El Futuro de los Mercados de CarbonoFundacin Empresa y ClimaBarcelona Mayo 2009

*Algunos Mensajes

Las emisiones de GEIs deben ser reducidas.Las tecnologas para facilitar esa reduccin estn disponibles hoy a un costo marginal aceptable. Las emisiones de GEIs se pueden reducir acudiendo a opciones de polticas, mecanismos de tarifas o una combinacin de ellos. Un mercado de carbono global, expandido y lquido tiene el potencial de contribuir significativamente a ese proceso. Los pases deberan tomar decisiones para establecer seales de precio de largo plazo y maximizar el beneficio de los mercados de carbono.

Saber de donde vienen las emisiones de GEIsFuente: WRI, Baumert et al, 2005

*Potencial: Cunto pueden crecer los mercados de carbono?Estimacin en el crecimiento de los mercados de carbonoReducciones en P en D: 1.7 billion tons por aoTotal mercados: 9.4 billion tons por aoAcciones requeridas para estabilizar las emisiones en 550 ppm: reducir 50 billion tons por ao.

Se podra decir que 25% puede provenir de mercados de carbono.

2020 data: UNFCCC assessments; 2050: Stern ReviewOffsets (Tales como reducciones generadas en pases en desarrollo) Podran crecer hasta 8 veces en 30 aos)Total carbon marketsEscenario 2020 (GtCO2e*)OffsetsTotal carbon marketsRequired actions by 2050Escenario 2050 (GtCO2e)1.79.412.5?50*GtCO2e: giga (x109) ton of CO2-equivalent

*Material para la discusin que nos trae a este eventoCmo operan los mercados de carbono?Qu se necesita para aumentar su escala?Qu decisiones deben tomar los pases?Por que los mercados de carbono son importantes?

*Mercados de Carbono: Crecimiento exponencial, pero modesto relativo a las reducciones requeridasVolume of carbon transacted (GtCO2e)Se necesita llegar a 50 GtCO2e por ao en el 2050.

El volumen actual es de 4 GtCO2e pero el volumen fsico es menor debido al mercado de permisos, donde un volumen puede pasar por diferentes entidades.Enorme diferencia entre el volumen presente y lo que se requiereSe requieren reduciones drmaticas de GEIs. De no lograrse ese objetivo, emisones y temperatura pueden crecer significativamente.

Estabilidad en 550 ppm CO2e en 2050 necesita que las emisiones reduzcan un 60%Los esfuerzos de mitigacin en las siguientes dos o tres dcadas sern esenciales. Source: WB State and Trends of the Carbon Market 2008, Stern Review 2007, Point Carbon 2008, IPCC 2007, McKinseyEffort required to stabilize emissions by 2050 (GtCO2e)

GHG vs CDM

0.170.0070699136

0.030.1437549097

0.260.6967792616

0.130.0018329406

0.080.0047132757

0.190.1008117308

0.140.0450379681

Sources of GHG emissions

Type of CDM projects

Volume traded

0.008490.097960.00910.01071

0.3210.3510.0110.027

1.1040.5620.0160.063

2.0610.7910.0410.09

2.61.233960.063960.20952

EU ETS

CDM

JI

Other

G tCO2e transacted

Sheet1

Sources of GHG emissionsType of CDM projects

Land use, Land-use change and Forestry17.0%0.7%

Waste3.0%14.4%

Energy supply26.0%69.7%

Transportation13.0%0.2%

Residential and Commercial buildings8.0%0.5%

Industry19.0%10.1%

Agriculture14.0%4.5%

Total100.0%100.0%

EU ETSOtherTotal allowancesPrimary CDMSecondary CDMJIOther compliance, voluntary and retailTotal project-based transactions

20048.497.7916.2897.000.969.102.92109.98

2005321.007.00328.00341.0010.0011.0020.00382.00

20061,104.0030.001,134.00537.0025.0016.0033.00611.00

20072,061.0048.002,109.00551.00240.0041.0042.00874.00

20082,600.00144.002,744.00859.56374.4063.9665.521,363.44

EU ETSCDMJIOtherTotal

20040.010.100.010.010.13

20050.320.350.010.030.71

20061.100.560.020.061.75

20072.060.790.040.092.98

2008 (forecast)2.601.230.060.214.11

Sheet2

Sheet3

Sheet4

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*Substantial potencial econmico de la mitigacin global de emisiones de GEIs.Abatement potentialGt CO2e/year, 2030Cost of abatement /t CO2e, 2030Source:McKinsey ~27GtCO2e a menos de 40/ton (~54% of effort) ~7GtCO2e no regrets (bajo costo) opportunities (14%) Se puede actuar en muchos sectores

*Como operan los mercados de carbono?Qu se comercia?Cul es el principio?Units = tons of carbon dioxide (or equivalent) allocated as part of an emission cap or reduced by a project or program activity. These units are labeled based on the market segment in which they are traded : AAUs, CERs, ERUs, EUAs, VERs, etc.Cost-effectiveness: a ton of CO2 emitted anywhere in the world has exactly the same impact on climate change and should therefore be reduced/mitigated where the cost of doing so is lowest.Por qu deben interarse las autoridades de energa?Significant new investments and financial flows for sustainable development;Application of new technologies and financial instruments to reduce emissions at lower costs; andRe-engineering of globalized economic activity into a lower carbon trajectory, better tuned to cope with future resource and environmental constraints. Cules son los beneficios de los mercados de carbono?Lowers compliance costs in countries with obligations to reduce emissions;Catalyzes financial and technology flows to developing countries to facilitate low-carbon growth;Creates a global and long-term price signal to lower carbon intensity.

*Opciones para cumplir con Kyoto para pases con obligaciones (Annex I countries)Los Mercados de Carbono reaccionan a decisiones polticasAcciones Domesticas

Mercado de derechos interno (EU ETS, future AUS or NZ ETS)Regulaciones y standardsSubsidios para tecnologas limpiasR&DMecanismos flexibles

Compra de derechos de emisiones (AAUs) de otros pases Annex-I que estn debajo de su lmite de emisiones (International Emissions Trading IET)Compra de reducciones (emission reductions credits) de proyectos (CERs/ERUs)En pases en desarrollo (Clean Development Mechanism CDM)En economas en transicin (Joint Implementation JI)Domestic action

Baseline emissions1990Business as-usual projected emissions by 20081990 BaselineKyoto targetAllowances from IETProject-based offsets (CDM/JI)2008-12Kyoto allowed emissionsProjected emissions increase between 1990 and 2008-2012Sources of reductionJI: Offsets obtained from another Annex-I country;CDM: Offsets obtained from a non-Annex I countryIET: Kyoto allowances obtained from another Annex-I countryA significant amount of the reduction must be achieved through domestic measures

*Secondary CDM 5,500EU Emissions Trading Scheme50,100New South Wales Certificates220CDM7,400JI500Allowance markets(US$ million)Annual market value more than doubled in in 2007.Source: WB State and Trends of the Carbon Market 2008, Reuters 2008Project-based transactions(US$ million)CDM increased by 30% in 2007.Mercados voluntarios en 2007Voluntary & retail270Chicago Climate Exchange70Los mercados para cumplimiento de Kyoto sobrepasaron los US$100 billones in 2007

*pero los mercados estn fragmentados.EU ETS (domestic)Kyoto signatories outside EU ETSAnnex I countries with economies in transition. Potential JI countriesNon Annex I countries. Potential CDM host countriesRegional Greenhouse Gas Initiative (RGGI):States in the Northeastern United States have also passed carbon regulations for stationary sourcesWestern Regional Climate Initiative:California is also a leading participant in a regional initiative to reduce its emissions.Kyoto frameworkNon-Kyoto voluntary initiativesSource: Element Markets

*Los Mercados de Carbono generan beneficios de desarrollo globalesBeneficios de desarrolloApalancamiento de capitalEl financiamiento de carbono (pagos por reducciones de emisiones) tiene un gran efecto de apalancamiento para las inversiones en varios sectores;En promedio $1 de finanzas de carbono apalanca $3.80 de inversin;Este es mayor para las energas limpias : $1 de finanzas de carbon apalanca $9 de inversin en renovables.Mejora la TIR de los proyectosFomenta la transferencia de tecnologa (micro hydro, solar, efficient domestic appliances, CFL, bio-digestors, water pumps, etc.) GlobalBeneficios para pases deasarrollados y en vas de desarrollo Alcance Un amplio rango de oportunidades de mitigacin LiquidezActivo comercio y mercados secundariosBeneficios globalesMenor costo de cumplimiento para los pases desarrolladosIncentivos para economas de baja intensidad de carbono en P. en D.Seales de precio globalSource: WB State and Trends of the Carbon Market 2008

*y tienen un enorme impacto en los pases en desarrollo.Source: WB State and Trends of the Carbon Market 2008Distribucin geogrfica despareja; China, India and Brazil = 85% of CDM market share;Africa todava retrasada, some successes in 2007;Pequeos proyectos y oportunidades bypassed;Reduciones de reforestacin y deforestacin todava ausentes.Muchos pases con grandes emisiones aun tienen poca presencia en el mercado. Many countries are under-penetrated even relative to their emissionsLocation of CDM projects(percentage of volume, 2007)Source: McKinsey

Working Draft - Last Modified 3/21/2008 11:01:43 AM

Printed 03/21/2008 10:09:22 AM

Today: Many developing countries and sectors have been left outside the carbon markets

Source:UNEP, WRI, team analysis

Many countries are under-penetrated relative to emissions

Smaller emissions reduction opportunities have been under-tapped

Land use has played a minimal role in the CDM pipeline

Three developing countries have captured >75% market share

CDM activity by country, mid-2007

Mt CO2e/year

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Distribution of project sizesPercent of total CER volume in pipeline*, by project size (kT CO2)

Share of total CER production, by countryPercent of total CER volume in pipeline

* (Mt CO2e p.a.)

Share of total CER production, by project typePercent of total CER volume in pipeline

13

*Source: UNEP Risoe, WB State and Trends of the Carbon Market 2008Muchas oportunidades de crecimientoProgrammatic approaches will enable scaling up/extending to interventions in key development sectors (energy, appliances, waste management, transport, and newer technologies). 64% of 2007 contracts for clean energyForestry is barely visible in CDMFor the first time, agreement reached at Bali to move forward on Reduced Emissions from Deforestation and Degradation (REDD), providing opportunity for countries with tropical forests to join the carbon markets. Required now: build capacity to measure and verify emissions associated with forests and bring these assets to market as soon as regulatory framework in place. Building on success to scale upTapping new sectors

Chart1

0.1740.0070699136

Sources of GHG emissions

Share of CDM projects

GHG vs CDM

0.1740.0070699136

0.0280.1437549097

0.2590.6967792616

0.1310.0018329406

0.0790.0047132757

0.1940.1008117308

0.1350.0450379681

Sources of GHG emissions

Type of CDM projects

Volume traded

0.008490.097960.00910.01071

0.3210.3510.0110.027

1.1040.5620.0160.063

2.0610.7910.0410.09

2.61.233960.063960.20952

EU ETS

CDM

JI

Other

G tCO2e transacted

Sheet1

Sources of GHG emissionsShare of CDM projectsEU ETS

Land use, Land-use change and Forestry17.4%0.7%

Waste2.8%14.4%

Energy supply25.9%69.7%40

Transportation13.1%0.2%

Residential and Commercial buildings7.9%0.5%

Industry19.4%10.1%60

Agriculture13.5%4.5%

Total100.0%100.0%

Volumes traded (MtCO2e)EU ETSOtherTotal allowancesPrimary CDMSecondary CDMJIOther compliance, voluntary and retailTotal project-based transactions

20048.497.7916.2897.000.969.102.92109.98

2005321.007.00328.00341.0010.0011.0020.00382.00

20061,104.0030.001,134.00537.0025.0016.0033.00611.00

20072,061.0048.002,109.00551.00240.0041.0042.00874.00

20082,600.00144.002,744.00859.56374.4063.9665.521,363.44

Volumes traded (GtCO2e)EU ETSCDMJIOtherTotal

20040.010.100.010.010.13

20050.320.350.010.030.71

20061.100.560.020.061.75

20072.060.790.040.092.98

2008 (forecast)2.601.230.060.214.11

Physical share of market (2007)EU ETSPrimary CDMJI

%62%22%1%Source: Point Carbon, Carbon 2008.

Volume1.040.660.03

Sheet1

Sources of GHG emissions

Share of CDM projects

Sheet2

Sheet3

Sheet4

Sheet5

Sheet6

*Un futuro, dos escenariosLos riesgos de CC estn reconocidos, y el futuro es un mundo con lmites de emisiones. A pesar del crecimiento exponencial en 2008, hay una gran incertidumebre sobre la expansin de la demanda futura. Las negociaciones internacionales determinarn la forma y efectividad de los mercados de carbono y su vnculo con el desarrollo. Mercados fragmentados con polticas domesticas/regionales: Riesgo de barreras al comercio y fugas interncionales.Volatilidad de precios: no fungibilidad de crditos, ausencia de seales comunes de largo plazo Poca claridad de inversin para el sector privado;Beneficios limitados para el comercio de reducciones.Convergencia e integracin de mercados: reducidos riesgos de fugas e incentivos perversos;Fungibilidad de crditos y seales de precios de largo plazo, favoreciendo el aumento de inversiones en tecnologas limpias y la participacin firme en crecimiento de baja intensidad de carbono. Amplios beneficios de los mercados para pases desarrollados y en vas de desarrollo.No acuerdo internacional despus del 2012Acuerdo internacional despus del 2012

*Decisiones necesariasSource: Stern, 2008

Proveer seales de precio de largo plazo y dar certidumbre al sector privadoDefinir una meta global de largo plazoFacilitar el acceso a los nuevos mercados de carbono, a fuentes de capital y bajar costos de abatimientoConstruir un verdadero mercado global vinculando esquemas regionales entre s con convergencia de precios y armonizacin de productosAcelerar los procesos de crecimiento de baja intensidad de carbono en los pases en desarrolloReformar los mecanismos flexibles existentes y explorar instrumentos de polticas. Costos de transaccin reducidos, procesos ms giles y metodologas simplificadas. Aumentar la escala y profundizar el acceso a los mercados de carbono y recursos financieros Facilitar la transferencia de tecnologas de baja intensidad de carbono y establecer programas sectoriales para facilitar inversiones de mayor escala en pases en desarrollo.

*Carbon Partnership Facility

Una Breve Introduccin

*AntecedentesPara una accin inmediata y para expandir los esfuerzos de mitigacin se requiere:Apoyar inversiones de largo plazo para una transicin a una economa de baja intensidad de carbono. Ir de las actividades de proyecto por proyecto a programas de inversin. Proveer incentivos para el desarrollo de tecnologas de baja intensidad de carbono. Integrar sistematicamente carbon finance en las decisiones de inversin pblica y privada. Nuevos incentivos para deforestacin evitada.

wb220280

*The Nueva Facilidad de Carbono (CPF)

Foco en oportunidades de mitigacin en multiple sectores con impactos de largo plazo y gran escala en las trayectorias de emisin. Comenzar ahora, con independencia del posible acuerdo en un rgimen pos 2012.

*Caractersticas principalesVisin estratgica y programtica: Integracin estratgica en los programas de asistencia del BM para apoyar a las regionesy pases en sus objetivos de desarrollo sostenible.No ms operaciones oprtunsticas, si no enfocada a programas de inversin, apalancando financiamiento y contribuyendo al dialogo sectorial. Mitigacin en gran escala:Apoyar la transicin a una economa de baja intensidad de carbonoRequerir la creacin of esquemas de facilitacin, incluir al sector privado y facilidades de mayor escala previstas para periodos ms largos de tiempo.

Aproximacin asociativa con la particpacin de compradores y vendedores.

Flexible en relacin a los mercados y al rgimen a aplicar.

*Carbon Partnership Facility

Incluir sectores donde carbon finance ya ha demonstrado su impacto, pero se enfocar a ampliar la escala y el alcance apoyando estrategias nacionales, regionales o sectoriales. Las actividades de la facilidad requerirn nuevas metodologas p.ej., programticas, sectoriales, multi sectoriales, etc.

*

CPF Programas Energa RenovableEficiencia energtica en el abastecimiento, mejora de procesos, and manejo de la demanda: Nueva generacin usando tecnologas avanzadas Rehabilitacin de plantas de generacin viejas e ineficientesEficiencia de procesosEficiencia en iluminaci Transporte Manejo de residuosGas de antorcha y reduccin de fugasSustitucin de combustibles para reducir el uso de combustibles fsiles.Secuestro de carbono (geolgico, forestal, uso de suelo)

*Algunos ejemplosTecnologa: Introduccin de nuevas tecnologas en pases en desarrollo.

Aumento de la escala de programas de eficiencia energtica con la participacin de intermediarios financieros.

Desarrollo urbano: Aproximacin integral (incluyendo manejo de residuos, tratamiento de agua, transporte, iluminacin pblico, cdigos de edificacin)

El Futuro de los Mercados de CarbonoFundacin Empresa y ClimaBarcelona Mayo 2009

EDUARDO DOPAZO edopazo@worldbank.org

*Context: First Bali Breakfast ( 12 April 2008) discussed Adaptation and Development; this is the key challenge for many of our client countries - we will help those who cannot be fully protected from the adverse effects of changes in the climate. Todays discussion focuses on an instrument of MITIGATION, or what we can do about preventing or slowing down climate change, by reducing the emissions of human-induced greenhouse gases. There is growing consensus that we need to act on this. This morning we will talk specifically about one of the instruments available to us, carbon markets, and why they are important to you.*Greenhouse gas emissions must be reduced.The challenge to development from Climate Change is now unequivocally recognized. Stabilizing greenhouse gas concentrations will require emissions to:Peak by 2020; Then be cut significantly to reach 550 ppm of CO2e by 2050;This suggests a reduction target of 30 to 60 GtCO2e per year.

Technologies are available now that enable substantial reductions at acceptable marginal abatement costs.Many emission cuts can be delivered using available technologies that also provide significant efficiency gains and can be financed at acceptable marginal abatement costs.

Emissions can be reduced through policy options, price-based instruments, or a combination of these.Policies to catalyze lower carbon behavior (standards, regulations/subsidies promoting clean technologies); or Price-based instruments (cap-and-trade or a carbon tax).

A deep and global carbon market has the potential to deliver significant benefits to all participants.Carbon markets have emerged as a key instrument of cap-and-trade, with potential to deliver significant benefits, including low-cost abatement options, and effective carbon price signals. They also enable opportunities for sustainable development, including financial and technological cooperation.

But challenges remain, notably in respect of long term price signals and market continuity.Success requires overcoming fragmented emerging markets, regulatory processes, and the lack of a long-term signal on continuity and future of the markets.

*Figure 1.3. GHG Flow Diagram, Global Greenhouse Gas Emissions*This slide attempts to demonstrate the huge untapped potential of carbon market access.**Volume of CO2 transacted Chart: (DATA from Stern Report)Current (2005) emissions: 45 GtCo2eThis is expected in the Business-as-Usual scenario to grow to 84 GtCO2e per year by 2050.The 550 parts per million (ppm) stabilization target (associated with a tmperature increase of @ 3Celcius) requires a reduction to 34 GtCO2e per year by 2050.

*Using very approximate calculations, the Green and red areas are more or less equal. Insulation Improvements: the three lines refer to three sectors/types.Standby losses= standby heat and power losses.Avoided deforestation in America is presumably LAC, we are verifying. Note that this is abatement potential, not necessarily quantifiable through interventions.*Carbon trading: one of the instruments that have emerged to drive down the costs of reducing emissions of greenhouse gases.

Rationale: Underlying principle - a ton of carbon is a ton of carbon: greenhouse gas emissions reduced anywhere will deliver the same global benefit. So it makes sense to carry out such reduction activities in a manner or location where they can be achieved at lower cost. A country with an obligation to cut emissions below a cap can benefit from lower costs. A country hosting a carbon project benefits from technology that improves efficiency. Globally, benefits for mitigating climate change.

Glossary of terms:Assigned Amount Units (AAUs): Annex-I Parties are issued AAUs up to the level of their assigned amount, corresponding to the quantity of greenhouse gases they can release in accordance with the Kyoto Protocol (Art. 3), during the first commitment period of that protocol (2008-12). AAUs equal one tCO2e.Certified Emission Reductions (CERs): A unit of greenhouse gas emission reductions issued pursuant to the Clean Development Mechanism (CDM) of the Kyoto Protocol, and measured in metric tonnes of carbon dioxide equivalent. One CER represents a reduction of greenhouse gas emissions of one tCO2e.Verified Emission Reductions (VERs): A unit of greenhouse gas emission reductions that has been verified by an independent auditor. This designates emission reductions units that are traded on the voluntary market.Emission Reduction Units (ERUs): A unit of emission reductions issued pursuant to Joint Implementation (JI). This unit is equal to one metric ton of carbon dioxide equivalent.European Union Allowances (EUAs): the allowances in use under the EU ETS. An EUA unit is equal to one metric ton of carbon dioxide equivalent.Abbreviations: AAUs: Assigned Amount UnitsERUs: Emission Reduction UnitsEUAs: European Union AllowancesCERs: Certified Emission Reductions*The reports of the Inter-Governmental panel on Climate Change (IPCC) established in 1988 have provided the underpinnings for international negotiations, leading to:the 1992 UN Framework Convention Climate Convention (UNFCCC); and the 1997 Kyoto Protocol, from where we have seen the emergence of instruments that enable a market to be created. Its major feature is that it sets binding targets for 37 industrialized countries and the European community (Annex I countries) for reducing greenhouse gas (GHG) emissions .These amount to an average of five per cent against 1990 levels over the five-year period 2008-2012.

Description of country rolesSignatories to the UNFCCC are split into three groups:Annex I countries (industrialized countries);Annex II countries (developed countries which pay for costs of developing countries);Developing countries.Annex I countries agree to reduce their emissions (particularly CO2) to target levels below their 1990 emissions levels. Annex II countries, that have to provide financial resources for the developing countries, are a sub-group of the Annex I countries consisting of the OECD members, without those that were with transition economy in 1992. Developing countries (or non-Annex I countries) have no immediate restrictions under the UNFCCC.Note: Annex B countries are defined in Annex B of the Kyoto Protocol. They are roughly the same countries as those listed in Annex I of the UNFCCC (only Turkey and Belarus are not Annex B countries) and are therefore commonly referred to as Annex I countries.

The main focus of the Banks involvement in carbon markets is the Clean Development Mechanism (CDM) and the Joint Implementation (JI) mechanism established by the Kyoto Protocol.

Text from UNFCCC: the UNFCCC preamble calls for the need for all countries to participate in an effective and appropriate international response, in accordance with their common but differentiated responsibilities and respective capabilities and their social and economic conditions.

*Size: Since they emerged in 2002, the story of the carbon markets has been one of amazing growth. Figures above are 2007 US $ values. Growth has been exponential in the last five years, doubling from year to year. Transactions under the EU Emissions Trading Scheme (EU ETS) are estimated at $85 billion for the past three years, of which $50 billion was transacted in 2007 alone. Likewise, the CDM market has contracted for $15.5 billion since 2002, of which 2007 alone accounted for $7.4 billion, a 30% increase from 2006.

Secondary CDM market: Project-specific guarantees provided by primary project developers, being monetized as enhanced credit;Guaranteed CER contracts entered by secondary sellers holding aggregated carbon portfolios;Forward contracts by Banks (small margins on large volume of CERs) for CERs.*There is not a single global carbon market yet.

Taking signals from the climate negotiations, various players have emerged and created carbon markets. Today, multiple assets are traded (offsets and allowances, voluntary and regulated, addressing consumer demand, corporate and compliance needs, as well as various derivatives) in multiple markets with increasing depth and sophistication.

World mapDark blue: EUs Emissions Trading Scheme, which trades within EuropeOrange: Countries with Kyoto obligations outside Europe (CAN/AUS/NZ/Japan)Light Blue: Joint Implementation markets (allows participation in supplying carbon assets by Economies in Transition)Green: Clean Development Mechanism countries

US mapVoluntary markets, including on both coasts of North America with participation from 44 US and Canadian states and provincial governments. Blue: Regional Greenhouse Gas initiative (RGGI): First RGGI auction held on 9/25/08 and successfully completed for 12.5 million tons at clearing price of US$3.07/ton.Brown: Western Climate Initiative (WCI) led by California.

Other Emerging markets: Australia ETS; New Zealand ETS.**Chart on 64% clean energyStarting with somewhat boutique project activity in early 2003, there was a huge spike in 2005 when projects targeting the industrial gases (HFCs and N2O) entered the market. This tended to be seen as gaming the market, because few development benefits could be associated with such projects (China set up a CDM Fund financed from a tax on such projects, as high as 65%!). But since then the CDM has moved progressively towards more development focus (clean energy).

Hydrofluorocarbons (HFCs) are mainly waste by-products from the refrigeration chemicals production process. HFCs have a very high Global Warming Potential (GWP) relative to CO2 [1: 11,700] over 100 years, and offer therefore a very attractive opportunity to reduce greenhouse gases.

Landfill gas (LFG): a waste gas containing methane and other gases emitted by landfills. The GWP of methane (CH4) is approximately 21 times that of CO2 over a 100-year time horizon.

Nitrous oxide (N2O) - Agriculture is the main source of human-produced N2O: cultivating soil, the production and use of nitrogen fertilizers, and animal waste handling can all stimulate naturally occurring bacteria to produce more nitrous oxide. The livestock sector (primarily cows, chickens, and pigs) produces 65% of human-related nitrous oxide. GWP of N2O is 298 times that of CO2 over a 100-year time horizon.

Coal mine methane (CMM) refers to methane released from the coal and surrounding rock strata during mining activities. CMM is a potent greenhouse gas that contributes to climate change if emitted to the atmosphere. CMM can also create an explosive hazard inside mines. But if CMM is recovered safely and used for energy, it is a valuable, clean-burning fuel source.

[NOTE: Global warming potential (GWP) is a measure of how much a given mass of greenhouse gas (GHG) is estimated to contribute to global warming over a specific time interval. It is a relative scale which compares the gas in question to that of the same mass of CO2 (whose GWP is by definition 1). ]

Fugitive emissions: air pollutants released to the air other than those from stacks or vents. They are often due to equipment leaks, evaporative processes, and windblown disturbances.

*Context: First Bali Breakfast ( 12 April 2008) discussed Adaptation and Development; this is the key challenge for many of our client countries - we will help those who cannot be fully protected from the adverse effects of changes in the climate. Todays discussion focuses on an instrument of MITIGATION, or what we can do about preventing or slowing down climate change, by reducing the emissions of human-induced greenhouse gases. There is growing consensus that we need to act on this. This morning we will talk specifically about one of the instruments available to us, carbon markets, and why they are important to you.