Bloomberg News

JPMorgan Buys Emission Credits From Kenya Water Filters

March 09, 2012

JPMorgan Chase & Co. (JPM) bought voluntary emission credits from a first-of-its-kind project that distributed water filters in Kenya, said ClimateCare, which is helping market the Gold Standard Foundation credits.

Vestergaard Frandsen SA, the Lausanne, Switzerland-based provider of health and emergency services, earned about 1.4 million metric tons of credits in its first tranche, an unspecified portion of which were bought by JPMorgan, Edward Hanrahan, chief executive officer of ClimateCare, said in a phone interview from London.

Credits have been sold at a price of more than 8.75 euros ($11.48) a ton, Hanrahan said, declining to be specific. That’s more than double the price of United Nations Certified Emission Reduction credits for December, which dropped 8.5 percent to 4.01 euros on the ICE Futures Europe exchange in London as of 3:44 p.m. local time.

The LifeStraw Carbon For Water program distributed 877,505 water filters in Kenya’s western province, curbing the need to boil water for drinking, a process that produced greenhouse gases and caused deforestation, Gold Standard said today by e- mail. The behavioral change is expected to produce more than two million tons of emission reductions annually, according to Vestergaard Frandsen’s website.

The Gold Standard, a voluntary offset standard that emphasizes sustainable development, put together a methodology for the LifeStraw project that includes a calculation of suppressed demand.

Suppressed Demand

Suppressed demand calculates CO2 emission reductions in poor areas against a benchmark that represents so-called minimum service levels for heat, water and light. These levels measure an acceptable standard of living, which many communities have not yet achieved. This means that projects that include a calculation for suppressed demand may earn more credits than the actual reductions they achieve.

Without including the notion of suppressed demand in methodologies used to calculate how many credits should be created, emissions trading can encourage growth in greenhouse gases, Adrian Rimmer, Gold Standard’s CEO, said by phone.

“There’s a perverse incentive to go on a high-carbon growth pattern and then decarbonize,” he said.

Under the project, more than 4 million people get clean drinking water without burning wood because each household has a filter used by about 5 people.

“You can use carbon finance to make a difference to people’s lives,” Rimmer said.

Applying Suppressed Demand

The Clean Development Mechanism, the biggest UN offsetting market, is assessing the notion of suppressed demand.

“The Gold Standard is working with the German government to explore ways of applying suppressed demand to expand access to carbon finance in Africa and other poor regions that have historically been excluded from its benefits,” according to the statement.

CDM credits can be used by factories and power stations in the European Union carbon market. The EU has banned some credits after CDM Watch, the environmental lobby group, claimed in 2010 that they were “bogus.”

ClimateCare, which was sold by JPMorgan last year in a management buyout, still helps manage the New York bank’s portfolio of voluntary credits, Hanrahan said.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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