BILL GATES DEMONSTRATES EMISSIONS TRADING: $136 MIL

Bill Gates-backed carbon fund taps China emissions
Michael Smith, August 8, 2007 (Reuters via Yahoo Finance)

WHO
Peony Capital Ltd, Bill and Melinda Gates Foundation Trust (representing Microsoft founder Bill Gates)

WHAT
Peony Capital Ltd, a new carbon trading fund, is raising funds to purchase emissions credits worth $544 million, according to the Kyoto Protocol Clean Development Mechanism (CDM). The Gates Foundation is putting up $136 million.

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WHEN
- The emissions credits purchases will extend through 2012.
- Peony was established in March and hopes to complete fund-raising by December 2007, though current credit turmoil is likely to create delays.

WHERE
Peony Capital is based in Beijing. The initial purchases will be investments in Chinese projects. Besides the US-based Gates Foundation, other investors will be from Australia, the United States, Europe and Asia.

WHY
- The initial investments will be in 2 fuel switching and a wind power project. Other types of projects are being studied.
- CDM projects are certified to reduce climate change-inducing emissions. Purchasers are largely European and Japanese utilities which, under the terms of the Kyoto Protocols to which their governments are signatories, need to buy credits (“permissions”) to emit as they earn by generating the power required by industry and consumers.
- Current prices are 16 Euros/tonne; China’s miminmu price is 8 Euros/tonne.
- Peony’s client is one of China's largest power producers. China is 2nd in the world in greenhouse gas emissions and will soon overtake the US to become #1. It is the highest seller via the CDM.

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QUOTES
Peter Yates, director, Peony: “No-one is immune to what has happened in the last weeks when trying to get or make financial decisions…If we can have it completed by December I think we would have done extremely well and if takes a few months after that it won't be a big surprise…The bonus is we are also doing something good for the planet…The second objective of Peony is we believe the introduction of air as a commodity into the capitalist system is going to accelerate rather than decelerate over the medium term."