COMPANIES in developing countries like SA may soon be able to sell their air pollution to developed countries, generating revenue in the process. This will become possible under the rules of the Kyoto Protocol, an international agreement designed to tackle the problems of global warming and climate change.

With increasing concern over global warming and the effect of air pollution on the world's climate, businesses are beginning to attach a financial value to these emissions. There are strong signs that these emissions will soon become tradable on a global market like other commodities.

Governments, environmentalists and the United Nations (UN) are supporting the development of emissions trading as this promotes the maximum reduction in emissions at the least cost. The UK has already established a national emissions trading scheme.

Analysts expect that Norway will have draft laws for a trading scheme available by early next year, and the Dutch cabinet has agreed to launch greenhouse gas trading in 2005.

The European Union (EU) also plans to launch a Europe-wide scheme for trading carbon dioxide emissions about the same time.

SA companies in particular stand to benefit from the UN's plan to create a global emissions trading scheme. This is already far advanced in the form of the Kyoto Protocol. SA ratified the Kyoto Protocol in March, making SA companies eligible to sell emission reductions under the mechanisms of the protocol.

This will be done under the socalled Clean Development Mechanism, where businesses that reduce their emissions can sell these reductions to developed countries that have reduction targets to meet. Developing countries like SA do not generally have reduction targets.

The National Committee on Climate Change and the World Bank have jointly released a SA Strategy Study on the Clean Development Mechanism, aimed at raising awareness of the mechanism in SA.

This has attracted the interest of major companies like Mondi and Sasol, who are currently evaluating potential projects.

A key factor in setting up a global emissions trading scheme is whether or not the Kyoto Protocol will come into force. For it to do so, industrialised countries responsible for at least 55% of carbon dioxide emissions in 1990 must ratify it.

The UN has expressed hope that this will happen by the time the World Summit in Johannesburg commences in August. But global emissions trading is already taking place even without the protocol.

Last month for example Environment Canada purchased the emissions reductions from an SA energy efficient housing project to offset emissions from air travel, car travel and hotel accommodations associated with a meeting of the Group of Eight ministers in Alberta.

A second key concern is the involvement of the US, which last year isolated itself in the climate change debate by taking the controversial step of rejecting the Kyoto Protocol. Indications are that the US will instead set up it's own emissions trading scheme independent of the Kyoto Protocol, although this may eventually link up with the Kyoto Scheme.

Habbitts is a greenhouse gas emissions and climate change adviser with KPMG Sustainability Services .

Jun 03 2002 12:00:00:000AM Stirling Habbitts Business Day 1st Edition