In our ongoing efforts to provide you with broader communications and industry information, we are pleased to issue another Industry Bulletin discussing recent trends in the markets that are driving the growth in demand for various rare and strategic metals. In this edition, we focus on the significance of the launch of the Montreal Climate Exchange on May 30, 2008.
As reported by Paul Brant of the National Post on April 22nd, "May 30 is opening day for trading carbon dioxide equivalent units at the new Montreal Climate Exchange."
The Montreal Climate Exchange, or 'MCeX' is a joint venture of the Montreal Exchange and the Chicago Climate Exchange (est'd. 2003), the latter being "North America's only and the world's first global marketplace for integrating voluntary legally binding emissions reductions with emissions trading and offsets for all six greenhouse gases ("GHG"; e.g. carbon dioxide)". Effectively, these Exchanges are financial institutions whose objectives are to apply financial incentives to advance social, environmental and economic goals.
The primary regulatory framework that underlies the new market is what is referred to as a "cap-and-trade" system. As briefly explained in Fasken Martineau / Perkins Cole's recent issue of Climate PERSPECTIVES (May 2008)
"What Is a Cap and Trade Program?
Cap and Trade is market based-regulation in which governments establish maximum GHG emissions, and distribute or auction emission allowances permitting emissions up to but not exceeding the cap. The allowances decrease with time to meet the government's target future emission levels. For each compliance period, regulated emitters must remit allowances equal to their actual emissions. Emitters with excess emissions or excess allowances may "trade" them with others in market transactions. Each program determines its own emission goals, regulated sectors, level and allocation of allowances, and methods to verify compliance and regulate markets."
Canada is taking aggressive action to achieve an absolute 20% reduction in GHG by 2020, and 60-70% by 2050. Regulated industries will be required to improve the 'emissions intensity' of their existing facilities by 18% by 2010 and a 2% continuous improvement each year thereafter. Intensity reductions of this magnitude are expected to yield absolute emission reductions even as the economy grows.
In response to the growing concern for the environment and economic imperatives, there is a surging demand for clean energy, the efficient use of resources and sustainable technologies.
How does these new market drivers and innovative technologies increase the demand for rare metals and specialty minerals? As Avalon has shared in previous Bulletins, the rare metals are fundamentally important alloying elements in making lighter, stronger, and new innovative materials available to efficient solar power, rechargeable batteries, permanent magnets for hybrid vehicles, catalytic converters, communications, glass and structural material that will help reduce energy intensity and our overall carbon foot print.
These initiatives are becoming ever so important in meeting soon-to-be regulatory/compliance requirements, which introduce economic incentives and impacts. As presented at the 2nd Annual Carbon Trading conference held in Toronto last week, Blaine Kennedy of Sustainable Development Technology Canada reported that the "Cleantech' segment grew from US$92.6B in 2006 and to $148.4B in 2007, and is expected to grow to US$450B by 2012". Quoting Blaine Kennedy again "