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Bloomberg: Global Carbon Trading Is Needed, Shell Australia Says (Update1)

By Angela Macdonald-Smith

May 28 (Bloomberg) — Global carbon trading is needed to set a price on carbon and allow for investments in new energy-supply projects while reducing emissions, said Russell Caplan, chairman of Royal Dutch Shell Plc in Australia.

While the European Union’s carbon trading system is “a good start,” a worldwide plan is required, Caplan said today at the Asia-Pacific Economic Cooperation energy business forum in Darwin, part of a meeting of energy ministers from the 21-nation group.

Global energy demand is set to increase 50 percent by 2030, resulting in a gain in carbon dioxide emissions of between 35 percent and 55 percent, according to International Energy Agency forecasts. APEC nations, which include the U.S. and China, are responsible for 60 percent of global energy demand.

“Market mechanisms are likely to be the most effective means of implementing change,” Caplan said at the forum. “Trading needs to become global to become truly effective and establish a clear market price for CO2 that will be factored in to the investment evaluations of the new technologies and energy conservation measures that we need for a low-carbon future.”

The talks by energy ministers from the 21 APEC nations, including the U.S. and China, are due to focus on initiatives to improve energy security, while reducing the harmful environmental effect of energy use. The member economies account for around 2.6 billion people, more than 40 percent of the world’s population, in excess of $19 trillion of gross domestic product, representing more than 56 percent of the global total, and more than 48 percent of world trade.

Australian Taskforce

The ministerial talks will cover emissions, without discussing a specific trading plan, Australian Resources Minister Ian Macfarlane said in a May 24 interview.

Australia and the U.S. have refused to sign the Kyoto Protocol aimed at reducing greenhouse gas emissions blamed for global warming. A taskforce including Xstrata Plc’s Peter Coates, Treasury Secretary Ken Henry and BHP Billiton Ltd.’s Chris Lynch is due to report to Australian Prime Minister John Howard by May 31 on whether to introduce carbon trading in Australia.

Any national system needs to be compatible with any broader regional or cross-regional mechanism that emerges, Caplan said later in an interview.

“I think we’ll see a progressively assembling patchwork” of trading systems, Caplan said.

`Remove Uncertainty’

The uncertainty about carbon pricing in Australia needs to be removed to ensure investments are made in time to meet the need for new base-load and peaking power generation capacity, said Paul Simshauser, chief executive officer of Babcock & Brown Power, Australia’s largest publicly traded power generator.

Australia’s power generation capacity needs to double by 2030 and all the existing thermal power plants will need to be replaced by 2050 in order to change to a lower-carbon power system, he said.

“In order for Australia to actually ensure that it gets the right economic environmentally adjusted outcome from the supply- side perspective it is important that CO2 carries a price sooner rather than later,” Simshauser said in an address at the business forum. Still, any emissions trading system needs to be carefully designed to avoid “catastrophic” effects on power supply because of the potential effects on coal-fired generators, he said.

Scientists say global warming caused by man-made emissions of carbon dioxide and other so-called greenhouse gases is causing glaciers to melt, sea levels to rise and coral reefs to die out.

The 21 APEC members are Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, the U.S. and Vietnam.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at [email protected]

Last Updated: May 28, 2007 01:11 EDT

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