Review of Carbon Markets

Transcription

1 UNECE-FAO Timber Committee Market Discussions Review of Carbon Markets Jukka Tissari Forestry Officer, Trade and Marketing Forest Products Service FAO, Rome 12 Oct Geneva

2 Contents 1. COP-15 outcomes 2. Who moved carbon in 2009? 3. Forest carbon 4. Main factors for the future

3 COP-15 Outcomes Wider recognition of forests in mitigation of climate change, funding pledges to kick-start REDD+ Mandate to: review data on Harvested Wood Products (HWPs) work on additional accounting methodologies in Land-use, Landuse Change and Forestry (LULUCF) work on the expanded scope for CDM The most important part of work is the new rules governing carbon accounting on forest management, which would increase the offsets from forests available to Annex 1 countries of the KP

4 How is Forestry Negotiated under UNFCCC? Forestry was the sole sector that was specifically addressed in the Copenhagen Accord Discussions on REDD-plus focus on two major aspects: 1. Policy approaches and positive incentives to address the broad architecture of a REDD-plus instrument under UNFCCC. 2. Methodological issues: methods for measurement, verification and reporting (MRV) and method for setting reference scenarios. Forestry Issues under UNFCCC Structure Policy Instruments Convention Bodies Subsidiary bodies Ad-hoc bodies UNFCCC COP SBI SBSTA REDD+ AWG-LCA methodological REDD+ issues policy approaches and positive incentives ADAPTATION Kyoto Protocol CMP AWG-KP LULUCF CDM Issues most relevant to ECE members: 1. ECE member commitments 2. Expanding the scope of CDM 3. Reference levels and accounting rules of forest mgmt 4. HWPs

5 REDD+ defined but not yet agreed Scope for REDD+ defined: reducing emissions from deforestation & forest degradation; sustainable management of forest; conservation of forest carbon stocks; enhancement of forest carbon stocks. BUT, REDD+ cannot be agreed before further commitments under UNFCCC, and substance of second commitment period for Kyoto Protocol are agreed Countries took a fast-track action: established REDD+ Partnership Agreement (May 2010), to accelerate REDD+ pilot activities in the field

6 Emission reduction targets announced by main countries after COP-15 (31 January 2010) 55 countries, accounting for 78% of global emissions from energy use, formally submitted their national targets to cut and limit GHGs by 2020 by the deadline. Developed country Announced target Comments United States 17% below % below 1990 European Union 20/30% below % condit. to global agreement Japan 25% below 1990 Canada 17% below % below 1990 Russia 15-25% below 1990 Australia 5-25% below % above 1990 New Zealand 10-20% below 1990 Switzerland 20/30% below 1990 Norway 30-40% below 1990 Some pledges were conditional to the success of COP-15, while others showed a varied degree of ambition, announcements and timeframes. Developing country Announced targets Comments China 40-45% cut in emissions/gdp Brazil 36-39% below 2020 below 2020 BAU scenario South Korea 30% below 2020 below 2020 BAU scenario Indonesia 26% below 2020 below 2020 BAU scenario India 20-25% cut in emissions/gdp

7 Who Moved Most Carbon in 2009?

8 Who Moved Most Carbon in 2009? Market segment Project-based transactions subtotal: Volume million tons CO 2 e Value million $ Volume million tons CO 2 e Value million $ 429 6, ,032 - Primary CDM 404 6, ,678 - JI Voluntary markets subtotal: OTC CCX Secondary CDM 1,072 26,277 1,055 17,543 Allowances markets subtotal: 3, ,183 7, ,773 - EU-ETS 3, ,526 6, ,474 - NSW RGGI ,667 - AAUs market ,003 - Alberta s SGER Total carbon markets 4, ,143 8, ,735 - Global carbon market moved 8.7 bill. t CO 2 e, worth $ billion - EU-ETS is the flagship: $ billion - CDM: $ 20.2 billion (prim. Project supply halved in a year) - Voluntary markets down: $ 387 million (OTC + CCX) - RGGI grew fast

9 Carbon prices Freefall until Feb Slow recovery, Flopenhagen dip-down Recovery up to April 2010 Reason: the financial strain caused by the slump in the global economy - more than the supply and demand dynamics Sellers: heavy industries falling below their emission caps, having excess supply of allowances Buyers: energy sector firms seeking compliance per tco 2 e June 2010 A pril 2010 February 2010 December 2009 October 2009 A ugust 2009 June 2009 A pril 2009 February 2009 December 2008 October 2008 A ugust 2008 Daily closing price spot EUA Daily closing price spot CER

10 What is the Future for Forest Carbon? Voluntary carbon markets (VCM): at least 434 forest projects have been identified up to date in all types of carbon markets in VCM a 2008 base of 226 forest-based projects in 40 countries a combined transaction volume estimated at 20.8 million tons of CO 2 equivalent in the past 20 years Clean Development Mechanism (CDM): has approved 17 forest carbon projects as of mid-2010, doubling from 2009 only represent 0.6% of all CDM projects and thus far have not issued any carbon credits to the market expansion of CDM scope (REDD, A/R, re-vegetation, wetland restoration, agriculture: grazing/crop lands, soil C mgmt) US cap-and-trade scheme: up to one billion tons of CO 2 equivalent of land-use and forestry offsets could be deployed both domestically and in tropical countries Forest projects in other cap-and-trade schemes / sub-regional climate initiatives

11 CDM forestry projects registered since Sept Title and year registered Reforestation of croplands and grasslands in low income communities of Paraguarí Department, 2009 Afforestation and Reforestation on Degraded Lands in Northwest Sichuan, 2009 Reforestation, sustainable production and carbon sequestration project in José Ignacio Távara s dry forest, Piura, 2009 Humbo Ethiopia Assisted Natural Regeneration Project, 2009 Assisted Natural Regeneration of Degraded Lands in Albania, 2010 The International Small Group and Tree Planting Program (TIST), Tamil Nadu, 2010 Forestry Project for the Basin of the Chinchiná River, an Environmental and Productive Alternative for the City and the Region, 2010 Nerquihue Small-Scale CDM Afforestation Project using Mycorrhizal Inoculation in Chile, 2010 Host Parties Other Reduction in Parties CO 2 e Paraguay Japan 1523 China Peru Ethiopia Canada Albania Italy India UK 3594 Colombia Chile UK 9292 Afforestation/ Reforestation Developed in partneships Small projects and reduction potentials

12 Why large corporate off-setters look favourably on forest projects in voluntary markets? More activities being eligible under VCM than in compliance markets: Afforestation and Reforestation (AR), Reduced Emissions from Deforestation and Forest Degradation (and more broadly, REDD+), Improved Forest Management (IFM), and Carbon stocks associated with Harvested Wood Products (HWP). Positive co-benefits for community livelihoods, biodiversity conservation, etc. Forest carbon credits can be certified against recognized standards Good for CSR

13 Main Factors Shaping Forest Carbon Markets Factors in Immediate Future COP-16 Cancun Main challenges Interim COP Prepare ground for agreement in COP-17 South Africa Offsets from forest mgmt in developed countries, CDM US cap-and-trade system postponed to Kick-start REDD+: 100 bill. $ yr by 2020: potential to become the overarching platform of forest-based carbon Passing bill through the legislature, water-down effect Stagnation (Kerry-Lieberman bill aka American Power Act) White House Big money, strings attached Governance, local capacities, CO 2 tenure 100 b$=1/4 forest prod. export / yr. Partnerships, not under UNFCCC

14 Possible Elements of the Cancun Outcome (06 Oct. 2010) 1. Shared vision on global long-term goals and cooperative actions for emission reductions 2. Adaptation framework and institutional arrangement, approach to address loss and damage 3. Mitigation economy-wide emission reduction commitments or actions by developed countries MRV for developed countries commitments or actions nationally appropriate mitigation action (NAMAs) of developing countries and associated support MRV for developing countries; NAMAs readiness phases of activities that contribute to mitigation actions in forest sector (REDD+) approaches to enhance the cost-effectiveness of, and to promote, mitigation actions, including using markets 4. Finance, technology and capacity building reporting on fast-start finance for new fund, mobilization of long-term finance, MRV technology mechanism, Climate Technology Centre and Network