Carbon Market

Trading Carbon talks with Robert Dornau about his many roles over the years in the carbon market. A market that he predicted in 1999 would be worth billions of euros by the end of this decade.

Today, projecting the size of the carbon market has almost become a business in itself. But back in 1999, when international carbon trading was still more theory than practice, one man was predicting the billion euro market that we see today.

Robert Dornau, currently director of the climate change programme at verification company SGS, was then working in the strategy department at the German stock exchange on an emissions trading project. He hoped to position the exchange to have a central role in any upcoming cap-and-trade scheme in Europe. But, his bosses didn’t agree.

“The CEO at that time didn’t buy it. He said that the Kyoto protocol would never be ratified and that there would never be an EU emissions trading scheme (ETS),” said Dornau. “He cancelled the project with immediate effect.”

Not put off, Dornau explored openings in the nascent carbon market and received an offer from the International Emissions Trading Association (Ieta). “I thought it was an excellent opportunity at an early stage of the market to be somewhere where I could follow all developments in the market, not just trading.”

He joined Ieta in 2001, and together with the association’s then president Andrei Marcu, set to work on expanding the organisation’s reach. Three years later, when he departed, Ieta’s membership was more than 100, up from around 30 when he joined, staff levels had tripled and new offices added around the world.

“It was an excellent experience,” he said of a job that saw him observe the first 15 meetings of the clean development mechanism (CDM) executive board – the UN-appointed body that

oversees the CDM project approval process.

Following a period of self-employment, which included organising the first three Carbon Expo trade fairs in Cologne and working with Netherlands-based consultancy Climate Focus on setting up Spanish utility Endesa’s climate change programme, he was approached by SGS.

“I thought why do they want me? I’m not an engineer, I’m not a verifier,” said Dornau. “And they said ‘we want someone with market knowledge, with networks and with an understanding (of how the carbon market works), who can put the (climate change) programme on a new level’,” he said.

And so, in 2005, Dornau joined SGS. Since then, it has been an interesting time in CDM for firms such as SGS, accredited by the executive board as a so-called designated operational entity (DOE) to provide, among other things, validation and verification services for projects and monitoring the issuance of carbon credits. The board has scrutinised the work of DOEs in recent years, as it questions more and more aspects of CDM projects, which often results in a review.

“The crux with the board is that they change all the time,” said Dornau. “After two years they finally understand everything, then leave and are replaced by a new bunch of people who have to be educated all over again.”

There is also a concern over the guidance given to DOEs by the board, which has not always been clear, he said. “You put something in writing. It’s a sentence to you and it’s absolutely clear. But there can be 10 interpretations of that: the project developer has one, we have one, the (board) has one…”

However, just to prove that everyone in the CDM can work together, the board and the DOEs have collaborated on a validation and verification manual that is aimed at providing a better understanding of what is expected.

“This is very important,” said Dornau. “If you want to be an extended arm (of the CDM), you have to understand the body. You can’t just be a loose limb,” he said.

And he feels that there is still work to be done to improve the functioning of the CDM. In particular, he would like to see a full-time professional executive board regulating the market instead of the current part-time set up. “It has to be a body that can regulate a multibillion Euro market,” he added. A multi-billion Euro market that Dornau himself predicted almost 10 years ago.

This story was first published in www.pointcarbon.com.