stock-take on market and compliance gap as kyoto protocol enters into force
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Stock-Take on Market and Compliance Gap as Kyoto Protocol enters into force
HCC Meeting, Washington DC
February 15, 2005
Total Value of Carbon Sales (in million U.S.$, nominal)
0
100
200
300
1998 1999 2000 2001 2002 2003 2004
Known Estimated
(Jan-May)
2
Main Seller: AsiaIn percent of volume sold from end 2003 to May 2004
OECD10% Transition
Economies8%
Africa4%
Asia51%
Latin America27%
3
Main Buyers: Japanese Firms In percent of volume purchased since Jan.2003
Netherlands23%
Japan41%
Carbon Finance Business24%
Other EU3%
Canada3%
USA3%
Australia & New Zealand
3%
4
Current Kyoto gap of Annex II: 620 MtCO2e
-8%
-6% -6%
-2%-3%
+20%
+12%
+9%
EU15
(228 MtCO2e)
Canada
(159 MtCO2e)
Japan
(214 MtCO2e)
Other Western Europe+ New Zealand
(19 MtCO2e)
Pe
rce
nt
of
19
90
em
iss
ion
s l
ev
el
Kyoto Target
Current (2002) Emissions
Emission Trends 1990-2002 in EU15, Japan and Canada
90
95
100
105
110
115
120
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
GH
G E
mis
sio
ns
(In
de
x 1
00
= 1
99
0)
EU15
Japan
Canada
Projected Gap of Annex II: 945 – 1116 Mt/yr
0
100
200
300
400
500
600
E.U. 15 Canada Japan Rest of Annex B woUS/Aus
Ky
oto
Ga
p in
MtC
O2e
Central US DoE Scenario High US DoE Scenario Central IEA Scenario
Current Kyoto gap of EU15: 228 MtCO2e
-13%
-8%
-21%
+0%
-21%
-7%
-28%
-6%
+15%
+4%
+9%
+3%+7%
-2%
+29%
+9%
+1%
+40% +40%
-4%
-15%-13%
+27%
+13%
+25%
+0%
-19%
-0%
+26%
-19%
Au
stri
a (1
7)
Bel
giu
m (
15)
Den
mar
k (1
4)
Fin
lan
d (
5)
Fra
nce
(-1
1)
Ger
man
y (3
0)
Gre
ece
(1)
Irel
and
(9)
Ital
y (7
8)
Lu
xem
bo
urg
(1)
Net
her
lan
ds
(15)
Po
rtu
gal
(8)
Sp
ain
(72
)
Sw
eden
(-5
)
Un
ited
Kin
gd
om
(-15
)
Per
cen
t o
f 19
90 e
mis
sio
ns
leve
l
Kyoto Target (EU bubble)
Last reported / base year
Current Kyoto gap of EU15: 228 MtCO2e
-13%
-8%
-21%
+0%
-21%
-7%
-28%
-6%
+15%
+4%
+9%
+3%+7%
-2%
+29%
+9%
+1%
+40% +40%
-4%
-15%-13%
+27%
+13%
+25%
+0%
-19%
-0%
+26%
-19%
Au
stri
a (1
7)
Bel
giu
m (
15)
Den
mar
k (1
4)
Fin
lan
d (
5)
Fra
nce
(-1
1)
Ger
man
y (3
0)
Gre
ece
(1)
Irel
and
(9)
Ital
y (7
8)
Lu
xem
bo
urg
(1)
Net
her
lan
ds
(15)
Po
rtu
gal
(8)
Sp
ain
(72
)
Sw
eden
(-5
)
Un
ited
Kin
gd
om
(-15
)
Per
cen
t o
f 19
90 e
mis
sio
ns
leve
l
Kyoto Target (EU bubble)
Last reported / base year
Current Kyoto gap of EU15: 228 MtCO2e
-13%
-8%
-21%
+0%
-21%
-7%
-28%
-6%
+15%
+4%
+9%
+3%+7%
-2%
+29%
+9%
+1%
+40% +40%
-4%
-15%-13%
+27%
+13%
+25%
+0%
-19%
-0%
+26%
-19%
Au
stri
a (1
7)
Bel
giu
m (
15)
Den
mar
k (1
4)
Fin
lan
d (
5)
Fra
nce
(-1
1)
Ger
man
y (3
0)
Gre
ece
(1)
Irel
and
(9)
Ital
y (7
8)
Lu
xem
bo
urg
(1)
Net
her
lan
ds
(15)
Po
rtu
gal
(8)
Sp
ain
(72
)
Sw
eden
(-5
)
Un
ited
Kin
gd
om
(-15
)
Per
cen
t o
f 19
90 e
mis
sio
ns
leve
l
Kyoto Target (EU bubble)
Last reported / base year
Current Kyoto gap of EU15: 228 MtCO2e
-13%
-8%
-21%
+0%
-21%
-7%
-28%
-6%
+15%
+4%
+9%
+3%+7%
-2%
+29%
+9%
+1%
+40% +40%
-4%
-15%-13%
+27%
+13%
+25%
+0%
-19%
-0%
+26%
-19%
Au
stri
a (1
7)
Bel
giu
m (
15)
Den
mar
k (1
4)
Fin
lan
d (
5)
Fra
nce
(-1
1)
Ger
man
y (3
0)
Gre
ece
(1)
Irel
and
(9)
Ital
y (7
8)
Lu
xem
bo
urg
(1)
Net
her
lan
ds
(15)
Po
rtu
gal
(8)
Sp
ain
(72
)
Sw
eden
(-5
)
Un
ited
Kin
gd
om
(-15
)
Per
cen
t o
f 19
90 e
mis
sio
ns
leve
l
Kyoto Target (EU bubble)
Last reported / base year
Projected Gap of Annex II: 945 – 1116 Mt/yr
0
100
200
300
400
500
600
E.U. 15 Canada Japan Rest of Annex B woUS/Aus
Kyo
to G
ap in
MtC
O2e
Central US DoE Scenario High US DoE Scenario Central IEA Scenario
Current Surplus of Transition Economies: 2,180 MtCO2e
-8% -8% -6% -8% -8% -6% -8% -8% -8%
-56%
-12%
-26%
-55%
-31%
-63%-66%
-32%
-48%
-37%
-28%
-47%
0%0%
-5%-8%
-1%
Per
cen
t o
f 19
90 e
mis
sio
ns
leve
l
Kyoto Target
Current (2002) Emissions
Baseline Baseline –– EI T Hot AirEI T Hot Air
2000 2008 2012 2018
Emissions
Target
Baseline Emissions
Hot Air, 1st Period: A
A
Hot Air, 2nd Period: B - C
B
C
Kyoto Obligation for EITs
Actual Emissions, below KP obligation because of economic downturn
Explaining the Special Case of the Transition Economies
14
OECD Compliance Gap
Ratifying OECD cumulative target reductions will be 5-5.5 billion tons of carbon dioxide below 1990 levels by 2012 based on their Kyoto obligations
If half emissions reductions are achieved domestically the “compliance gap” to be met through trade with developing countries and transition economies through 2012 would be 2.5 billion tons – 10 times current carbon purchase contracts
Current gap over domestic action suggests need for > 3 billion t/CO2e
Carbon is currently selling for about $5 ton of carbon dioxide, but likely to increase to about $10 ton
At a selling price of $5-$10 per ton carbon payments to developing countries and EITs between now and 2012, trade value will be between $12.5 billion and $25 billion
Sources of Supply to fill the Compliance Gap
• Carbon contracts with developing countries (Clean Development Mechanism) today are <200 MT for 2012 delivery.
• Its too late for conventional investment projects to more than double this amount.
• Emissions trading with EITs (Assigned Amount Units) has to be at least 2 billion tons (the EITs have the potential to trade about 7 billion tons because their emissions are significantly below their allocation under the KP due to the economic downturn)
“Greening” the AAUs to OECD Sovereign buyers will be essential - implies about $30 billion of new investment over the next 4-5 years
The balance of about 1 billion tons will probably be made up of trades involving industrial gases: HFC-23 and N2O (primarily with China – CDM) where “greening” is also required
Bank Carbon Finance Business Programs Representing Sellers
Economies in Transition and Greening of AAU Trade• Green Investment Schemes designed for Bulgaria and
planned for Czech and Slovak Republics and Latvia in collaboration with commercial banks
• Dialogue beginning with Russia and Ukraine China Industrial Gases Greening
• Partnership with China to assure buyers of the sustainable development benefits of trade in HFC23 that is vital to supply of compliance grade carbon assets to ratifying OECD. Trade value is $3 billion plus
Argentina – request for Bank assistance to develop and present high quality carbon assets to global market
20 developing countries supported under CF-Assist to develop carbon assets for sale to others at/around Carbon Expo. Bank as buyer of last resort
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