Emissions -Related Solutions What is Emission Risk? For many companies, the management of emissions has become an important risk management challenge of direct relevance to the bottom line. Regulators around the world are tightening the rules governing the release of atmospheric pollutants including CO2, NOx, greenhouse gases and even mercury. At the same time, so-called Renewable Portfolio Standards are forcing electricity generators and suppliers to source more and more of their power from renewables. The power, utilities, energy, transportation and heavy manufacturing sectors are most affected. Market mechanisms involving trading of emissions and renewable energy certificates (RECs) or equivalent have now emerged as the regulatory framework of choice. Companies will need to fully understand their obligations under these systems, the nature of any assets or liabilities created, and how to best manage their exposure as the markets expand. Greenhouse gas (GHG) markets are now in place following the entry into force of the Kyoto Protocol and the formal initiation on January 1, 2005 of the European Union Emissions Trading Scheme ("EU ETS"). Between 12,000 and 16,000 installations, which together produce over 40% of European emissions, are covered by the scheme (approximately 6,000 companies). The penalties for non-compliance are €40/t CO2 in 2005-2007 period and €100/t CO2 in 2008-2012. During 2007, the carbon market including the EU ETS had a notional value of €70 billion, two and half times that of in 2006. Greenhouse gas emissions restrictions are also under development in Australia, Canada, and at state level across the United States. The financial penalties for non-compliance or poor risk management are escalating. Unanticipated price movements, regulatory developments, transaction or project failure, weather fluctuations and energy prices can all influence company's ultimate exposure. Swiss Re Emissions -related Products Emissions Trading Proprietary and managed trading accounts (exchange and OTC markets for EUAs and CERs) and related counterparty services tailored to help affected companies manage their individual emissions markets positions and future compliance exposures. Structured Solutions and Integrated Risk Transfer Customized structured risk transfer and emissions-linked financial instruments that provide price and delivery assurances for both buyers and sellers; financial credit enhancement for clean energy and emissions-reducing projects and financial stakeholders; integrated weather and emissions risk transfer instruments for 'total risk' hedging. Swiss Re's Competitive Advantage Products Trading Price and delivery insurance Structured buy and sell Single project or portfolio Single or dual triggered Structures Swaps, collars, floors, caps Can be combined with other triggers such as weather Tenors Limits Seasonal, annual, multi-year USD 10 to 50 million Expertise Intimacy with market dynamics Deep experience with innovative risk transfer and risk financing solutions Swiss Re Capital Management and Advisory 30 St Mary Axe London Ben Lashkari +44 207 933 4153 Swiss Re Structures Product for CDM Carbon Credit Transaction with the Government of Luxembourg (.pdf 114 KB) Swiss Re Opens Emissions Desk in London: Recent Growth in Carbon Emissions Markets Spurs New Operations (.pdf 88 KB) RNK Capital and Swiss Re Structure First Insurance Product for CDM Carbon Credit Transactions (.pdf 96 KB)