Under the Kyoto Protocol, emissions trading is supplemented by two other mechanisms that offer considerable flexibility: the clean development mechanism (CDM) and joint implementation (JI). In a CDM, an industrialized country invests in an emission reduction project in a developing country. The resulting emissions reduction is credited to the industrialized country. In JI, an industrialized country invests in an emission reduction project in another industrialized country and, again, receives credit for the emissions reduction.

E.ON’s long-term emission reduction target goes well beyond the targets set by the Kyoto Protocol and the European Union. By 2030, we aim to halve our specific CO₂ emissions (the amount of CO₂ we emit for every kilowatt-hour of electricity we generate) compared with the figure for 1990.

 

As part of this effort, we plan to participate in emission-reduction projects around the world. The Climate & Renewables market unit, which began operations in 2007, is responsible for selecting projects and coordinating our participation in them. We’re currently examining a number of projects involving renewables and energy efficiency. We don’t participate in projects involving industrial gases (such as HFC-23) or projects that promote a reduction in emissions through the use of biofuel which is currently thought to have negative impacts on the environment (such as in the case of palm oil).

E.ON Ruhrgas and Gazprom are planning a JI project to enhance energy efficiency in rural regions of the Russian Federation that are not currently connected to Russia’s natural gas pipeline system.

 

We’re also examining other climate protection projects in Russia that would involve updating generating units as well as renewables projects (mainly wind power) and projects aimed at improving the efficiency of industrial power plants.

Participating in climate protection funds is another way for companies to acquire emission reduction credits, known in the industry as certified emission reductions (CERs). Companies can also team up to invest in CDM and JI projects and receive CERs in return. E.ON is currently involved in two climate-protection funds: the EUR455 million Greenhouse Gas Credit Aggregation Pool and the KfW Bankengruppe’s EUR80 million climate protection fund. The latter fund specializes in projects that promote renewables and energy efficiency measures.

 

We also support a number of projects in emerging countries, including a biomass project in China, an industrial gas project in India, a landfill gas project in Thailand and an energy efficiency project in South Africa. Between 2008 and 2012, we expect these projects to yield us CERs equal to about 3.2 million metric tons of CO₂.