Natsource LLC

This article is part of the Climate project of Spinwatch.

Natsource LLC is one of the largest private sector carbon trading and greenhouse gas asset managers "with over $1 billion in assets under management and commitments". Based in New York but with offices in London, Tokyo, Washington, Canada and Panama - they provide asset management, origination, and advisory and research services on global emissions and renewable energy markets, with clients in investment and industry.

History

Natsource is one of the first major companies arranging carbon trading between industries and investors under the cap and trade model EU-Emissions Trading Scheme and Clean Development Mechanism.

According to its website in January 2010:

In 2004, Natsource arranged the first publicly announced transaction of Certified Emission Reductions (CERs) between private companies from a Clean Development Mechanism (CDM) project with an approved baseline. The project incinerated HFC-23, a potent greenhouse gas, from a facility in South Korea. Our early commitment to developing the CER market was demonstrated by the fact that up the end of 2004, Natsource had originated and structured transactions for over 10 million CERs from a range of technology types and countries.

We also have significant experience in national and regional allowance markets and arranged some of the first transactions in these markets. In 2001, Natsource arranged the first greenhouse gas allowance transactions in the UK and Danish emissions trading programs. In 2002, Natsource originated the first forward swap of UK and Danish allowances.

Defending Cap and Trade

In November 2009, at the start of the Copenhagen COP15 Summit, Dirk Forrister and Richard Rosenzweig of Natsource authored a statement defending the merits of Cap and Trade schemes in light of the large scale criticism leveled at the market based mechanism by environmentalists which had led to some provisions in the American Clean Energy and Security Act (Aces) which were not beneficial to their members . (See The Story of Cap and Trade for a summary of critiques).

The document, entitled 'Writing Wrongs: Response to Opposition to the Use of International Offsets for Compliance in a Future Domestic Cap-and-Trade Program' opens with a large, politically critical cartoon of a U.S business man, his top hat transformed into a smoking factory chimney, playing with a deck of cards representing the Clean Development Mechanism (CDM). The self parody ends here however as the document defends offsetting as the only affordable option, contradicting its self aware title and into, claiming:

There is little disagreement on the potential benefits of international offsets and the important role they could play in a US climate change programme. Most important is their ability to help control costs.

They use US Environmental Protection Agency figures which suggest that without international offsetting (CDM) the cost of carbon allowances would increase by 89%. This argument puts cost before real carbon reductions, as one of the critiques of the CDM is that its too cheap and therefore does not provide a serious deterrent to heavily emitting industries. They also name benefits of the CDM as stimulating carbon reduction in developing countries and "creating export opportunities for the U.S", again suggesting that income generation is the bottom line for them.

The article responds to a number of the most common critiques;

To the argument that many offsetting activities were not 'additional' (i.e would have happened anyway) they claim that this has now been resolved by better resourcing and staffing the CDM (which it claims was 'naturally' under-resourced for its first few years) and is now considerably more transparent and effective.

Or the common practice of offsetting emissions with projects destroying trifluoromethane (HFC23), which was criticised as a 'perverse incentive' which rewards the wrong people, as "the carbon offset credits that were sold to reduce HFC-23 are twice as valuable as the refrigerant itself" and were generating $7.15 billion for HFC23 emitters, compared to less than $155.4 million if the companies had paid the plants directly to destroy emissions, hence generating big profits for credit sellers such as Natsource.. To which the document replies that HFC-23 reductions are a great example of additionality (reduced emissions which wouldn't have otherwise happened) and also of the power of the market to create profitable and effective measures.

In the next section the authors make the argument that critics of liberal climate change policies such as offsetting measures are making environmental arguments about their ineffectiveness because of a secret agenda to stop all climate change policy which may limit GHG';

Many participants in the climate change debate have long been opposed to any policy that would require action to reduce GHG emissions to address climate change. They know that other policy instruments, such as taxes and command and control approaches, do not have the political support to be enacted. As such, they may argue against carbon trading because it is the one approach with the potential to address the issue and secure the necessary political support to become law.

This argument may hold weight when applied to big industry who have actively denied the science of anthropogenic climate change and resisted any changes to business as usual (though today even corporations like Exxon and BP have joined organisations pushing for market based (and minimum cost) climate strategy, seeing the benefits for their image and even profits) but it is a very unlikely argument to be leveled at environmentalists who have argued that emissions reductions should start at home, not abroad, as they appear to suggest.

People

• Jack Cogen President and CEO (also Chairman of International Emissions Trading Association)
• Richard Rosenzweig Chief Operating Officer
• Alan Kirshenbaum Chief Financial Officer
• Andrew O`Connor
• Michael Intrator
• John Geissinger

• Dirk Forristermanaging director at carbon asset manager Natsource in Washington.

Contact

Natsource's global origination efforts to source and structure transactions for Natsource Asset Management are managed from London.

Martin Collins Global Managing Director mcollins@natsource.com

Natsource's London office houses NAT-CAP and commercial operations staff, which complete transactions for Natsource Asset Management.

Phil Gillam Director, Commercial Operations GG-CAP pgillam@natsource.com

Egbert Liese Principal Portfolio Manager, NAT-CAP eliese@natsource.com

Natsource- London Hill House Heron Square Richmond TW9 1EP UK

Tel: + 44 (0) 20 8439 9515 Fax: +44 (0) 20 8439 9514