Carbon Trading Overview

7/31/2019 Carbon Trading Overview

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Howard Jeandenis


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The Speaker

Kyoto, past and present

Basics of Carbon Trading

Geopolitical Factors and Impact

Is carbon trading green?

Outlook for the Industry

Conclusion


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BS in Economics-Finance, MBA in GlobalBusiness Bentley U.

Banking, Finance, commodities exp.

Part of a team which established a U.S. Carbon

trading desk

Founded Green Competitive Advantage LLC


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UNFCC creates Kyoto Protocol

Why? Growing consensus that greenhouse

gases were caused by human activity

Sets binding targets for industrialized countries

181 Countries ratified this agreement


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Commit to reduce 5% below 1990 levels

37 Industrialized countries commit

(whom represent 64% of global emissions)

First Kyoto Commitment Period, 2008 2012

(The United States did not ratify/commit)


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Name Abbreviation Global WarmingPotential

% of totalemissions

Carbon dioxide C02 1 77%

Methane CH4 21 14%

Nitrous Oxide N20 310 8%

SulfurHexafluoride

SF6 23,900


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Greenhouse gases trap heat in atmosphere

Atmospheric C02 content has risen from pre-industrial to post-industrial drastically

Unknown variables future temp increases,atmospheric concentrations, local andinternational effects, damages and costs

We must do something about this!


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Carbon emissions Trading

Clean development mechanism (CDM)

Joint Implementation


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Program to create projects in developingcountries

3,500 Projects worldwide

Annex 1 entity finances the project while the

Non-annex performs the project


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% of Projects

AsiaLatin America

Africa

East Europe


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Reforestation

Waste Handling

Alternative Energy

Fugitive Emissions from Fuels

Agricultural Processes

Energy Efficiency

Industrial (N20, and HFC)


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Cap and Trade

Emissions Allowances and Offsets

EU ETS, Japan, Canada, Australia


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Identify Sectors

Determine total emissions and sources

Issue Allowances (offset provision)

Companies abate, trade, or hold

The cap is lowered in subsequent periods(making allowances scarcer and forcing

reductions) Assess the results


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Permit to emit one metric ton of CO2e

A tradable environmental commodity

Assigns an economic value to pollution

Proposed solution to offset climate change?


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Regulator

Emitter

Bank

Trader


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Comprehensive Cap and Trade

Covers 27 Member States

Cap was 2.2 bn tCO2/year (covers 46%emissions)

Sectors Power and Heat, refineries, metals,minerals, pulp and paper


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Dependence on Legislation (compliance)

Issues (additionality, over-allocation, etc..)

Voluntary Market


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Main drivers - weather, fuel prices, economicgrowth

Policy and Regulation Issues

The price of carbon must be sufficiently high to

encourage companies to switch to cleantechnologies


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$0.00

$5.00

$10.00

$15.00

$20.00$25.00

$30.00

$35.00

Dec-04

Jun-05

Dec-05

Jun-06

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

Dec-10

Jun-11

Dec-11

EUA Price

EUA Price


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Liebermann Warner Bill

AB 32 Law passes, Low carbon fuel standard

Pre-compliance period anticipating a Law


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Pre-compliance activity

Regional greenhouse gas initiative

Midwestern greenhouse gas accord

Western Climate Initiative


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Strong support by democratic candidates in2008, but this slowed due to Senate opposition

National Carbon Law never passed

EPA


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Source % of total emissions

Electricity and Heat 43%

Industry and Transportation 29%

Forestry 20%

Waste 2.5%

Agriculture 5.5%


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Voluntary, 400 Members, cover 6 major ghgs

Commit to 6% reductions by 2010

Price Trend (highest) $7.50 - $0.10 (lowest)

Due to inactivity and controversy Closed inJuly 2010, now defunct


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Cap and Trade starts in January 2012

North American participants (U.S. andCanada)

Size is half of the EU-ETS (focus on California) Includes nat gas + liquid transportation fuels

1st comp. period 700 million tons/year

2nd comp. period 1.4 billion tons/year


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Abate emissions internally

Buy Surplus emissions allowances

Buy CERs offsets

Pay high penalty for non-compliance


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Emissions

Cap02468

10121416

Emissions

Cap


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IPCC 1988

UNFCC 1992

Kyoto Protocol 1997

First Emissions trading Scheme 2005

U.S. Carbon Law rejected 2008-2009

Kyoto Commitment Period 2008 - 2012


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Emissions Levels 1995 -2005

Emissions during first Kyoto Period

Analysis of Causes: Recession, abatementthrough sustainability, new technologies..


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330

340

350

360

370

380

390

400

1990 2000 2001 2003 2011

C02 (ppm)

C02 (ppm)


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(US) Burning fossil fuels costs $120Billion/year in health care for prematuredeaths caused by air pollution

Kyoto targets lead to average rises of 26% inelectricity prices in Italy, UK, Germany, Spain


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Country % of GDP Absolute Euros

Germany -0.8% -18,000,000,000

Spain -3.1% -26,000,000,000

Italy -2.1% -27,000,000,000

United Kingdom -1.1% -22,000,000,000


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Effectiveness of reductions requirecollaboration

President Bush vs. the world

Bali Action Plan and Roadmap

Will developing countries (BRIC) emissionsswamp global emissions efforts?


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High level talks in 06- 07

Called discussion of high emitting nations

Meetings in Hawaii Jan 07, Paris Apr 07

End result No agreement on concrete targets,focus was on cutting trade barriers to cleantechnologies


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Inconvenient Truth Gore

Clinton Foundation LEED Platinum

International Green Superstar Gore

Clinton Global Initiative - Clinton


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Change we can believe in

Announced Energy, Climate change and

Environment Plan

One million advanced vehicles by 2015

Obama Announced that EPA wouldimplement GHG reduction program in 2013


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New Fuel economy standards causing onaverage $3,000 savings per consumer

1,000 miles of scenic rivers and millions ofacres of wilderness preserved by OmnibusPublic Lands Act


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9 Billion investment in clean energy

1/3 reduction in Oil imports by 2025

Electricity from Clean sources

increase from 40% to 80% by 2033


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Coal States (Unless CCS)

Oil and Gas (want their subsidies)

Climate Change Deniers

Proponents of other social causes


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EU committed, seeks action from others

Canada follows U.S., has a trading scheme,

significant source of emissions (tar sands)

U.S. unwilling to ratify protocol but

increasingly active, waiting on China


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Japan- committed, however not excited aboutpost Kyoto without U.S./China

G77 Developing countries are active butreluctant to compromise their growth

BRIC (Brazil/Russia/India/China) Veryactive but have their issues


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Additionality is controversial

Results

Environmental impact of projects

Footprint of the participants

Yes??/No????


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The COP (Conference of Parties) announcedlong term collaboration on emissionsreductions

NAMAs (nationally appropriate mitigationactions)

REDD (Reductions emissions fromdeforestation and forest degradation)


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UN Secretary Ban ki moon A comprehensivelegally binding agreement could be out ofreach

Xie Zhenhua (negotiator from China) wasstrategically coy

Many parties were talking of delaying anagreement until 2020


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Green Climate fund was discussed, this wouldprovide support to developing countries

GCF could be key as it attempts to mobilize 100billion in funds by 2020

Hopes for continuation of Protocol are in doubt


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Melting of Ice Glaciers and Ice Sheets inGreenland and Antarctica

Low level coastal regions at risk Vietnam,Bangladesh, Tuvalu, India, china, Vanuatu,Philippines, Indonesia


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Sea Level Rise projected to increase from 20thcentury rate (15-20 centimeters/year)

Warming Ocean, average global temp to riseabout 4 degrees by 2100

Reduced Albedo leading to advanced solarradiation absorption


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Ocean Acidification

Marine ecosystems at risk - 1,000 of species

need calcium carbonate

Atmospheric CO2 concentrations need to stay

less than 450ppm


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Global Carbon Price is clouded in uncertainty

There is not enough investment from

Bankers, Traders

Renewable Energy is becoming new focus

Carbon Tax is an alternative


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Post Kyoto Period is coming

Investors are looking for strategies that drive

revenues instead of adding costs to doingbusiness

Sustainability in the workplace


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Howard Jeandenis

Green Competitive Advantage LLC

www.greenca.org

Documents

Carbon Trading Overview