Post on 11-Jan-2017
Overview of Global Carbon MarketPresented by:
DANIEL MENDOZA
Presentation Outline
1. What is Carbon Financing?2. Structure of Global Carbon Market3. Carbon Market Relevant for Bangladesh4. How Big is the Global Carbon Market?5. Current Trends in the Carbon Market
web: www.wasteconcern.org
What is Carbon Financing?
Carbon financing can be defined as financial resources provided to projects generating (or expected to generate) green house gas emission reductions in the form of the purchase of such emission reductions.
In simple term, carbon finance is a purchase contracts whereby one party pays another party in exchange for a given quantity of Green House Gas (GHG) emission reductions.
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Payment made in different forms to abate GHG
EQUITYDEBT/
SOFT LOANIN KIND
CONTRIBUTION FOR TECHNOLOGIES
CASH
Global Warming Potential (GWP) of Key GHG
Green House Gas Global Warming Potential
Carbon dioxide (CO2 ) 1
Methane (CH4) 21
Nitrous Oxide (N2O) 310
HFC’s 140-11,700
Perflorocarbons (PFC’s) 7,000-9,200
Sulphur Hexafluoride (SF6) 23,900
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Emission reduction credits)
Industrialized country
Project Reducing GHG emissions in developing country
investment $$
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Structure of the Global Carbon Market
Global CARBON market
Compliance Markets
KyotoKyotoMarketsMarkets
New South WalesGHG Abatement
SchemeEU ETS
ChicagoClimate
Exchange
UKETS
CDM ->CERs
JI ->ERUs
AAUs +
RMUsEUAs VERsNGACs CCLAs
VoluntaryMarkets
Carbon Market
Compliance Market Voluntary Market
CER VERCompliance markets generate and trade green house gas emission reductions known as Certified Emission Reductions (CERs) that are regulated and directly initiated under the Kyoto Protocol’s Clean Development Mechanism (CDM).
Voluntary markets generate and trade greenhouse gas emission reductions that are not regulated or directly initiated by the Kyoto Protocol and known as Verified Emission Reductions or (VERs).
Certified Emission Reduction (CERs): Green house gas reduction of any CDM project is measured according to internationally agreed methods and are quantified in standard units called Certified Emission Reductions (CERs). These are expressed in tons of carbon dioxide (CO2) equivalents.
Verified Emission Reduction (VERs): Green house gas reduction outside Kyoto Protocol is measured according to internationally agreed methods and are quantified in standard units called Verified Emission Reductions (VERs). These are also expressed in tons of carbon dioxide (CO2) equivalents.
Investment Opportunity from CDM/VER
0 50 100 150 200
Project Cost
Investment canbe obatined from
CDM
Investment canbe obatined from
CDMInvestment can be obatined fromCDM
Investment can be obatined fromCDM
Project Cost
maximum
minimum
Carbon Market at a Glance 2005-2007 and projected 2008
Type 2005 2006 2007 2008 (Projected)
Volume (MTCo2e)
Value (M US$)
Volume (MT Co2e)
Value (M US$)
Volume (MT Co2e)
Value (MUS$)
Volume (MT Co2e)
Value (MUS$)
AllowancesEU-ETSNew South WalesCCXUk-ETS
328 7971 1131 24620 2690 43000 3000 70,000
CDMJIOthers
382 2894 508 5477 947 17000 1200 22,000
Total 710 10,864 1639 30,098 3637 60,000 4200 92,000
CDM 351 2638 475 5257 947 17000 1200 22000
Source: 2005-2006 World Bank and IETA; 2007 and 2008 Point Carbon (Press Release Feb 26, 2008)
Annual Volumes and Values of Transactions
Bill
ion
US
$
Carbon Market at a Glance 2005-2007 and Projected 2008
Source: 2005-2006 World Bank and IETA, May 2007 and 2008 Point Carbon (Press Relaese Feb 26, 2008)
10.864
2.638
30.098
5.257
60
17
92
22
0
10
20
30
40
50
60
70
80
90
100
2005 2006 2007 2008
Total MarketCDM Market
Overview of the CDM market
• CDM has the largest CO2 project based offset system in the world
– 979 registered projects by April 1 2008– Approx. additional 2021 projects in pipeline– 49 countries– 134,993,328 CERs issued (certified emission reductions)– 2.7 billion CERs expected to end of 2012
• CDM has a legal basis in the Kyoto Protocol– Run by Executive Board (EB) answerable to KP Parties– EB back-stopped by UNFCCC secretariat with support for:
• Registration and issuance• Accreditation of third-party validators• Methodologies for emissions baseline setting and monitoring
Overview of the CDM market
39
471 530
183
750
940685
1600
1900
979
2021
2700
0
500
1000
1500
2000
2500
3000
Dec-2005(COP/MOP1)
May-06 May-07 Feb-08
Registered project activities Projects in the pipelines Projected CERs
No.
of P
roje
cts/
C
ERs
bef
ore
2012
(mill
ion)
Overview of the CDM market
Map and statistics accessible at http://cdm.unfccc.int/
Overview of the CDM market
Overview of the CDM market
Overview of the CDM market
Overview of the CDM market
Bangladesh 0.2%
Registered CDM projects all over the World
Sectoral ScopeRegistered
Projects
1 Energy Industries (renewable -/ non-renewable sources) 650
2 Energy distribution 0
3 Energy demand 16
4 Manufacturing industries 69
5 Chemical Industries 23
6 Construction 0
7 Transport 2
8 Mining / mineral production 7
9 Metal production 1
10 Fugitive emissions from fuels (solid, oil and gas) 98
11 Fugitive emissions from production & consumption of halocarbons & sulphur hexafluoride 16
12 Solvent use 0
13 Waste handling and disposal 256
14 Afforestation & reforestation 1
15 Agriculture 83
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Overview of the CDM market
carbon trading
Present Price of CERs and VERs (Carbon Credits)
Crediting Period for CERs and VERs
Both the CERs and VERs are represented in terms of carbon dioxide equivalent (CO2e).
The present price (As of 1 April, 2008):
CERs : US $ 18.50-23/ton
VERs : US $ 7 to US $ 10/ ton
Emission reductions can be claimed for maximum ten years, without revision of the project baseline,
or
for a period of seven years with two extensions of seven year each, provided the project baseline is revised at the time of each extension.
4200
3637
1639
710
$11.00
$7.50
$17.80 $18.50
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2005 2006 2007 20080
2
4
6
8
10
12
14
16
18
20
Volume (MT Co2e) Price of CER
Carbon Market at a Glance 2005-2007 and Projected 2008
Source: 2005-2006 World Bank and IETA, May 2007 and 2008 Point Carbon (Press Relaese Feb 26, 2008)
Price drivers – Evolution of the CER Price (secondary market, in EUR)
0
2
4
6
8
10
12
14
16
18
20
Mar
-07
Mar
-07
Apr
-07
Apr
-07
May
-07
May
-07
Jun-
07
Jun-
07
Jun-
07
Jul-0
7
Jul-0
7
Aug
-07
Aug
-07
Sep
-07
Sep
-07
Oct
-07
Oct
-07
Nov
-07
Nov
-07
Nov
-07
Dec
-07
Dec
-07
Jan-
08
Jan-
08
Feb-
08
Source: Reuters – TFS Energy
Overview of the CDM market
CURRENT TRENDS IN THE CARBON MARKET
• CDM experienced a strong growth (from US $ 5 b to 17b) throughout 2007.
• With increase in the volume of emission reduction, price of carbon credits ( CERs and VERs) is also increasing ( $ 7.5 in 2005 to $ 23 in 2008).
• CERs have consolidated as a reliable carbon asset class.
• Increasing interest in CERs for voluntary offsetting purposes may constitute another price driver in the future.
• Voluntary GHG market has also seen strong performance based on:
National/regional/domestic initiativesCorporate social responsibility (CSR) issues
Country Number of ProjectsSri Lanka 4
Thailand 5
Tunisia 2
Uganda 1
United Republic of Tanzania 1
Uruguay 1
Viet Nam 2
Country wise Number of CDM projects
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• Assigned Amount Units (AAUs) – Each Annex I Party that ratifies the Kyoto Protocol has a GHG emissions limitation commitment for 2008-2012, which is its "assigned amount." If a country's emissions are lower than that amount, it may sell the unused units.
• Certified Emission Reductions (CERs) - These are credits issued for emission reductions achieved by a project under the CDM. CERs can be used by an Annex I Party to help meet its emissions limitation commitment under the Kyoto Protocol. The credits issued for sink enhancements achieved by afforestation or reforestation projects under the CDM are either temporary CERs (tCERs), or long-term CERs (ICERs) that are subject to provisions to protect against possible reversals of the sink enhancements.
• Emission Reduction Units (ERUs) - These are credits issued for emission reductions or removals achieved by a project under the JI mechanism as defined in Article 6 of the Kyoto Protocol. ERUs can be used by an Annex I Party to help meet its emissions limitation commitment under the Kyoto Protocol. Each ERU equals 1 tonne of carbon dioxide equivalent (CO2 e).
• Removal Units (RMUs) - These are credits issued for net sink enhancements achieved by eligible activities under Articles 3.3 and 3.4 of the Kyoto Protocol. RMUs can be used by an Annex I Party to help meet its commitment under the Kyoto Protocol. Each RMU equals 1 metric tonne ofCO2e.
Country wise Number of CDM projects Country Number of ProjectsArgentina 10
Armenia 3
Bangladesh 2
Bhutan 1
Bolivia 2
Brazil 113
Cambodia 1
Chile 21
China 139
Colombia 6
Costa Rica 5
Cuba 1
Cyprus 2
Dominican Republic 1
Ecuador 9
Egypt 3
El Salvador 4
Fiji 1
Georgia 1
Guatemala 5
Honduras 12
India 296
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Country Number of Projects
Indonesia 11
Israel 7
Jamaica 1
Lao People’s Democratic Republic 1
Malaysia 21
Mexico 99
Mongolia 3
Morocco 3
Nepal 2
Nicaragua 3
Nigeria 1
Pakistan 1
Panama 5
Papua New Guinea 1
Peru 8
Philippines 14
Qatar 1
Republic of Korea 16
Republic of Moldova 3
South Africa 12
Country wise Number of CDM projects
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