news/updates
Chemrez Technologies signs Emission Reductions Purchase Agreement with Natsource
March 12, 2007
Chemrez Technologies has decided to go the route of carbon emission credits, a much-practiced method in Europe to reduce greenhouse gasses, and has committed to sell 500,000 tons of carbon dioxide reductions, resulting in foreign currency earnings that go directly to profits.
Chemrez Technologies announced last Friday that it had signed an Emissions Reductions Purchase Agreement (ERPA) with Natsource Asset Management Corp. for carbon credits coming from the use of its premium coco-biodiesel product, currently sold to both retailers and oil and transport companies under the brand name of BioActiv.
Carbon credits as a way of limiting climate-changing gases such as carbon dioxide is implemented according to the terms of the 1997 Kyoto Protocol, under a program administered by the Bonn-based United Nations Clean Development Mechanism (CDM).
Under the program, businesses in wealthier nations of Europe and in Japan buy the credits to help pay for the scaling down of pollution in poorer ones as a way of staying within government limits for greenhouse gasses emissions.
Chemrez Technologies Chief Finance Officer Francis Caluag said their commitment to Natsource, which it is believed will sell it in turn in Europe or Japan, is to sell certified emission-reduction credits amounting to 500,000 tons of carbon dioxide equivalent from 2007 to 2013—with these dollar earnings being bottom line enhancements generated without any incremental cost to the firm.
Natsource managing director Paul Vickers said that ChemrezTech will be the first manufacturing firm in the country to earn carbon emission reduction credits. While most firms selling carbon credits use this to fund their emission-reducing projects, Chemrez Technologies biodiesel plant is already up and running.
Caluag said the credits will be earned from the 1-percent reduction in the consumption of fossil fuel by motor vehicles upon implementation of the mandatory blending of 1-percent coco-biodiesel with petro-diesel.
Vickers said the signing of the forward contract shows that Natsource is confident that Chemrez will play a key role in the local coco-biodiesel industry through its BioActiv coco-diesel additive. “We have conducted due diligence on Chemrez and we have seen that they have the experience and expertise. They are very good at what they do.”
While the biofuels law mandates the blending of coco-biodiesel with all diesel fuel including those used by seagoing vessels and power plants, Caluag said their credit will come only from reduced emission from the use of BioActiv by motor vehicles. The reason: there is yet no approved methodology for the computation of the carbon credits for the use of BioActiv in ships, trains, and other transport vehicles. However, there is a pending application from Thailand for such a methodology in the UN Clean Development Mechanism. Vickers said this could cut the time to the approval a system of calculating carbon emission credits.
Caluag said the 500,000 tons of carbon dioxide equivalent is based on a conservative estimated consumption of 30,000 tons of BioActiv coco-biodiesel for automotive use at the 1-percent mandated blend. ChemrezTech has an existing capacity of 60,000 tons of biodiesel a year. If the government eventually decides to raise the blend to 2 percent or higher, Caluag said the potential added credits they would have could be sold to others at market prices.
In response to apprehensions that the upcoming implementation of the Biofuels Act might prevent the Chemrez biodiesel project from being recognized by the CDM Executive Board in Bonn as a legitimate CDM project, Carlos Antonio Palad, Chemrez Public Affairs Officer, said that pro-biofuels legislation enacted after November 2001 do not affect the eligibilty of biofuels programs to be recognized as CDM projects. Palad -- who had undergone training on CDM in preparation for his role as Chemrez negotiator for the ERPA -- cited several decisions by the CDM Executive Board, especially Annex 3 of the Report of the 22nd meeting of the CDM Executive Board in Bonn.
