Hurdles to Overcome for Carbon Market Success

In 1999, Alfonso Lanseros Valdés travelled to Denmark to investigate why a decision was made to shut down a coal power plant. The manager explained Denmark had decided to reduce its CO2 emissions by 20%. At the time, Lanseros Valdés was promoting fossil fuel projects but came to an important realization: if the Danish were shutting down a carbon plant in which they had invested millions of euros, then carbon emissions were truly critical to the energy sector. It was the first time he was confronted with a movement in favor of reducing CO2 emissions. Lanseros Valdés points to that moment as being behind the birth of CO2-Solutions, a Spanish company, of which he is the CEO, that focuses on carbon credits and works closely with the renewable energy sector.

CO2-Solutions began working with European governments and companies in relation to the EU policy to create a carbon trade market. Since then, it has helped international companies create strategies to learn how to operate in a low-carbon economy. Soon enough CO2-Solutions started working on international Clean Development Mechanism (CDM) projects with a strong focus on Latin America. “We were pioneers in developing CDM renewable energy projects,” states Lanseros Valdés. The company decided to focus on renewable energy as it went hand in hand with sustainability. “The fact that something is sustainable does not mean it does not have an impact and a cost,” says Lanseros Valdés. “Nothing in life is free of consequences and renewable energy is not exempt. Hydroelectric plants and wind parks have a negative impact but that impact is offset than their positive aspects. At the end, the renewable option is clearly better than other alternatives.” In Mexico, CO2-Solutions has worked so far on many wind energy projects, including Acciona’s Eurus I, Oaxaca II, III and IV and Peñoles’ Fuerza Eólica, as well as on PEMEX’s project at the Dos Bocas port and CFE’s hydroelectric Chicoasen plant.

CO2-Solutions provides consulting services and advice to government agencies about policies that help create Mexico’s energy strategies. It also works closely with governments on Nationally Appropriate Mitigation Action (NAMAs), which countries take to reduce greenhouse gas emissions under a UN compact. In Mexico, CO2-Solutions has worked with CONAGUA, CFE, PEMEX, and SEMARNAT and renewable energy project developers. The firm helped them manage and process CDM projects through the UN framework, as well as monitor and implement the sale of carbon credits. It also provides help in the commercialization stage and for carbon credit sales, so companies do not have to dedicate additional human resources to administrate the credits.

The decision to work in Mexico came naturally. It was not only a matter of speaking the same language and of cultural proximity as Lanseros Valdés also saw a great future in the country. “In the next ten years, Mexico will experience important growth, industry is going to flourish, violence will diminish and people will have access to quality jobs. I have no doubt that it will become the strongest economy of Latin America. The US knows that Mexico has all the energy the US needs, whether for oil, gas, and natural resources. That creates a guideline for the Mexican, American and Canadian relationship, regarding an energy strategy where the three would not have to depend on other countries.”

The carbon credit market is still reeling from the global economic crisis and carbon credits are at a very low price. But Lanseros Valdés believes that as the global economy recovers, the carbon credit will also pick up. “Global warming is a fact and I believe that countries are conscious that they have to shift towards sustainable development,” he states. In order for carbon commerce to thrive, Lanseros Valdés emphasizes that CDM projects are rather unfair since the country generating and receiving the most carbon credits is China, which is not in the grips of an economic crisis and is actually buying debt. “We are seeing China buy up European debt but we are simultaneously waiting for European countries to buy Chinese carbon credits. It does not make sense. It is unfair that only Europe is buying carbon credits when everyone is generating carbon emissions. This affects the market significantly.” However, there is a silver lining when comparing the current situation to only a decade ago, carbon credits and global warming today is on everyone’s mind. “Before, it was not part of any political speech or electoral agenda. Now, it is part of every government agenda. It is clear we are living a tough moment, and the market has to go in the same direction as the political agenda,” he acknowledges. As the market moves forward, it might be time for CO2- Solutions to reinvent itself due to the world’s focus on natural gas, Lanseros Valdés admits. However, he believes renewable energy will benefit from crucial technological developments that will make it more competitive in the short-term. “This environment is very positive to the energy industry in general, and particularly to Mexico".