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Carbon Trading: Prospects and Drivers Kristian Tangen, Point Carbon IETA-seminar Bonn

Carbon Trading: Prospects and Drivers Kristian Tangen, Point Carbon IETA-seminar Bonn June 10 2003. Carbon Market Analyst F orecasts and market reports Carbon Market Quarterly The broader picture Country Profiles Ranking of JI hosts Carbon Market Projects

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Carbon Trading: Prospects and Drivers Kristian Tangen, Point Carbon IETA-seminar Bonn

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  1. Carbon Trading: Prospects and Drivers Kristian Tangen, Point Carbon IETA-seminar Bonn June 10 2003

  2. Carbon Market Analyst Forecasts and market reports Carbon Market Quarterly The broader picture Country Profiles Ranking of JI hosts Carbon Market Projects Tailor-made package for the CDM & JI Markets Carbon Market News Free daily newsletter Carbon Market Europe Free weekly newsletter CDM Monitor Free Monthly service Carbon Transaction Database World’s most comprehensive >400 transactions, 400 MtCO2e Trading Systems Database With IETA Structural price-model Simulation of policy scenarios Monte Carlo-simulations Parametric sensitivity studies Expert Networks Polls Products and tools Products Analytical tools See www.pointcarbon.com

  3. A fragmented market • Not ONE market: • Domestic schemes • Project-based programs • Voluntary programs • Not ONE commodity: • Payment, risk-sharing • Standardisation: only in domestic schemes • Not ONE price

  4. Trends 2002-2003 • Focus of attention shifting towards Europe • On-going UK, Danish and Dutch programs • Planned EU ETS directive • First trade in EU allowances February 2003 • Volumes in domestic schemes dwarfed by CDM/JI • But, how much will be offered to the market, and when? • Focus on projects compatible with Kyoto rules • CDM/JI • First ”clean” AAU-deal in December 2002

  5. No. Transactions 1996-2002

  6. Traded Volumes 1996-2003

  7. Future: Political drivers • Russian ratification • Increased Japanese demand • (Canada) • EU ETS Directive • Creates a large market from 2005 • EU JI/CDM Directive • No sinks or large hydro? • Ceilings (6%)? • Effects on the CER-market • CDM Procedures

  8. EU ETS: Current prices • Bids and offers, ref. Carbon Markets Europe • 5 to 7 €/tCO2 bid-offer spread, firm bids: 5 to 5.5 €/tCO2 • Nuon-Shell deal: probably in the indicative market • Why this price-level? • Maybe: Point Carbon’s September ’02 analysis (5 €/tCO2) • Probably: linked to CER prices (4 to 6 €/tCO2) • The CDM is currently influencing EU prices • The role of CDM, in the longer term? • What would be the volume?

  9. Prospects for the CDM • Developing CDM-projects is time-consuming • After 5 years: relatively few projects • The most advanced have reached the PDD-stadium • Implementation, after EB approval of PDD: 1-2 years • Issuance of CERs: 1 year after implementation • 1-3 years from PDD to CER • Projects that have not yet been developed as PDDs are not likely to start delivering CERs before after 2005 • Current PDDs give an indication of CER-supply by 2005

  10. CER volumes • About 2 MtCO2e to market in 2005 • About 0,1 % of total emissions • Dwarfed by annual variations • CERs to market in 2005: 3.35 MtCO2e

  11. Natural variation, EU15 • Total volume allowances: 1800 MtCO2e • Natural variation: 30 MtCO2e • CERs to market in 2005: 3.35 MtCO2e

  12. The size of the EU market

  13. Conclusions • Market implications for CERs • CER price = Price of EAU • Two prices: approved and not approved by EU • Offset opportunities: Reduced risk in connection with CDM investments • Makes CDM more attractive • But potential depends on procedures...

  14. Thank you for your attention! For more information : kt@pointcarbon.com www.pointcarbon.com

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