over the next 20 years. GOOG will not use the wind energy directly but will instead resell it to the main grid, thereby boosting the amount of safe and clean energy on the market. The proceeds from that sale will then be used by Google to buy Renewable Energy Credits also known as “green tags” to help offset its carbon footprint. Apart from helping the environment, GOOG has locked in a portion of its energy bill and is positioned to benefit financially as energy prices are expected to continue to climb in the long-term.
In Jamaica, a few Firms have already shown their commitment when it comes to making the Country a safer place and also increasing shareholder value. For example, Jamaica Broilers Group Ltd’s (JBG) recent foray into ethanol production, not only provides the Firm with a diverse revenue stream, but has also resulted in cost savings and the generation of fewer greenhouse gases. The Jamaica Public Service Co (JPS) has also partnered with the PCJ, in an effort to utilize Renewable Energy Technologies (RET). JPS purchases in excess of 20 megawatts of energy from the Wigton Wind Farm, an amount that is expected to increase to 38.7 megawatts with the completion of the wind farm’s expansion this July. Early this year, the power Company also recommissioned its first hydro plant back into service, investing USD 1mm to add 0.77 megawatt of capacity to the grid.
Additionally, Caribbean Cement Co Ltd (CCC) has recognized the importance of reducing the pollution that arises from its manufacturing of cement. When the Firm undertook its recently completed expansion and modernization programme it focused on installing energy efficient equipment, not only to save costs but also to contribute to a safer, cleaner environment for the community in which it operates.
Undoubtedly, reducing carbon emissions is not only good for the environment as it contributes to sustainable development, but it also makes good business sense. This budding phenomenon sets a platform for businesses to utilize an alternative energy efficiency measure to reduce costs and increase shareholder value in the long run.