carbon trading: prospects and drivers kristian tangen, point carbon ieta-seminar bonn
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Carbon Trading: Prospects and Drivers Kristian Tangen, Point Carbon IETA-seminar Bonn June 10 2003. Carbon Market Analyst F orecasts and market reports Carbon Market Quarterly The broader picture Country Profiles Ranking of JI hosts Carbon Market Projects - PowerPoint PPT PresentationTRANSCRIPT
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Carbon Trading:
Prospects and Drivers
Kristian Tangen, Point Carbon
IETA-seminar Bonn
June 10 2003
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Products and tools
Products Analytical toolso Carbon Market Analyst
– Forecasts and market reportso Carbon Market Quarterly
– The broader pictureo Country Profiles
– Ranking of JI hosts o Carbon Market Projects
– Tailor-made package for the CDM & JI Markets
o Carbon Market News– Free daily newsletter
o Carbon Market Europe– Free weekly newsletter
o CDM Monitor– Free Monthly service
o Carbon Transaction Database– World’s most comprehensive– >400 transactions, 400 MtCO2e
o Trading Systems Database– With IETA
o Structural price-model– Simulation of policy scenarios– Monte Carlo-simulations– Parametric sensitivity studies
o Expert Networks– Polls
See www.pointcarbon.com
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o Not ONE market:– Domestic schemes– Project-based programs– Voluntary programs
o Not ONE commodity: – Payment, risk-sharing– Standardisation: only in
domestic schemes
o Not ONE price
Trading System Carbon Prices US$/tCO2e
EU ETS 6 - 8 UK Auction 23 UK Market 4 - 20 Erupt/Cerupt 3 - 5 PCF 3 - 5 Denmark 0,5 - 5 North America 1 - 3 Other 0,5 - 5
A fragmented market
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Trends 2002-2003
o Focus of attention shifting towards Europe– On-going UK, Danish and Dutch programs– Planned EU ETS directive– First trade in EU allowances February 2003
o Volumes in domestic schemes dwarfed by CDM/JI– But, how much will be offered to the market, and when?
o Focus on projects compatible with Kyoto rules– CDM/JI
o First ”clean” AAU-deal in December 2002
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No. Transactions 1996-2002
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Traded Volumes 1996-2003
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Future: Political drivers
o Russian ratification– Increased Japanese demand– (Canada)
o EU ETS Directive– Creates a large market from 2005
o EU JI/CDM Directive– No sinks or large hydro?– Ceilings (6%)? – Effects on the CER-market
o CDM Procedures
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EU ETS: Current prices
o Bids and offers, ref. Carbon Markets Europe– 5 to 7 €/tCO2 bid-offer spread, firm bids: 5 to 5.5 €/tCO2 – Nuon-Shell deal: probably in the indicative market
o Why this price-level?– Maybe: Point Carbon’s September ’02 analysis (5 €/tCO2)
– Probably: linked to CER prices (4 to 6 €/tCO2)
The CDM is currently influencing EU prices The role of CDM, in the longer term? What would be the volume?
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Prospects for the CDM
o Developing CDM-projects is time-consuming– After 5 years: relatively few projects– The most advanced have reached the PDD-stadium– Implementation, after EB approval of PDD: 1-2 years– Issuance of CERs: 1 year after implementation
1-3 years from PDD to CER Projects that have not yet been developed as PDDs
are not likely to start delivering CERs before after 2005
Current PDDs give an indication of CER-supply by 2005
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o About 2 MtCO2e to market in 2005o About 0,1 % of total emissionso Dwarfed by annual variations
CER volumes
• CERs to market in 2005: 3.35 MtCO2e
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Natural variation, EU15
• Total volume allowances: 1800 MtCO2e• Natural variation: 30 MtCO2e • CERs to market in 2005: 3.35 MtCO2e
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The size of the EU market
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Conclusions
o Market implications for CERs– CER price = Price of EAU– Two prices: approved and not approved by EU– Offset opportunities: Reduced risk in connection
with CDM investments Makes CDM more attractive But potential depends on procedures...
