Investors eye thailand for carbon credits

Taking an insurance policy for your car can offset what has become known as your carbon footprint, at least in Germany.

Last September, Allianz introduced the ECOmotion insurance policy for the environmentally conscious, whereby drivers could offset the carbon dioxide emissions of their vehicles through carbon-credit certificates purchased, for instance, through the broker of a palm-oil mill in Chumpon.

As carbon or emission trading gains momentum, investors are looking to Asia - in this case agribusiness-driven Thailand - for projects with carbon-credit potential, according to Armin Sandhoevel, CEO of Allianz Climate Solutions.

Thailand has registered 10 projects under the Kyoto Protocol's Clean Development Mechanism, seven of which were co-invested with European Union partners. The Kyoto Protocol, which has most developed nations committed to reducing their emissions of not just carbon dioxide but also methane and nitrous oxide by at least 5 per cent from 1990 levels by 2012, when the protocol expires, has spawned a business in itself.

The trading volume of the European Union Emission Trading Scheme (EU ETS) market more than doubled from ¤24 billion (Bt1.21 trillion) in 2006 to ¤50 billion last year. The Kyoto Market, which is the smaller of the two major carbon-trading markets after the EU ETS market, has also been enjoying double growth.

Analysts believe the surge in carbon-credit trading might partly be attributed to hedge funds shuffling their money in the credit crunch.

Many businesses in Thailand are already alerted to the potential profits of emissions trading. Charunya Phichitkul, president and CEO of the petrochemical producer Ube Group, told The Nation last month that the company would gain more than US$1 million (Bt31.49 million) from trading its carbon credits.

Though the Europeans have been spearheading this initiative, they are hoping that Asia will pick up on the investment climate, not only for the carbon market, but also the renewable-energy sector, said Sandhoevel, whose Munich-based Allianz subsidiary has been tapping investment opportunities in the field.

Sandhoevel said that other forms of renewable energy sources such as wind farms and solar power could help break Thailand from over-reliance on biomass. He added that, for instance, palm-oil production might come with a reputation hazard - the food-versus-biofuel argument, for instance.

"This might sound far-fetched for us in Thailand but carbon markets, credits and emission trading are going to come very soon," said Pakit Iamopas, president and CEO of Allianz CP General Insurance.

The company has recently insured two renewable-energy power plants: one 9.8-megawatt biomass plant and another 250-kilowatt wind-turbine site, worth Bt663 million and Bt9.4 million respectively.

Although no climate-related products are in the pipeline, Ayudhya Allianz CP will benefit from the indirect impact of a cleaner environment as it helps reduce the number of health-related claims, said president and CEO Wilf Blackburn.

Sandhoevel believes that only this market mechanism can help combat climate change, which accounts for 40 per cent of losses worldwide.

Though Allianz has yet to make a single cent of direct investment in the region, with income derived largely from the secondary markets of carbon trading and acting as advisers, Sandhoevel said there were plenty of projects looking for funding.