Masdar to turn carbon-neutral into cash-positive

Abu Dhabi's green energy company in line to be first in GCC to earn international credits through a UN-administered fund to fight global warming.

The credit from two projects backed by Masdar are worth about ?1.13 million a year at current prices.

Masdar, the Abu Dhabi Government's clean energy company, is set to become the first in the GCC to earn lucrative international credits for efforts to fight global warming. The credits from two projects backed by the company, worth about ?1.13 million (Dh5.3m) per year at current prices, are likely to be the first among scores of clean energy investments to eventually channel hundreds of millions of dirhams annually from the UN-administered carbon credit market to UAE companies.

Inspectors have completed monitoring of the two projects, the last bureaucratic hurdle before the board of the UN's Clean Development Mechanism can award credits that are then sold on the European carbon market, said Shibu Davies, the general manager for TUV Middle East, a local subsidiary of a German firm that audits carbon credit projects. "The projects have been completed from our side ? how much time the UN takes we don't know but the project is all done," he said. "I think both of them will be approved this year."

Mr Davies predicted it would take two to three months for the UN board to actually issue the credits following its own final review. A separate project at an oilfield in Qatar had been set to become the first in the GCC to earn credits but has been delayed by at least a year for unspecified reasons. Once Masdar gets the credits, it will be able to sell them on the European carbon market to polluters that need them to offset their own emissions.

If carbon prices rise from their current rate of just above ?12 a tonne, the credits would be worth more than ?1.13m. Masdar's credits come from a 10-megawatt solar panel array it operates at Masdar City, the carbon neutral development at the edge of the capital, as well as an energy efficiency project it helped implement at a power station in Taweelah, in partnership with Emirates CMS Power. The two projects have kept a total of 94,268 tonnes of emissions out of the atmosphere over the past 12 months, according to monitoring reports uploaded earlier this month on the UN climate body's website.

The website lists 15 projects that have been proposed by UAE companies, potentially reducing emissions by a total of more than 1 million tonnes a year and worth ?12.1m at current prices, which remain low by historic standards. Some of these projects have been postponed while others have been changed. Masdar, in addition to building its carbon neutral city and investing in its own clean energy projects, has made a business out of helping other companies register for carbon credits.

Earlier this year it proposed a huge project for the Abu Dhabi National Oil Company (ADNOC) that would reduce gas flaring and cut emissions by 151,408 tonnes a year. The credits alone would boost the rate of return on the US$29.5m (Dh108.2m) investment in the gas capture technology from 4.3 per cent to 9.6 per cent, according to the project's registration documents. But the carbon credit industry remains riddled with regulatory and bureaucratic risks, as Masdar learnt last year when it abruptly withdrew registrations for three ADNOC projects.

Investors can wait years for registration, auditing and credit award processes to unfold, said Charlie Coghlan, the vice president for SCC MENA, a clean energy project developer in Bahrain. "If you start looking at projects in this region, there are very few that are actually registered," he said. "Even those that are registered, knowing whether they can tick every box or not can make it very difficult to predict when credits will be issued."

In addition, the carbon credit scheme could end suddenly in late 2012, when the Kyoto treaty expires. Most analysts, however, believe it is likely to be extended. A huge flare reduction project by Qatar Petroleum at the Al Shaeen oilfield has failed to earn any of the 2.5 million forecast credits after repeatedly saying credits were imminent. Monitoring on the project was completed at the end of 2008.

The reasons for the long delay remain unclear. Saif al Naimi, Qatar Petroleum's director of health, safety and environment regulation and enforcement, told a May conference in Oman that credits would be awarded "very shortly". @Email:[e-mail]