presentationv1

1.A Laymans guide to And lots more.

Global warming

How / Why

Danger?

What are we doing about it:

Marrakech Accords

Multilateral Carbon Credit Fund

Carbon credit(s)

Mechanism

Pricing

Avenues for Earning

Importance

Financial Impact on Developing Countries

Whats happening today

Copenhagen

India perspective

The other view

too little

too late

reality check

What it holds for us

Some trivia

Which planet taught us about global warming?

Mercury

CO2 levels

18300.028 %

0.038%

0.0005 % ^ annual

0.085%

Ozone hole

Acid Rain

Montreal Protocol

The Acid Rain Program is a market-based initiative taken by the United States Environmental Protection Agency in an effort to reduce overall atmospheric levels of sulfur dioxide and nitrogen oxides, which cause acid rain

The program is an implementation of emissions trading that primarily targets coal-burning power plants, allowing them to buy and sell emission permits (called "allowances") according to individual needs and costs

Phase I:unitscut SO 2emissions by 50% below 1980 levels by 20 1 0 (10 M tons).

Est. 1990, legally binding in 1995.

Grandfathering (baseline period 85-87) .

Limited auctioning ( 3% of total allowance ) .

Banking allowed. Penalty $2,000/ton.

Phase IIunitsstarted on 01/01/ 2000.

Significantemissions reductions achieved b y 2004 (7 M. tons according to EPA) .

Banking >7.5M. tons by2004 .

Trading >15M. tons in2004 .

Estimated cost-savings (relative to C&C): $1 billion / year.

Reduced human risk of premature mortality :

(EPA reports a 40-to-1 benefit to cost ratio).

Global warming

How / Why

Danger?

Marrakech Accords

Carbon credit(s)

Mechanism

Pricing

Avenues for Earning

Importance

Emissions

Intergovernmental Panel on Climate Change (IPCC)

United Nations Framework Convention on Climate Change (UNFCCC)

North & South agree to mitigate climate change before it is too late

Agree that they have Common but Differentiated responsibilities .

Kyoto Protocol which in details describe how the GHGs can be reducedentered into force on 16th February 2005.

The Kyoto Protocol and its rulebook, set out in the Marrakech Accords, consist of five main elements:

1.Commitments

A. Specific emissions commitments

B. General commitments

2.Implementation

A. Domestic policies and measures

B. Land use, land-use change & forestry sector

C. Joint implementation

D. Clean development mechanism

E. Emissions trading

3.Compliance

A. Facilitative Branch

B. Enforcement Branch

4.Minimizing impacts on developing countries

A. Adaptation Fund

All Parties to the Protocol are subject to a set of general commitments that mirror those of the Framework Convention.

These include:

Taking steps to improve the quality of emissions data.

Promoting environmentally-friendly technology transfer.

Supporting climate change education, training and public awareness.

Cooperating on international climate observation.

At the real heart of the Kyoto Protocol lies its set oflegally-bindingemissions targets for industrialized countries. These emissions targets amount to a total cut, among all Annex I Parties, of at least 5% from 1990 levels by 2008-2012.

It relies on market based flexible mechanisms to reduce GHGs emissions to mitigate GW.

Emission trading(trading of allowances between Annex I governments)

Clean Development Mechanism (CDM)(projects in Non-Annex I countries with participation of Annex I countries)

Joint Implementation (JI)(projects between Annex I countries)

Emission reduction unit (ERUs),

Certified emission reduction(CERs),

Assigned amount unit (AAUs)

Removal unit (RMUs)

Voluntary emission reduction (VERs)

The Marrakech Accords is a set of agreements reached at the Conference of the Parties 7 (COP7) meeting in 2001 on the rules of meeting the targets set out in the Kyoto Protocol.

Decides to adopt the framework for meaningful and effective actions to enhance the implementation of Article 4.5 of the Convention

Decides to establish an expert group on technology transfer

Detailed definitions and rules for each element of the Kyoto Protocol

Agreement on compliance process and penalties, final decision on binding nature of compliance delayed until after ratification

Includes use of sinks (forest, cropland, and grazing land management, and revegetation are eligible activities)

No quantitative cap on the use of flexible mechanisms (emissions trading, CDM, joint implementation)

Established by the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD).

Participants: Six countries and six private companies

Belgium (Flanders), Finland, Ireland, Luxembourg, Spain, Sweden

Abengoa (Spain), EZ (Czech Republic), Gas Natural (Spain), Endesa (Spain), PPC (Greece), and Union Fenosa (Spain).

Total of 165-million for 3 zones across Central Europe and Central Asia (150 mln for projects, 15 mln for Green Investment Schemes)

MCCF helps Participants to meet their mandatory or voluntary greenhouse gas emission reduction targets by purchasing carbon credits (EAUs, CERs, ERUs and AAUs) from projects financed by the EBRD and/or EIB

The negotiation, contracting and monitoring of carbon credit transactions outsourced to private Carbon Managers

Procurequality, low-cost creditsfrom Countries in Transition (CEE and CIS)

Increaseinvestment flows in low-carbon technologies

Support thedevelopment of emission trading

Promote dissemination ofbest practicesthrough policy dialogue

Target50-150 million

Open toshareholders of EIB/EBRD , and alsoPrivate Companies(incl. state-owned and sub-sovereign) (compliance buyers only)

To buy credits underJI, CDM, and ETS ; but can also facilitateAAU sales under Green Investment Schemes ;

FromTransition Countries (EBRDs 27 CoOs)

Preferably from EBRD- or EIB-funded projects

Outsourcingof preparation, negotiation, contracting and monitoring of carbon transactions to 1-3 private, competitively selectedCarbon Credit Managers (CCMs)

LightMCCF Secretariatas interface with Participants, CCMs and Project Companies, and Governments (policy dialogue), administers project selection & project participation, checks funding is in place, and supervises CCMs

Buyers beardelivery riskandKyoto risk

A multilateral initiative

Political weight and clout

Capacity for engaging Governments (Policy Dialogue)

Risk mitigation through size and diversification

Benefits from EBRD-EIB involvement

Political comfort

Quality of emission reduction projects and size of pipeline

Unique knowledge of, and presence in, the region

Experience from Dutch JI Fund (EBRD)

Experience with managing multi-donor funds (EBRD)

Region has largest potential for low-cost credits

Vast opportunities for JI and CDM projects

Surplus AAUs in Russia, Ukraine, etc

Global warming

How / Why

Danger?

Marrakech Accords

Carbon credit(s)

Mechanism

Pricing

Avenues for Earning

Importance

Protocol put a cap on emissions

Developed countries that have exceeded the levels can either cut down emissions, or borrow or buy carbon credits from developing countries.

Such a credit can be sold in the international market.

The trading can take place in open market.

Louis Redshaw, founded carbon emissions trading

In 2004, met with five investment bankers to discuss the possibility of trading carbon dioxide as a means to reduce harmful greenhouse gases into the air

Barclays Capital was the only bank interested in his venture

Currently, this market is worth more than $30 billion and is expected to grow to $1 trillion within the next ten years

Investment banks are expanding carbon business rapidly

Hedge funds and private equity funds in the Mayfair district in London, as well as emerging niche investments banks pursuing carbon emissions trading very seriously.

The concept of Carbon Credit trading seeks to encourage countries to reduce their GHG emission, as it rewards those countries which meet their targets and provides financial incentives to others to do so

Surplus credits (collected by overshooting the emission reduction target) can be sold in the global market

One credit is equivalent to one tonne of carbon dioxide emission reduced. CC is available for companies engaged in developing renewable energy projects that offset the use of fossil fuels.

Risk allocation

Creditworthiness & experience of project sponsor

Viability of underlying project

Contract structure (e.g. upfront payments incur discount, penalties for non-delivery, ability to pay penalties)

ER vintage & seniority

Cost of validation & potential certification

Host country support & willingness to cooperate

Additional environment and social benefits

Trading

Investing

Creating Offsets (Certificates)

Exchange traded (allowances)

Developer

Wind farms

Landfill Methane

Farm methane

Sewage plants

Cogeneration

Fertilizer plants - N2O

For a full list see unfccc.int

Foreign companies which cannot fulfill the protocol norms can buy the surplus credits form companies in other countries through trading

Stage is set for Credit Emission Reduction (CER) trade to flourish

India is considered as the largest beneficiary of carbon trading, claiming about 31% of the total world carbon trade through the Clean Development Mechanism (CDM), which is expected to earn in at least $5-10 billion over a period of time.

Carbon Finance is the term used for carbon credits to help finance GHG reduction projects

There are two categories of countries involved in carbon credit trading and finance:

Developing countries which do not have to meet any targets for GHG reduction. However, they may develop such projects because they can sell the ensuing credits to countries that do have Kyoto targets

Industrialized countries which include OECD countries (the richest nations of the world) and countries in transition from centrally planned to open market economies.

Transfer of specifically climate friendly technology to the developing countries, including emerging economies has become one of the hot topics in recent years

Governments and multilateral institutions have taken up a variety of measures in promoting and financing trade and investments in this field.

The Kyoto Protocol has given a special boost to the market forces in two ways

investments in more environmentally friendly energy production

investments in clean production technologies and energy efficiency

The developing countries are among the main beneficiaries

Technology transfer to developing countries can relate to several different activities, which are targets for financial transactions

purchase and trade of carbon credits through the CDM and JI processes

Export of technologies, equipment and services on purely commercial basis

transfer of intellectual property rights through licensing and related commercial means

utilisation of multilateral and bilateral promotional and financing schemes tailored for this purpose

physical or financial investment in clean energy production and clean technology companies in the developing countries

provision of advisory services through various technical assistance programmes.

A number of financing instruments are available for the following

Carbon offset

cleaner energy production

wider use of renewable energies

use of climate cleaner production processes

end user energy efficiency

Multilateral development financing institutions such as the World Bank Group and Regional Development Banks have been supporting and financing clean technology development in various ways

The members of World Bank Group (WBG) have been actively developing financing solutions for clean technology

In emission levels between average Northern and average Southern country especially in the past

The bulk of the impacts until 2020-2050 are caused by past emissions of the developed world;

If emission levels are to be kept within safe levels the world budget for the 21 stcentury is over by 2032.

Impacts more severe in the South both location wise; and because vulnerability is the greatest.

Copenhagen

India perspective

The other view

too little

too late

reality check

Some trivia

Process flowing from the Climate Convention

Includes US

Excludes all the agreements made at Kyoto

Process flowing from the Kyoto Protocol

Excludes US

Follows up on the Kyoto agreements

Process flowing from the Danish intervention

Ignores the integrity of the negotiating process

Tries to bypass and shortcut

Focuses on US interests

New ABASIC (Africa, Brazil, South Africa, India, China)proposal in the wings

Long term target

Targets for developed countries

NAMAs: Nationally appropriate mitigation actions

REDD: Reducing emissions from deforestation and land degradation

Financial mechanism

Objective promoted by scientists/ NGOs

- 80 % below 1990 levels by 2050

350 ppm CO2 eq.

Peaking by 2015

UN secretariat hopes for:

50% below 1990 levels by 2050

Peaking global emissions by 2025

EU:- 20% in 2020

Norway:- 40% in 2020

Japan:- 25% in 2020

US:- 4% in 2020(-17% in 2020/2005)

Pledges amount to 8-12% below 1990 levels

Brazil: 38-42% reduction in 2020

India: 25% energy efficiency target in 2020

Indonesia: 26% energy efficiency target in 2020

South Korea: 21-30%

China: 40-45% energy efficiency target

First time willingness to take on commitments

Not absolute, but relative;

Governance system weak so implementation questionable!

Risk of double counting

Forestry about 20% of GHGs

How to reduce deforestation

Faith in market mechanisms!!

Goal for discussion:

Half deforestation rate by 2020

Halt forest loss by 2030

Resources needed 35 billion $ annually

Evolution of language from compensation to subsidy

Assistance for adaptation (seen as local issue!!!)

Assistance for mitigation

Shift from climate assistance to mainstreaming climate change into development cooperation!

Emission Reduction obligations only for developed countries, based on 1990 baseline

Concept of Measurable, Reportable and Verifiable (MRV) Mitigation actions under the Bali Action Plan:

Developed countries to ImplementMRVMitigation actions

Developing countries to undertake nationally appropriate mitigation actions (NAMA) in context of sustainable development supported and enabled by technology, financing and capacity building

MRVfor developing countries under Bali Action Plan applies only in the context of tech and financial support.

Financial Architecture & Framework for Technology Action Plan

US accounts for 30% of global emissions, while India makes for three per cent -India can transfer part of its allowed emissions to developed countries

In India so far, 242 projects have been identified for generating CERs while a total of 318 projects have received clearance by the Ministry of Forestry and Environment

For the Indian carbon market this has the potential to supply 30-50% of the projected global market of 700 million CERs by 2012

India is being heralded as the next carbon credit destination of the world

Increased international finance and investment should be equitable and sustainable;

Governance mechanisms should be transparent and efficient;

India has also projected funding needs: USD 200210 Bn by 2030 additional investment + requirements for incremental investment for adaptation (UNFCCC estimate: 0.30.5% of global GDP; Lord Stern: 2% of global GDP)

Not to be treated as Aid; It should be aLegal Obligation& not a Repayable Loan

What further aspects need to be addressed:

Objective mechanisms and criteria to determine eligibility for and quantum of financial assistance

ER Targets not possible: Common but Differentiated Responsibility

No Deviation from IPCC Baseline of 1990

Emphasis on new financial architecture

MRV for LCG to be linked to MRV for financial contributions & tech transfer

EU & US

ER Targets for Dg countries (US more insistent than EU)

Differences between EU & US: Baseline of 1990 or 2005

EU emphasis:Commitment to Low Carbon Growth by Dg countries

Robust & Verifiable Strategies for accessing intl support

Identification of support reqd.

Intl Registry for Actions for monitoring LCG

Carbon Financing Challenges

To be made a viable source of funding at the project construction/ development stage; not just an additional source of revenue

Clarity required on receiving advances against ERs

Regulatory framework required for financial viability of carbon neutral projects

Incentives for Investment in Low Carbon Growth

Current legal Framework lopsided and often favours highcarbon growth patterns;

No adequate support for lowcarbon initiatives;

E.g.s:

High subsidies for Chemical Fertilizers; not for Organic Composting

Mining Compensatory Afforestation reqd.onlywhen mining on forest land; not otherwise;

No sufficient incentives for Common Effluent Treatment Plants.

Jatropa plantations: Caught in legal ambiguity of no foreign investment in plantations

Common but Differentiated Responsibility at Intl Level

Same principle at national level as well to bridge the richpoor divide & ensure fulfillment of development needs

Recent study: Significant carbon footprint of a relatively small wealthy class (1% of the population)

is camouflaged by the 823 million poor population of the country, who keep the overall per capita emissions below 2 tonnes of CO2 per year.

PM has recently addressed issue of lifestyle changes at the national level

WORLDS LARGEST SOLAR STEAM COOKING SYSTEM ATTALETI, NEAR MOUNT ABU, RAJASTHAN

Copenhagen

India perspective

The other view

too little

too late

reality check

Some trivia

Confusion helps inaction. Carbon tracking took 15 years to monetize. Emission tracking will take 15 years or more .

Needless and acrimonious debate amongst nations resulted in a dozen COP Conferences during the past decade that achieved little in terms of stated objective.

No provision in Carbon auctions or Kyoto pact stipulates that Carbon funds shall be essentially used for funding clean energy.

Clean development is not mandatory.

Kyotos main international offsets scheme, the Clean Development Mechanism http://tinyurl.com/59at69

Some emission reductions under the CDM are false or exaggerated

In 2007 the CDM was accused of paying 4.6 billion for projects that would have cost only 100 million if funded by development agencies

Where as the project developers feel they did not get a fair price

The first commitment period of the Kyoto Protocol excluded forest conservation/avoided deforestation

-carbon emissions from deforestation represent 18-25% of all emissions, and will account for more carbon emissions in the next five years than all emissions from all aircraft since the Wright Brothers until at least 2025.

Only $ 366 million raised in U.S. and similar small sumsin Europe in country wise carbon auctions in 2008.

Mega market pipe dream busted as real numbers appear.http://tinyurl.com/luzxss

Too sophisticated/complex a market

Too expensive to enter

The future beyond 2012 is yet uncertain

Does not survive the Cost Benefit analysis

Huge Markets like agriculture untouched

Forestry projects are too complex

The project developer doesnt get a fair price

The ultimate buyer doesnt get a fair price

Profits go in the pocket of middlemen

CDM popular only in developing countries not in Lower developed countries

Technology transfer which CDM promises already exist with South in some cases

Little initiative by government entities to take up CDM projects

Proving additionality is very difficult in most of the cases

Carbon exchanges have played limited role till yet

The largest resource grab in history

Will strengthen existing inequalities

Many of the sources of carbon credits are scams

Tree planting is not a solution

Encourages companies to profit from efficiencies that would have been introduced anyway

"Hot air" trading is an accounting fraud

Huge incentives for cheating

The vendor gets the cash without having to change anything and the buyer gets cheap credits.

The carbon market cannot be monitored or controlled

no global institution or accounting system that can manage the complexity of this market.

The legal framework will never be strong enough

Countries that want to use carbon credits to subsidise their emissions are already arguing for penalties so weak that they will not discourage cheating.

Co2 is not SO2 or CFC

these programme were small, easy to monitor (one pollutant from one industrial process), and within a strong legal framework.

Carbon credits from different sources are not equivalent

Add to this the complexity of trading in different greenhouse gases. Each source requires different monitoring rules, different criteria and different agencies.

A tsunami is rolling across the climate science establishment since the e-mails were leaked from the Climatic Research Unit (CRU) at the University of East Anglia. What climate warming skeptics have been saying for years is now being examined seriously for the first time and the results are making headlines in major newspapers. Professor Phil Jones, head of CRU, has now stated the warming from 1975-1998 is no different than that of 1860-1880 and 1910-1940. That there has been no statistically significant warming since 1995 and the Medieval Warm Period could indeed have been global. They are comments for which he would have been labeled a denier or flat earther a scant three months ago.

Read More athttp://www.delcotimes.com/articles/2010/03/07/opinion/doc4b93166a65b71184122352.txt

Copenhagen

India perspective

The other view

too little

too late

reality check

Some trivia