Julie Godin, Carbon Finance Specialist Carbon Finance Unit April, 2009

Transcription

1 Overview of the Compliance and Voluntary Carbon Markets Julie Godin, Carbon Finance Specialist Carbon Finance Unit April, 2009

2 Overview of the Compliance and Voluntary Carbon Markets Global Carbon Market Size, volume, trends Compliance Market EU ETS, CDM Voluntary Market Standards, trends 2

3 Carbon markets surpassed US$130billion in 2008 Allowance markets (US$ million) Project-based transactions (US$ million) Assigned Amount Units 180 EU Emissions Trading Scheme 100, (twice over 2007) Regional GHG Initiative 240 New South Wales Certificates 180 JI 700+ CDM 6,000 Secondary CDM 25,600 Voluntary market in 2008 niche segments (US$ million) Chicago Climate Exchange 310 Voluntary & retail 500? Source: WB State and Trends of the Carbon Market 2009, forthcoming, Point Carbon, Reuter 3

4 Carbon market reality: A fast-growing market dominated by EU Emissions Trading Scheme (EU-ETS) ETS) 160 annual value of transactions (US$ billion) * EU ETS other allowance markets Secondary CDM Primary CDM other project markets * Preliminary estimate; EU ETS figure includes over-the-counter (OTC) transactions of EU Allowances and derivatives cleared through exchanges 4

5 The project-based segment of the carbon market transaction ns annual vol lume of pro oject-based (MtCO 2 e) Voluntary Other compliance JI CDM 2008 price: ~$14.7/tCO2e

6 Compliance Market 6

7 EU ETS EU ETS: Centre-piece of EU s strategy to meet Kyoto target Phase I (pilot): Phase II: (matches Kyoto Protocol commitment period) EU Allowances to 12,000 installations in the 25 EU Countries in key sectors (power plants greater than 15 MW; iron and steel; cement ) Represents ~ 30% of all EU greenhouse gas emissions Allows importing CDM and JI credits to the system; thus providing incentive for EU private entities to invest in CDM and JI Phase III: post 2012 is under development (part of EU climate and energy package) Several EU governments (e.g. Spain, the Netherlands, Italy, Denmark) have set-aside funding for purchase of CDM and JI credits EU position post-2012: proposed unilateral target -20% below 1990 by 2020 If International Agreement: EU target to go to -30% below 1990 levels by 2020 EU-ETS to continue to be centre-piece Continuation of recognition of CDM credits (with limitations) Also domestic targets for greater renewable energy; energy efficiency and CCS 7

8 CDM Statistics Registered CDM Projects (UNFCCC - p// / ) 1549 Registered Projects (~ 60% are renewable energy) Issued Certified Emission Reductions (CERs): million tco2e (~ 12% from renewable energy) CDM pipeline (UNEP/RISOE - Number of Projects: 4541 Expected CERs: 2.9 billion tco2e by

9 CDM Statistics CDM Pipeline (UNEP/RISOE Supply-Side EE 10% CH4 Reduction, Cement and Coal mine/bed 16% Fuel Switch 3% Demand-Side EE 5% Afforestation and Reforestation 1% Transport 0% HFCs, PFCs and N2O 2% Renewables 63% Number (%) of CDM projects in each category of types 9

10 CDM Statistics CDM Pipeline (UNEP/RISOE Latin America 19% Middle-East 1% Africa 2% Europe and Central Asia 1% Asia and Pacific 77% Number (%) of CDM projects by region 10

11 Bank Work on Methodologies and Business Models CDM methodologies WB Total WB Approved for forest projects % Approved for all other project types % * Methodologies are proposed by project developers (bottom-up approach) WB work on CDM modalities General definition of baseline and monitoring methodologies Definition of validation and verification services Programs of Activities t under the CDM CDM support for demand side energy efficiency Next phase Simplification, standardization of methodologies Methodologies for complex, underserved sectors (transport, urban, ) Synergy projects (Carbon Finance, Montreal Protocol, GEF, Adaptation Fund) Avoided deforestation (FCPF) Sector and program approaches (CPF) Carbon finance sector strategies 11

12 Voluntary Carbon Markets 12

13 Voluntary Carbon Markets Market Size and Price Source: Ecosystem Marketplace & New Carbon Finance s State of the Voluntary Carbon Markets report; 2008 projection: New Carbon Finance 13

14 Voluntary Carbon Markets: Characteristics Voluntary Carbon Markets: lack of regulatory drivers. Created by individuals id and companies that t are offsetting/reducing i their ghg emissions (e.g., corporate social responsibility (CSR), carbon neutral commitment). Price : variable, key factors: project types & standards. Transactions by location (2007)*: Asia (39 %), North America (27 %), Europe/Russia (13 % ). Project types (2007)*: renewable energy (31%), energy efficiency (18%), methane destruction (16%), forestry yprojects (18%). *per volume of transactions, source: Ecosystem Marketplace. State of the voluntary Market

15 Voluntary Carbon Markets Price per type of project Voluntary Carbon Index, $ per project type (July, Dec 08) $10 $8 $6 $8.90 $8.00 $6.90 $6.10 $5.70 $4.50 $4 $2 $0 Renewable Methane EE/Fuel Agricultural Energy Switch Soil Forestry Industrial Gas Source: Ecosystem Marketplace & New Carbon Finance s State of the Voluntary Carbon Markets report; 2008 projection: New Carbon Finance 15

16 Voluntary Carbon Markets Standards standards Description Co- benefits start date Chicago Climate Exchange (CCX) California Climate Action Registry (CCAR) Voluntary Carbon standard (VCS) Members make a legally binding emission reductions commitment. Internal Cap and trade system. Offsets accepted: methane, ODS destruction, renewable energy, energy efficiency, fuel switch. Etc Voluntary ghg reductions registry. Sets standards and protocols. Type of offsets (forestry, landfill) Standard for offsets projects and carbon credits, closely follows Kyoto Protocol s CDM requirements. no 2003 no First protocol 2005 no 2008, registry set in 2008 Gold Standard Standard for offsets projects and carbon credits yes 2006 launch, 2007 (first (VER) (limited to renewable energy and energy efficiency) project verified) ISO Standard program for emissions accounting, reporting ghg projects, carbon credits. no Protocol available since

17 Voluntary Carbon Markets: Key differences between standards Stakeholders, proponents Project cycle Third party validation/verification Allowance/project-based transactions Environmental and social benefits Types of project accepted Demonstration of additionality Process for approval of new projects/new methodologies Registry systems 17

18 40% Trends under the Voluntary Carbon Markets 35% 30% 29% 31% 2007 July to Dec 08 20% 10% 0% VCS CCAR 12% 11% 9% 9% 7% 7% 5% 4% 3% 2% 2% 3% 3% 2% 0% 0.4% 1% Gold Standard VER+ C CCX Social Carbon CCB ISO other no Source: Ecosystem Marketplace & New Carbon Finance s State of the Voluntary Carbon Markets report; 2008 projection: New Carbon Finance none 18

19 Voluntary Carbon Market: Emissions tracking system Registries: The Climate Registry CCAR Climate Action Registry APX (VCS, Gold Standard etc.) TUV SUD s Blue Registry CCX Caisse des Depots VCS Registry System (links APX, Caisse des Depots, TZ1) Etc. Objectif: Create a serial number for each credit Avoid double counting Track ownership 19

20 Thank you 20

21 References World Bank Carbon Finance website: Website of the UNFCCC: and Website (UNEP, Risø Centre): CDM (and JI) pipeline overview Website Ecosystem MarketPlace: Overview of the Voluntary Market 21

22 Voluntary Carbon Markets Impact of the Financial Crisis Source: Ecosystem Marketplace & New Carbon Finance s State of the Voluntary Carbon Markets report; 2008 projection: New Carbon Finance 22

23 Pre-Compliance Markets Regional Schemes in North America Pre-Compliance Markets (Regional Schemes in North America) California Climate Action Registry (CCAR): Voluntary ghg reductions registry. Sets standards and protocols. Consistent with Global Warming Solutions Act (AB 32) (i.e., reach 1990 emissions level by 2020). Regional GHG Initiative (RGGI): Formed by 10 states on the East coast, cap-and-trade with auction, first apply to power plants in member states. Western Climate Initiative (WCI): Includes California, New Mexico, Oregon, Washington, Arizona, Utah, British Columbia, Manitoba, Quebec. States/provinces have committed to a 15% GHG emission reductions goal below a 2005 baseline by