18 January 2019
Finding ways to manage and reduce emissions has not been on the forefront of the agendas of European industrials and utilities in the past decades – but this is starting to change. James Atkins and Marc Falguera von Niessen at emissions trading specialist Vertis, reflect on the company’s 20 years in business
Environmental Finance: What are the main changes you’ve seen in how industrials and power companies manage their emissions – in recent years and since the inception of emissions trading?
James Atkins: The EU allowance (EUA) price was so low that it wasn’t of strategic importance to companies. Now, that’s starting to change. Our clients are interested in both managing and reducing their emissions.
Marc Falguera von Niessen: Yes, CO2 has become a burden for them. The carbon market is an important topic now for our clients and for financial institutions – more so than just one or two years ago.
James: There’s a general change of attitude happening. Companies are starting to feel that emissions reductions are of such importance that they are prepared to look beyond the short-term financial results to address the issue.
EF: That sounds encouraging – what do you think is driving this change of attitude? And what does it mean for Vertis as a business?
Marc: EUA compliance for industrials, utilities and aviation operators remains the biggest part of our business. (Vertis was voted best EU ETS trader and broker across a number of categories in Environmental Finance’s Annual Market Rankings) We have 50 people active on EUA compliance across Europe and we have over 1,000 clients. But we’re also trying to expand our portfolio to offer products helping clients to go beyond compliance.
James: EUA prices are at healthier levels now meaning work on compliance strategies is starting to pay off. Companies are looking to manage the risk of rising and volatile power prices and also move towards renewable energy. This means they are looking into other products such as renewable energy power purchase agreements (PPAs) and Guarantees of Origin (GOOs). We’re increasingly active in both these markets.
EF: How are you working with your clients looking to actively go beyond compliance?
James: We want to help our clients align with the shift towards a net-zero carbon world and are working on this through an initiative we call Vertis 2050. We’re going to see more businesses move beyond carbon compliance to mitigation. This will involve launching active efforts to reduce emissions and make positive contributions to the environment. The PPA market is expected to grow dramatically and GOOs and voluntary emissions reductions (VERs) are also going to be of increasing importance.
We have also developed a concept called ‘Change the Legacy’. We think this is the last generation of heavy industries – these high emitters might not have much life left in them, either because they become unviable in a low-carbon world or our civilisation gets hit in the neck from climate change. So this is the last generation that can actually take action and contribute to creating a more positive environmental legacy for industrials.
Marc: Through ‘Change the Legacy’, we’re engaging particularly with family-owned industrials – they seem more likely to have long-term strategies in place to remain familyowned and profitable for several generations. They are looking at what they can do to reduce emissions in the long-term and make a positive contribution. At the moment we’re working with a global construction company on how to go carbon neutral, set up a climate fund and finance carbon-neutral products. In addition to family-owned companies, listed companies are also facing investor pressure to address their emissions. Financial investors are really starting to realise that climate change is posing a risk and they want to manage fossil fuel exposure.
EF: Amid all this progress and encouraging change of attitude, are you seeing any challenges in maintaining this momentum? What are your biggest concerns at the moment?
James: My biggest worry is that we’ll get some sort of legal backlash that will set back emissions reductions. If generators and industrials feel too threatened by the shift towards a low-carbon economy and this feeds into politics, as we’re seeing to an extent in Poland, for example, it might create difficulties.
Marc: I agree to an extent, but while many people talk about set-backs in Poland, it is also clear that Polish companies are increasingly interested in making a change. So things could move forward. And we’re seeing more interest than ever before in managing emissions and increasing renewable energy generation in central Europe.
Find out more about Vertis at www.vertis.com