Rhodia Credits Show CO2 Trade Can Help Brazil, World Bank Says

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Rhodia SA (RHA)’s sale of 6 million carbon credits to the World Bank’s Spanish Carbon Fund shows that emissions trading can help emerging nations cut pollution and potentially aid in their economic development, the lender said. The credits for delivery through 2013 are generated under the United Nations’ Clean Development Mechanism from a Rhodia plant that produces adipic acid in Paulinia, Brazil, the French chemical maker said Feb. 28. The fund chose to accept credits from adipic acid, for an undisclosed price, because the Paulinia project “helps our work beyond carbon finance,” the Washington-based bank said in an e-mailed response to questions.

“In all carbon projects, the added revenue stream of the carbon credits is important in facilitating the technology change and can be instrumental in helping nations such as Brazil in their development challenge,” said Mauro Azeredo, a spokesman for the bank in Brasilia.

The European Union decided in January to prevent factories and power stations within the bloc’s cap-and-trade program from using future credits for projects that reduce nitrous oxide generated in the manufacture of adipic acid. The EU regulator said such credits create windfall profits for investors and undermine the carbon market’s integrity. Emitters in the market won’t be able to use them after April 30, 2013.

Developed nations such as Spain, with targets under the 1997 Kyoto Protocol, will still be able to use credits from projects that produce adipic acid after that date. Adipic acid is used to make nylon and polyester.

UN credits for December were little changed yesterday at 11.90 euros ($16.62) a metric ton on the ICE Futures Europe exchange in London, having gained 4.4 percent so far this year. Rhodia, based in Paris, makes plastics and perfume ingredients.
Curbing Pollution

Azeredo said the bank has helped Brazil curb pollution at Cubatao, 50 kilometers (31 miles) south of Sao Paulo, during the past 30 years. Cubatao was “arguably one of the most polluted industrial cities in the world in the 1980s,” he said. “Cubatao dramatically improved its condition, and industrial plants located there, including Rhodia, now have incentives to continue to control their emissions.”

Elsewhere in Brazil, a project in Rio de Janeiro closed down a dump site to generate energy and jobs, as well as create carbon credits from reduced methane emissions, Azeredo said.

The Spanish Carbon Fund is capitalized at 220 million euros and will commit its funding by Dec. 31, the bank said.

The World Bank has not announced a target for buying a specific volume of emission credits, it said. “Its commitment is to maximize its investments for its carbon funds,” Isabel Hagbrink, a spokeswoman in Washington, said by e-mail.

The sale of Rhodia credits was arranged by Orbeo, the emissions-trading venture of Rhodia and Societe Generale SA.

Source- Bloomberg