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Providing critical insights into energy and environmental markets www.pointcarbon.com California’s compliance times 14 th annual EPA LMOP Conference Baltimore, Md January 19, 2011 Olga Chistyakova

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Page 1: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

California’s compliance times

14th annual EPA LMOP Conference Baltimore, Md

January 19, 2011

Olga Chistyakova

Page 2: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

Point Carbon: a Market Intelligence Provider

• News• Conferences • Training courses

• Leading provider of News, Analysis and Advisory services to global energy and carbon markets

• 180+ employees. Oslo (HQ), London, Kiev,Tokyo, Washington DC

• More than 15,000 subscribers in 150 domains

• Advisory services • Trading Analytics & Research• Comprehensive data on carbon

and energy markets

Page 3: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

Global carbon market growth

Page 4: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com- CAR was the largest segment of the market

- Low volumes and low prices

Page 5: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

Source: Point Carbon CPM NA Sept 2010

- Pre-compliance overall made up close to 2/3 of the traded US Market- CAR was pre-compliance driven

Page 6: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

• 2012-2020: 8% of entity’s emissions per year• 214 million tons CO2e from US-based projects • recommends Mexico (non-ODS), Canada for later

• 4 domestic project types• U.S. ozone depleting substances• Urban forest (forest buffer account)• U.S. forest (creation of forest buffer account)• Livestock manure (digesters)

• Potential international sources: Sectoral credits (TBD) • Requires approval by ARB• REDD by 2015, first sectors from existing partnerships with Acre, Brazil &

Chiapas, Mexico• 20% of 214 Mt in phase 1 and 2, 40% in phase 3

• Projects start date: Jan 1, 2007 (may differ for non-ARB issued credits)

California offsets: the basics

Page 7: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

California offsets: early action• Jan 1, 2005 - Dec 31, 2014• Project start date: prior to Jan 1, 2012• 4 project types from U.S. based projected

• U.S. ozone depleting substances (CAR Ver. 1.0)• Urban forest (forest buffer account) (CAR Ver. 1.0-1.1)• U.S. forest (CAR 2.1 or 3.0-3.2)• Livestock manure (digesters) (CAR Ver 1.0-3.0)

Page 8: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

NA offset price changes in 2010

Prices shown represent average bid/offer and do not imply transactions.

0

2

4

6

8

10

12

14

Pric

e U

S$

CAR Natl LFG V09

CAR Cal Forestry V09CAR Natl Forestry V09CAR ODS V10-11

CAR AB32 Compliant V05-14CA Allowances (CCAs)

CCA/CRT spread $3.50/t

Page 9: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

Who is buying US offsets?

Emitters (utilities, industrials) have yet to fully enter the market

Source: Point Carbon Survey

Page 10: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

25,931

1,735,436

4,100,413

186,289

3,513,671

764,358 Coal Mine Methane

Forestry

Landfill Gas

Livestock methane

Ozone Depleting SubstancesNitric Acid N2O

948,659 US-sourced

Issued CRTs to date: 10.3 MtIssued CA eligible CRTs: 2.8 Mt

Page 11: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

2005 – 2014 CRT Supply

Total: 27 million CRTs(significant ODS supply potential untapped)

Agricultural Methane

10,000,000

Forestry 12,000,000

ODS 5,000,000

Page 12: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

CA strategic reserve tightens cap post-2015

Page 13: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

Fair Price Assessment: California

Year 2012 2013 2014 2015 2016 2017 2018 2019 2020

Price $10 $11 $11 $13 $19 $30 $47 $64 $82

Page 14: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

WCI participants

BC MB*

SK

ON

CA UT

AZ NM

OR

WA

ID

NVCO

AK

KS WCI member

WCI member –unlikely to join market for time being

QC

WY

MT

Canada

Mexico

USA

Market participants Round 1 (2012 start)British Columbia (BC) California (CA) New Mexico (NM) Ontario (ON) Quebec (QC)

Round 2 (2015 start)Oregon (OR)Washington (WA)Manitoba (MB) Montana (MT)

Other WCI participants:Arizona (AZ)Utah (UT)

SO

TM

CH

NLCO

BC

AB

Page 15: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

Conclusions• CRT-based offset supply not sufficient• Additional protocols to be announced in February will aim to provide

necessary supply• Voluntary markets can provide carbon revenue at $1.50-$3.00/t• Allowance price to range between $10-82 from 2012-2020

• Offset prices to create trade at a spread

Page 16: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

Thank You!

[email protected] ext. 269

Page 17: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

On behalf of Molly Peters-Stanley

Ecosystem Marketplace

[email protected]

Page 18: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

Non pre-compliance, LFG credits purchases are King

25%

11%

9%

7%7%

5%

4%

4%

4%

3%

3%

3%3%

2%

2%1%

7%

Landfill

Affor/Refor

Wind

Run-of-river

Avoid. Def.

Livestock

EE & Fuelswitch

Coal mine

Geo-seq

Forest Mgmt

Allowance

Ag Soil

RE - all others

Wastewater

Agro-forestry

Remaining - all others

Not specified

Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace

Page 19: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

U.S. leads in pre-compliance offset purchases

49%

41%

4%

2%1% 1% 2%

US

EU (incl. Russia)

AU/NZ

Asia

Canada

Latin America

Remaining

Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace

Page 20: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

Discounting for Pre-compliance, US leads in LFG credit purchases

Customer Location, % of 10.2 MtCO2

68%

29%

1% 1% 1%

US

EU

Other

AU / NZ

Canada

Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace

Page 21: California’s compliance times€¦ · Olga Chistyakova. Providing critical insights into energy and environmental markets Point Carbon: a Market Intelligence Provider • News •

Providing critical insights into energy and environmental markets www.pointcarbon.com

Discounting for Pre-compliance, US leads in LFG credit purchases

Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace

Projected Market Growth for the Voluntary Carbon Markets, according to Participants

0

200

400

600

800

1,000

1,200

1,400

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Historic Growth Projected Growth (by 2008 participants)

Projected Growth (by 2007 participants) Projected Growth (by 2009 participants)