an introduction to carbon markets
TRANSCRIPT
AN INTRODUCTION TO CARBON MARKETS
IATA & IETA WORKSHOP, NAIROBI
14-15 FEBRUARY 2017
WWW.CLIMATECARE.ORG
CLIMATECARE
• Based in Nairobi, UK and India• Works with corporate and government partners to develop and
implement their carbon management strategies • Develops carbon reduction projects, specialising in community energy
access programmes that deliver sustainable development alongside emission reductions
• IATA’s carbon offset partner for the IATA Voluntary Offset Program • Current Co-Chair of ICROA – the international voluntary carbon market
industry alliance promoting best practices • Strategic Partners of Gold Standard for Global Goals
WHAT IS A CARBON CREDIT?
A carbon credit is a tradeable instrument which represents either:
• A permit which gives the holder the right to emit one tonne of carbon dioxide or equivalent greenhouse gas (tCO2e) into the atmosphere
or
• A certificate from a project that represents the removal or avoidance of one 1 tCO2e from the atmosphere
THE CARBON MARKETS
As well as 2 distinct carbon credit types (Permits and Project-based credits), there are 2 distinct types of carbon market.
ComplianceMarkets for carbon credits created by the need to comply with a regulatory act. In a Cap-and-Trade emissions reductions market, actors buy and sell carbon credits to comply with the cap or limit imposed on their emissions.
VoluntaryCarbon market that functions outside of compliance markets. Enabling businesses, governments, NGOs, and individuals to voluntarily offset their emissions by purchasing carbon credits.
THE DIFFERENT TYPES OF CARBON CREDITS
Market Compliance Voluntary
Credit Type Permits to Pollute Project- Based Emission Reduction Credits
Project-Based Emission Reduction
CreditsDescription A ‘certificate to pollute’ one
tonne of CO2e. Number issued corresponds to the
emissions cap of the trading scheme
A carbon credit of 1 tonne generated from an
emission reduction project
A carbon credit of 1 tonne generated from an emission reduction
project
Issued by National Governments/Agencies
Certification body recognised by the
Compliance Scheme
e.g. UN Clean Development Mechanism (CDM),
California Climate Action Reserve
Independent certification bodies
e.g Verified Carbon Standard (VCS), Gold
Standard
Examples European Union Allowance (EUA)
Certified Emission Reduction (CER)
Verified Carbon Unit (VCU), Gold Standard
Verified Emission Reductions (GS VER)
CARBON CREDITS FROM PROJECTS
CORSIA will require airlines to offset through project based credits – although the eligible types of projects, project locations and verification standards are still to be determined by ICAO
Common Project Technologies
Source: Ecosystem Marketplace
CARBON CREDIT STANDARDS
Source: Ecosystem Marketplace
CURRENT GLOBAL LANDSCAPE
Source: IBRD/World Bank 2016
MARKET HISTORY
Source: IBRD/World Bank 2016
ICAO projections of the emissions to be offset (left) and the costs of CORSIA (right)
FACTORS AFFECTING FUTURE SUPPLY AND DEMAND
ICAO’S FORECAST DEMAND
Figure 1: ICAO projections of the emissions to be offset (left) and the costs of CORSIA (right)
FACTORS AFFECTING FUTURE SUPPLY AND DEMAND
KEY DECISIONS/ISSUES THAT WILL AFFECT SUPPLY FOR CORSIA
1. What type(s) of carbon credits will be eligible for CORSIA? a) Existing standards: UNFCCC or Voluntary Market credits?b) Will individual projects have to be accredited?
2. What will be the role of project-based carbon credits in the Paris Agreement? a) All countries make reductions under Paris. Can project developers
sell reductions to airlines?3. Will project developers be able to unlock enough carbon finance to
incentivise them to develop new projects or to operate existing projects? a) Developers have to see demand (and often actual contracts) in order
to either develop their project or carry out “carbon asset development”
4. Will the aviation industry take a role pre-2026 to support the carbon market and ensure adequate supply?
