Iceland to Join EU’s Carbon Market in `Near Future’ (Update1)

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By Jeremy van Loon, Sourced From Iceland, whose currency collapsed last month, plans to join the European Union’s carbon market, where nations can raise cash by selling surplus emission permits, Environment Minister Thorunn Sveinbjarnardottir said.

The entry may come in the “very near future,” she said in an interview. The country, not a member of the 27-nation group, already is respecting EU legislation on carbon emissions, Sveinbjarnardottir said. More details may be given after EU proposals on renewable energy and carbon-dioxide reductions pass legislative hurdles as early as next month, she added.

By adding more economies to the EU trading program, the world will move closer to a global emissions system, Sveinbjarnardottir said.

The nation also needs funds and has drawn closer to international organizations after its three largest banks failed and the currency plunged. Iceland agreed on Oct. 24 to a $2.1 billion bailout package from the International Monetary Fund and may also get a loan from the European Union, according to the European Commission.

“What we have to do is to create new jobs and then we must not shy away from bold thinking in that respect,” Prime Minister Geir Haarde told Radio RUV on Nov. 9.

Under the Kyoto global-warming treaty, which Iceland ratified, the North Atlantic island-nation is entitled to create emissions credits. Surplus licenses can be sold to other nations that exceed their CO2-emissions targets.

Market Allocation

Iceland does not have its own domestic carbon-trading plan, which means putting in place the rules to join the EU’s system has required more preparation than other countries that had domestic trading before joining the region-wide program, said Emmanuel Fages, an analyst at Societe Generale in Paris.

“The key thing is whether they already have an idea of how much they want to allocate” to the market, he said.

Iceland, in recognition of its efforts to cut emissions and boost renewable energy, was allowed to increase emissions by 10 percent from 1990 levels under the Kyoto agreement. That helped it accumulate a surplus of pollution permits.

The country produced 4 million tons of carbon in 2006 and will likely release 3.6 million tons annually through 2012, according to estimates by New Carbon Finance.

The krona lost about 37 percent against the dollar during the last three months, to 129.61 to dollar yesterday from 81.99 on Aug. 10, according to Bloomberg data.