oportunidades y riesgos en los mercados de carbono
DESCRIPTION
lo largo de estas jornadas, expertos nacionales e internacionales en el tema analizan la situación actual, tendencias futuras y principales retos que plantean los esquemas de reducción de emisiones y los mercados de carbono como herramientas en la lucha contra el calentamiento global, especialmente después de la cumbre de Copenhague. Murray Ward participa a esas jornadas con la ponencia "Oportunidades y riesgos en los mercados de Carbono".TRANSCRIPT
CARBON POLICYCARBON POLICYOpportunities and Risks in Carbon MarketsOpportunities and Risks in Carbon Markets
By Murray WardBy Murray Ward
for ABENGOA ZEROEMISSIONS for ABENGOA ZEROEMISSIONS
CARBON TRAININGMadrid, SpainMadrid, Spain
3 February 20103 February 2010GtripleC
www.GtripleC.co.nz
OK, it’s easy to feel a bit glum about the carbon market
Copenhagen Accord Copenhagen Accord …….(what accord?).(what accord?)Weak and nonWeak and non--binding targets by developed countries binding targets by developed countries ––and unclear legal status of the Accordand unclear legal status of the Accord
Two years of technical effort on REDD, CDM reform, Two years of technical effort on REDD, CDM reform, enhanced mechanisms, treatment of CP1 surplus buried enhanced mechanisms, treatment of CP1 surplus buried in [ in [ ……] in ] in ““L documentsL documents””, with unclear process ahead, with unclear process ahead
Domestic ETS schemes falteringDomestic ETS schemes falteringUS cap and trade bill may not go ahead in 2010US cap and trade bill may not go ahead in 2010
High politics in Australia High politics in Australia
Compliance demand weakened by recessionCompliance demand weakened by recession
BUT STEP BACK!
THE ULTIMATE DRIVER FOR CARBON MARKETS ISN’T WHAT
GOVERNMENTS DO (OR NOT)
IT’S CLIMATE CHANGE … AND HOW CARBON MARKETS CAN INFLUENCE
THE INVESTMENTS NEEDED TO DEAL WITH IT
“BIG PICTURE” CONTEXT…which key Heads of State do seem to
agree on (the 2oC version, anyway)
To avoid the worst effects of climate changeTo avoid the worst effects of climate change
Global emissions need to peak within 2 decadesGlobal emissions need to peak within 2 decades
And be halved by 2050And be halved by 2050
Means average global per capita of 2T COMeans average global per capita of 2T CO22ee
““A matter of simple arithmeticA matter of simple arithmetic”” (Lord Stern)(Lord Stern)
Massive global reductions needed in just four Massive global reductions needed in just four decadesdecades
Investment is critical to 2oCIn the coming decade we need to shift trillions of dollars of investment from a (6oC) business-as-usual path to a 450 path. IEA call this “a revolution”....but say it is possible.
Source: IEA WEO2009
Energy “green path” versus “brown”
Source: IEA WEO2009
World energy‐related CO2 emissions
Trillions of dollars of investments
Source: IEA WEO2009
Total global investment for power generation in the 450 Scenario
Supply side and demand side
Source: IEA WEO2009
World energy‐related CO2 emission savings by policy measure in the 450 Scenario
Incremental cf Reference
In China, for example
Source: IEA WEO2009
Energy‐related CO2 emission savings by policy measure in the 450 Scenario
Incremental cf Reference
...and in power generation in China
Source: IEA WEO2009
Power generation capacity in the 450 Scenario, GW
What does a 1 GW increase mean?Noting increase from 2007 in “wind and other renewables ”:• in China, ~ 170 GW by 2020, 375 GW by 2030• In India, ~ 30 GW by 2020, 55 GW by 2030
Size, MW # Plants for 1 GW
Coal 1000 1 Gas 500 2Nuclear 1000 1Hydro - Small scale 10 100Wind - on shore 50 20 Wind - off shore 300 3Biomass-large 200 5Biomass-small 10 100 Solar without thermal storage 50 20Solar with thermal storage 15 67
The 2T per person challenge
THE POINT OF THESE “CHALLENGE”SLIDES IN THE CONTEXT OF A TALK
ON CARBON MARKETS … IS
HOW CAN CARBON MARKETS INFLUENCE THE CHANGE FROM
BUSINESS AS USUAL INVESTMENTS NEEDED … BETTER THAN OTHER
INTERVENTIONS TO CHANGE BAU?
HOW ARE WE DOING?
HOW FAR HAVE WE COME?
FIRST, SOME HISTORYAND FOUNDING THEORY
Carbon trading started with the Kyoto Protocol mechanismsArticle 17: International Emissions TradingArticle 17: International Emissions TradingArticle 6: Joint ImplementationArticle 6: Joint ImplementationArticle 12: The Clean Development MechanismArticle 12: The Clean Development Mechanism
But US SOBut US SO22 Trading Scheme was the modelTrading Scheme was the model
JI and CDM were innovations (and offsets), JI and CDM were innovations (and offsets), but relied on demand created in IET (initially) but relied on demand created in IET (initially)
Why was Emissions Trading Why was Emissions Trading needed?needed?
TradingTrading…….put simply.put simply
LULUCF and the CDM add LULUCF and the CDM add ‘‘creditscredits’’
The mechanics of emissions tradingThe mechanics of emissions tradingWhat are What are ‘‘allowancesallowances’’ and how do they relate to the cap?and how do they relate to the cap?
The mechanics of emissions tradingThe mechanics of emissions tradingEmission Unit Registries and Emission Unit Registries and ““RetiringRetiring”” Units to ComplyUnits to Comply
Domestic implementation of Domestic implementation of international emissions tradinginternational emissions trading
…………in principle anywayin principle anyway
The importance and role of Domestic The importance and role of Domestic Emissions Trading Schemes (DETS)Emissions Trading Schemes (DETS)It is firms and individuals who know their mitigation It is firms and individuals who know their mitigation opportunities and costs opportunities and costs
THAT WAS THE THEORY ANYWAY
DETS as intended and in practice DETS as intended and in practice The The ““architectsarchitects”” of Kyoto expected relatively of Kyoto expected relatively open links between DETS and IETopen links between DETS and IET……and a and a fungible carbon commodityfungible carbon commodityIt mostly hasnIt mostly hasn’’t worked out that wayt worked out that way
Instead different countries are developing their Instead different countries are developing their own units own units …….and are building carbon currency .and are building carbon currency ““wallswalls”” around their DETS jurisdictionsaround their DETS jurisdictions
EU ETS is a key exampleEU ETS is a key exampleBut walls were necessary when US pulled out of But walls were necessary when US pulled out of Kyoto and fundamentally disturbed the demandKyoto and fundamentally disturbed the demand--supply balance in the Kyoto first periodsupply balance in the Kyoto first period
DETS DETS ““walled citieswalled cities””
CDM bridge between different DETS CDM bridge between different DETS
An open international carbon market An open international carbon market
Carbon trading in a postCarbon trading in a post--2012 agreement 2012 agreement
Source: “Architecture of a Global Climate Change Agreement” ( A Briefing Paper of the Breaking the Climate Deadlock initiative)
QUANTITATIVE ELEMENTS that manage emissions and set the basis for a
GLOBAL CARBON MARKET
‘THE BIGGER PICTURE’ ELEMENTS
Unconstrained
FBTs in ICs SNLTs for DCs
IBFCs
Legend: FBTs in ICs Fixed and Binding Targets in Industrialised Countries IBFCs International Bunker Fuel commitments SNLTs in DCs some Sector No‐Lose Targets in some Developing Countries – example sectors: • Electricity Generation • Electricity Transmission & Distribution • Emissions intensive commodities:
(cement, iron and steel, aluminium) • Oil and gas production (gas flaring) • Other?
REDD Reducing Emissions from Deforestation andforest Degradation
IBFCs
OR ?
EXAMPLES OF POSSIBLE ELEMENTS
1) Sectoral ‘policy’ agreements, e.g. • IBFCs (if not under main quantitative ‘deal’) • Electricity sector (e.g. % renewables,
% CCS‐ready coal power plants, etc) • Vehicles sector (e.g. vehicle emissions
intensity standards) • Performance agreements in key emissions
intensive commodity sectors • Commitment to SD‐PAMS in DCs (with
technology and financial support from ICs) • Sustainable Forestry measures , e.g.
REDD, with financial support from ICs (if not under main quantitative ‘deal’)
• Technology R&D cooperation agreements • Cooperative technology diffusion agreements
2) Measures to facilitate adaptation planning and implementation, especially for the most vulnerable populations and ecosystems
3) Financial mechanisms to provide support for adaptation, capacity building and technology deployment
4) Enabling environments • Creating conditions that attract investment • Advancing ‘helpful’ measures in bilateral and
multilateral trade agreements
REDD REDD
OR ?
Enhanced CDM‐type mechanism acts in balance of ‘unconstrained’ space
LOOMING RISKS FOR ETS COMPLIANCE DRIVEN CARBON MARKETS !
MOSTLY ON THE DEMAND SIDE
GAINS cost curves for pre- and post-crisis projectionsAnnex I, 2020 (excl. LULUCF)
-20
0
20
40
60
80
100
120
-35%
-30%
-25%
-20%
-15%
-10%
-5%0%5%
GHG emissions in 2020 relative to 1990(excl. LULUCF)
Mar
gin
al a
bat
emen
t co
sts
[€/t
CO
2eq
]
WEO 2009
WEO 2008
Marginal abatement costs(Carbon price)
-0.1%
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
-35%-30%-25%-20%-15%-10%-5%0%5%
GHG emissions in 2020 relative to 1990 (excl. LULUCF)
Annual
mitgat
ion c
ost
s [%
of 2020 G
DP] WEO 2008
WEO 2009
Total abatement costs
Current pledges Current pledges
CAN’T BASE INSIGHTS AND POLICY DIRECTIONS ON JUST ONE SET OF
MODEL RESULTS… BUT
WEAK TARGETS AND SLOWER ECONOMIES (AND CARRIED OVER SURPLUSES FROM CP1) MEANS
VERY LITTLE DEMAND, AND NEED FOR CONSTRAINTS ON SUPPLY TO MAINTAIN A PRICE FOR CARBON
MOREOVER, APART FROM THE EU ETS (WHICH MAY HAVE LIMITED
DEMAND AND WHERE THERE WILL BE NEW CONSTRAINTS ON THE
SUPPLY OF OFFSETS) WHAT OTHER COMPLIANCE DEMAND WILL EXIST?
WILL AN IET MECHANISM SURVIVE?So sovereign demand, not just entity demand in DETS
WILL DETS HAPPEN IN THE US, CANADA, JAPAN, AUSTRALIA … AND CREATE DEMAND?
WHERE TO NOW?
HOW CAN CARBON MARKETS INFLUENCE THE CHANGE FROM BUSINESS AS USUAL NEEDED …
BETTER THAN OTHER INTERVENTIONS
AN OPPORTUNITY FOR INNOVATION …. SO OPTIMISM
NEED “EVERY SECTOR” AND “EVERY TOOL IN THE POLICY TOOLKIT”
CARBON MARKETS CAN PLAY A FUNDAMENTAL ROLE
Carbon Markets can be created by different Carbon Markets can be created by different policy tools:policy tools:–– Cap and Trade emissions trading schemesCap and Trade emissions trading schemes–– Carbon Carbon ‘‘OffsetsOffsets’’–– Contestable Carbon FundsContestable Carbon Funds
MARKETS EXIST WHERE SOMEBODY NEEDS A PRODUCT (OR SERVICE),
SOMEBODY CAN CREATE THIS PRODUCT (OR SERVICE) AND
INTERMEDIARIES EXIST TO HELP CONNECT THE TWO PARTIES.
THERE CAN BE MANY CARBON MARKETS, EACH DEPENDING ON
PROGRAMS OF DEMAND AND SUPPLY. THEY MAY CONNECT, OR NOT.
WHO MIGHT SOME OF THE MARKET DEMAND SIDE SOMEBODIES BE?
SUB-NATIONAL LEVELS OF GOVERNMENTStates and provinces may enact DETS in their regions, and perhaps connect these with others
CARBON NEUTRAL OR LOW CARBON FOOTPRINT PROGRAMS … WITH TRADING/OFFSET MECHANISMS
Local governments and community groups
Corporates, citizens groups, individuals
A “BUNKERS CARBON FUND” FOR THE INTERNATIONAL AVIATION AND MARINE SECTORS
YES THERE CAN BE POTENTIAL OVERLAPS AND CONFLICTS ….WHICH
NEED TO BE ADDRESSED WITHOUT “MISSING THE FOREST FOR THE TREES”
ADDRESSING CLIMATE CHANGE IS NO LONGER AN INCREMENTAL OR
EVOLUTIONARY GAME. THE IEA CHOSE THE WORD “REVOLUTION”.
WHAT ROLE FOR CARBON MARKETS IN THE REVOLUTION?
THANK YOU
Further Information:Further Information:
[email protected]@gtriplec.co.nz
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