Ets World Bank Carbon Market 2007

8/13/2019 Ets World Bank Carbon Market 2007

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TheWorld

an

a e an ren s o e

,World Bank

CARBON EXPOKoeln, May 2, 2007


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Methodolo

This stud is based on the followin :

Analysis of the World Banks confidential project database;

Interviews with market players (natural buyers (Europe & Japan),fund mana ers develo ers sellers DNAs rivate e uit fundshedge funds, banks, traders & brokers), assisted by Natsource;

A comprehensive review of published literature; Cross-reference with IETA market sentiment survey.

Project database includes:

More than 930 ro ect-based transactions ERPAs si ned Completeness of information >90% in all fields except on

exact terms and price of transaction >60%.

Aggregate data on allowance markets:

From major exchanges and OTC sources.


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Overall US$ 30 bil lion (06) > US$ 11 billion (05)

EUAs market US$ 24.4 bi ll ion (06) > US$ 7.9 billion (05)

ro ec ar e ou es

US$ 4.8 bil lion (06) > US$ 2.4 billion (05)

Secondary market emergesor o os o guaran ee comp ance asse s

US$ 0.44 bill ion + (06) through intermediaries

Voluntary Market expands US$ 0.1 bill ion + (06) confirmed

Price Signal to Market Drives Capital Allocation


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Volumes transacted in 2006(in MtCO2e)

- Transactions

EU Emission16

Trading SchemeCDMSecondary

1,10025 +

UK ETSNew South WalesCertificates

OtherCom liance

Voluntary& Retail

Exchange1910 MtCO2e

20

+


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Markets for Allowances


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Disconnected EU ETS markets

35EUA price

/tCOSpot price (Pnxt)

PhI is long pushing EUA prices < 2

30 Dec 08 (ECX)

energy price & no EUA banking

Utilities have covered Ph I position CERs to be banked to Ph II

20PhII expected to be short, > 12

15

: more a owances were o e ssue yMember States than the likely quantity ofactual emissions in 2008-12 meeting theKyoto commitments would be severely

10compromised and little or no environmental

benefit would be provided. COM(2006) 725

Market prices reflect analysts

0

shortfall consensus:900-1,500 MtCO2e

(level of effort required = 8-10 %)-

J

-0

F

-0

M

-0

A

-0

M

-0

J

-0

J

-0

J

-0

A

-0

S

-0

O

-0

N

-0

D

-0

J

-0

F

-0

M

-0


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Pro ect-based transactions


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Pro ect-based Credits:Volumes and prices up

600

actions

Voluntary

Other compl iance US$ 10.4 /tCO2e

400sedtran JI

CDM US$ 7.2 /tCO2eCER I $ 10.9

ERU $ 8.7

300roject-b

MtCO2e

)

200

lu

meof

US$ 5.2 /tCO2e

100

annualv

1998 1999 2000 2001 2002 2003 2004 2005 2006


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28

24

US$ per tCO2e

20

12

8

+52%

+43%4

pre-CER CER ERU 2ndary CER


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CDM&JI Bu ersEU Private Sector 75% of demand

s are o vo umesOther & Unsp.

3%Other Europe

12% Other & Unsp.7%

Other Europe10%

UK

Japan7%

15%

Japan

UK50%

Europe-Baltic

Sea

Netherlands4%

Spain7%

S ain

Austria3%

3%

Netherlands8%

urope- a cSea9%

6%Italy10%

Jan. 2005 to Dec. 2005 Jan. 2006 to Dec. 2006


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CDM SellersChina leads supply

(share of volumes)

500

e)

400

acted(MtCO2

Other & Unsp.

Africa

R. of Latin America

BrazilR. of Asia

12%

300

lvolumestran

.

India

China

ChinaAfrica

3%

7%

100

200

ryC

DMa

nnual

Other & Unsp.7%

Brazil

0

prima4%

R. of LatinAmerica

6%

Jan. 2006 to Dec. 2006


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CDM Asset classesShare of Clean Energy Rises

(share of volumes)

N2OClean energy: 11% Clean energy: 25%

HFC

Other

5%Hydro

3%

Hydro

6%

13%13%

n

2%

Other Renewables

Biomass

3%

Wind

5%

HFC34%

Biomass

3%

Other Renewables

LFG

CMM

7%

EE+Fuel s.

1% EE+Fuel s .

9%

Agro-forestryCMMAnimal Waste

2%

2%1%7%5%

2%

Jan. 2005 to Dec. 2005 Jan. 2006 to Dec. 2006


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CDM & Clean Energy

Investment leverage 2002-2006

Cumulative CDM deals =

US$ 7.8 billion

,per year of commitment

16

e)

US$ ~2.7 bil lion for cleanenergy (current prices) 12

,currentval

Other

EE+Fuel s.

Other Renewables

Biomass

car on =~ nves efor clean energy 8unt(US$b

lln Wind

Hydro

on everagefor clean energy in

developing countries since

4

estmentamo

2002

US$100 bill ion invested 0

2

2002 2003 2004 2005 2006

Inv

2006


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Outlook


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Market balance 2008-2012

2008-12 demand for Kyoto mechanisms (Analysts expectations)

Demand from EU ETS = 1,140 MtCO2e (900 -1,400 MtCO2e)Based on varying assumptions of growth adjusted

for improvement in carbon intensity

Expected demand from EU Governments: 450 MtCO2eExpected demand from Japan: 100-500 MtCO2e (avg: 350MtCO2e)

xpec e eman rom o urope an : 2e

Based on varying assumptions of Parties about performance ofadditional (and exist ing) pol icies and measures

Will sufficient supply be stimulated, contracted and delivered?

CDM/JI: How many reductions wil l they deliveron time?

AAU/GIS: How many, when and at what price? Some host countrieshave expressed their interest in setting GIS (Ukraine, Latvia)


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Ex ected K oto Balance

Already contracted Already contracted Potential su l917 MtCO2e

Residual demand

1,083 MtCO2e

930 MtCO2eNot yet contracted

> 975 MtCO2e

6000-7,100 MtCO2e

2 500

Canada ??

1 500

2 000

(MtCO2e

)

Japan

RoEurope + NZJI

1 000Volum

-

CDM

0

500 EU ETS

Demand for KMs CDM/JI supply AAU/GIS: amount not yet contracted


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Beyond 2012:

A bridge to a safe climate future ?

eve op ng coun r es an s ave s rong yresponded to EU and Japan demand.

ar e s o manage em ss ons avedemonstrated their ability to source ERs.

xper ence s ou encourage coun r esconsidering ambitious targets to .

This requires efforts in all sectors, including

market.


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,

the development and deployment of

would stall, and the evolution of a

ynam c an qu g o a mar et woube severely undermined.

omm ss on, c o erCOM(2006) 725


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Thank you

Full report available at

www.carbonfinance.org

Documents

Ets World Bank Carbon Market 2007