Masdar eyes carbon credit bonus

Masdar says it will seek to cash in on the market for carbon credits by helping a petrochemical company reduce its emissions.

Performers hang off wires during a presentation at the Masdar City Ground Breaking Ceremony in February.

ABU DHABI // Masdar, the clean energy company based in Abu Dhabi, says it will seek to cash in on the growing market for carbon credits in Europe by helping a petrochemical company based in Bahrain to reduce its ­emissions. The agreement is a major step in an effort by regional companies to profit from reducing pollution in the oil and gas industry, which is the source of a large portion of the region's total greenhouse emissions. The carbon credit business in the Middle East and North Africa had the potential to grow to US$2 billion (Dh7.3bn), said analysts at Point Carbon, a carbon credit research company.

Masdar said yesterday that it would provide technical assistance to the Gulf Petroleum Industries Company (Gpic) in setting up technology to capture 100,000 tonnes of carbon dioxide from a fertiliser plant. Each tonne equals one credit, and each credit sells for between ?10 (Dh57.93) and ?12 in European markets - or about ?1 million to ?1.2m a year. The deal may have appeared small, but Masdar was expected to take a leading role in the region's incipient carbon credit industry, said Will Greene, a senior analyst at Point Carbon.

"Masdar is using its extensive networks across the Middle East to find oil and gas companies that are using outdated technology," he said. "Under the plan, they design a project to reduce or capture the emissions, and collect a proportion of the credits, which they sell." There are only six projects registered to sell carbon credits in the Middle East and North Africa, Mr Greene said. The largest is Qatar Petroleum's Al Shaheen Oil Field Gas Recovery and Utilisation programme, which is set to generate about 14 million tonnes of carbon dioxide reductions by 2012.

"The CDM [clean development mechanism] provides an incentive to Gpic to develop the CO2 capture project, and we expect this project to pave the way for more carbon reduction initiatives in the future," said Sultan al Jaber, the chief executive at Masdar. The carbon credit trading market formed as a result of the Kyoto Protocol, an agreement signed by 182 countries to reduce emissions that are hazardous to the environment. The "cap and trade" system works by setting limits of emissions for companies in developed countries. Then companies in developing countries can sell those companies the carbon credits they earn from reducing their emissions.

The market, which is based in Europe, traded about ?12bn worth of carbon last year. To obtain credits, a company has to have its project certified by outside consultants and ultimately vetted by the United Nations. A key part of the certification process is the rule of "additionality". According to the UN's requirements, a company can only get credit for upgrades if it can prove those upgrades would not have been economical without the income gained by the carbon trading programme.

A long list of companies are trying to profit from the carbon credit market in the region, including Ecoventures, Ecosecurities, JBF Industries and Ceres, a landfill operator in Ras al Khaimah. But none has the resources of Masdar, a company that specialises in renewable energy and clean technology that is holly owned by Mubadala Development. Its most well known project is Masdar City, a vast development that will have zero emissions, but it is also pioneering the country's attempts to turn sustainability into a profitable business. Its carbon management unit is at the centre of that initiative.

According to a prospectus on the unit, it is pursuing two routes for carbon projects: providing companies with financial and technical expertise in starting a carbon credit project; and developing large-scale infrastructure projects that reduce emissions. Masdar announced in January that it was building a $2bn facility in Abu Dhabi that would separate carbon dioxide from natural gas and inject it into oil wells, in order to retrieve more oil. Leftover hydrogen would be burnt to generate electricity.

The company has indicated it is looking to do more projects in the UAE. In June, it said it would partner with the Abu Dhabi Ports Company to develop ways to capture emissions at Khalifa Port Industrial Zone. It also said it was interested in working with Tabreed, the Abu Dhabi district cooling company, to install more energy-efficient cooling systems in blocks of city buildings and monetise those improvements through carbon credits.

In May, Duncan Hedditch, the chief executive of Emirates Aluminium, said that his company was talking with Masdar about capturing emissions from a natural gas power plant it was building on the site of its planned smelter in Taweelah. Earlier this week, Mubadala and General Electric announced a "framework partnership" that included a $50m investment from GE into Masdar's clean technology fund. Masdar's project with Gpic will capture carbon dioxide emissions from Gpic's petrochemicals plant and combine them with ammonia to create urea, a type of fertiliser.

The rush to carbon credit trading was part of the world's increasing attention to climate change issues, said Shezan Amiji, the founder of Ecoventures. "Both governments and companies are looking to either profit from efficiency or reduce their environmental footprint," he said. "There's been a change in people's mindset about this issue. Climate change is being looked at as an opportunity rather than a risk."

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