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Stock-Take on Market and Compliance Gap as Kyoto Protocol enters into force

Stock-Take on Market and Compliance Gap as Kyoto Protocol enters into force. February 15, 2005. HCC Meeting, Washington DC. Total Value of Carbon Sales (in million U.S.$, nominal). (Jan-May). 2. Main Seller: Asia In percent of volume sold from end 2003 to May 2004. OECD. 10%. Transition.

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Stock-Take on Market and Compliance Gap as Kyoto Protocol enters into force

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  1. Stock-Take on Market and Compliance Gap as Kyoto Protocol enters into force February 15, 2005 HCC Meeting, Washington DC

  2. Total Value of Carbon Sales (in million U.S.$, nominal) (Jan-May) 2

  3. Main Seller: AsiaIn percent of volume sold from end 2003 to May 2004 • OECD • 10% • Transition • Economies • Latin America • 8% • 27% • Africa • 4% • Asia • 51% 3

  4. Main Buyers: Japanese Firms In percent of volume purchased since Jan.2003 • Australia & New • Carbon Finance Business • USA • Canada • Zealand • 3% • 3% • 3% • Other EU • 24% • 3% • Netherlands • 23% • Japan • 41% 4

  5. Current Kyoto gap of Annex II: 620 MtCO2e

  6. Emission Trends 1990-2002 in EU15, Japan and Canada

  7. Projected Gap of Annex II: 945 – 1116 Mt/yr

  8. Current Kyoto gap of EU15: 228 MtCO2e

  9. Current Kyoto gap of EU15: 228 MtCO2e

  10. Current Kyoto gap of EU15: 228 MtCO2e

  11. Current Kyoto gap of EU15: 228 MtCO2e

  12. Projected Gap of Annex II: 945 – 1116 Mt/yr

  13. Current Surplus of Transition Economies: 2,180 MtCO2e

  14. Explaining the Special Case of the Transition Economies 14

  15. OECD Compliance Gap • Ratifying OECD cumulative target reductions will be 5-5.5 billion tons of carbon dioxide below 1990 levels by 2012 based on their Kyoto obligations • If half emissions reductions are achieved domestically the “compliance gap” to be met through trade with developing countries and transition economies through 2012 would be 2.5 billion tons – 10 times current carbon purchase contracts Current gap over domestic action suggests need for > 3 billion t/CO2e • Carbon is currently selling for about $5 ton of carbon dioxide, but likely to increase to about $10 ton • At a selling price of $5-$10 per ton carbon payments to developing countries and EITs between now and 2012, trade value will be between $12.5 billion and $25 billion

  16. Sources of Supply to fill the Compliance Gap • Carbon contracts with developing countries (Clean Development Mechanism) today are <200 MT for 2012 delivery. • Its too late for conventional investment projects to more than double this amount. • Emissions trading with EITs (Assigned Amount Units) has to be at least 2 billion tons (the EITs have the potential to trade about 7 billion tons because their emissions are significantly below their allocation under the KP due to the economic downturn) • “Greening” the AAUs to OECD Sovereign buyers will be essential - implies about $30 billion of new investment over the next 4-5 years • The balance of about 1 billion tons will probably be made up of trades involving industrial gases: HFC-23 and N2O (primarily with China – CDM) where “greening” is also required

  17. Bank Carbon Finance Business Programs Representing Sellers • Economies in Transition and Greening of AAU Trade • Green Investment Schemes designed for Bulgaria and planned for Czech and Slovak Republics and Latvia in collaboration with commercial banks • Dialogue beginning with Russia and Ukraine • China Industrial Gases Greening • Partnership with China to assure buyers of the sustainable development benefits of trade in HFC23 that is vital to supply of compliance grade carbon assets to ratifying OECD. Trade value is $3 billion plus • Argentina – request for Bank assistance to develop and present high quality carbon assets to global market • 20 developing countries supported under CF-Assist to develop carbon assets for sale to others at/around Carbon Expo. Bank as buyer of last resort

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