climate change & corporate
TRANSCRIPT
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Climate Change,Carbon Market and
the Corporate SectorInternational Conference on S&T Capacity Building for Climate Change
October 21 2002
2001 PricewaterhouseCoopers. PricewaterhouseCoopers refers to the individual member firms of the world-wide PricewaterhouseCoopers organisation. All rights reserved.
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In the next few minutes
Climate change challenge and global action
Monetising carbon market, buyers, price drivers
Corporate Sector opportunity, preparedness, implications
PricewaterhouseCoopers
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The Challenge
Economic slowdown, crisis of trust and cross-border terrorism
overshadowed a big challenge facing the world :
Climate Change
Climate change is as much a business issue as it is an issue for
the Government and civil society
Corporations world-wide control more than half of the means of
anthropogenic GHG emissions
Twin challenge of
Decoupling GHG emissions from growth
Mitigation of impact of climate change
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Global action
The Kyoto Protocol sets binding
targets for GHG reductions in a
majority of developed countries
(Annex B)
The Protocol provides opportunities
to reduce global emissions by
utilising cheapest abatement
options
Three flexibility mechanisms
Emission Trading
Joint Implementation
Clean Development
Mechanism
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Abatement options
Abatement curves significantly different for different
Corporations
Corporations with commitments (or obligation) to reduce GHG
emissions can
implement GHG emission abatement in its own operations
buy credits from other Corporations
sell surplus credits to other Corporations
For Corporations, this provides an opportunity to participate in
the carbon market
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The Opportunity
The opportunity is for corporations in developing countries as well as
developed countries
Developing countries can move rapidly to clean development
technology with financial assistance from developed countries
Developed countries can meet their obligations by the cheapest
route
PwCs review of CDM projects in India indicates that carbon finance
can provide up to 15% of new project costs at current valuation
expectations
Make marginal projects investment grade
Leverage carbon financing for better project financing terms
Carbon transactions provide possibilities of strategic alliances, access
to new markets and financing sources
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Carbon transactions so far
Internationally since 1996
A total of over 100 trades reported corresponding to 200
MtCO2e have been executed
Deals have been VERs approved by third-party accountants
ER deal reported by an Indian steel major
Dutch government
Selected 6 projects from India under first CERUPT Prototype Carbon Fund investments in CDM projects
Investment in a waste-to-energy project
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The buyers
EU-countries led CDM initiatives:
ERUPT/ CERUPT by HOLLAND already underway
AUSTRIA to dedicate $36 million, starting Jan 03
DENMARK has committed $17 million
SWEDEN has budgeted $22 million
The NORDIC COUNTRIES are setting up a $10 million fund
JAPAN recently bought an annual flow of 62,000 tonnes of CO2e from
Kazakhstan
Active participation by Annex B countries is likely to
Increase companies sense of security of investing in CDM
Increase transparency in all stages of project development
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Buyers requirements: CDM
Clear CDM rules
Host country endorsement rules
Investment rules Robust and large CDM projects
robust carbon, robust project
Developed by large Corporations
Ability to stand by performance obligations
Portfolio of credits
Projects having high sustainability criteria
Stakeholders perspective
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PREMIUM
COMPLIANCE
PRE - COMPLIANCE
RETAIL
Price Volume
Price vis-a-vis quality of credit
In our view it is likely that there
will be a strong demand for
various types of credits leading
to a segregation of the carbonmarkets according to credit type
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Harnessing the opportunity
In order to harness this opportunity, we need
Corporate commitment and preparedness
Policy and regulatory framework Capacity building in systems
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Level of preparedness
Based on 60 contacts with the largest Indian Corporations in
energy and emission intensive industries
Climate change is not perceived as a strategic value driver
and as such is wholly absent from Board Agendas.
Carbon is not an identified factor in investment criteria
There is general awareness of CDM
However, CDM is seen as opportunity in future and prefer
to adopt wait-and-watch attitude
Environment departments not yet fully focussed on carbon
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Level of preparedness
Based on 60 contacts with the largest Indian Corporations in energy
and emission intensive industries
Energy efficiency is largely a plant/unit level initiative. Energy
efficiency initiatives as a Corporate priority is present in about 25%of the Corporations contacted
Less than 10% of the Corporations contacted have conducted
exercises to create an inventory of all direct GHG emissions in
their operations
Less than 5% of the Corporations have initiated an exercise to
identify all possible emission reduction opportunities, cost-benefit
analysis
No instances of capturing indirect emissions
No instances of GHG emission abatement curves
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Capacity building in Corporations
Human, organizational and information assessment capacity
Include carbon as a strategic value driver
Incorporate carbon as a key investment criteria Provide incentives to employees to think carbon: incorporate
carbon as a key employee performance evaluation criteria
Set up internal systems across organization to promote
carbon investments, disseminate best practices information,
monitor performance
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Capacity building through policy and
regulatory framework Clear policy framework integrating
Environmental: clear approval criteria for CDM projects including
criteria for measuring non-carbon environmental/ social benefits
Energy: promotion of clean energy generation and efficient energy
usage
Investment: approval criteria for FDI in CDM projects
Taxation and reporting: clarity in taxation structure of carbon
revenues/financing; fiscal incentives to promote cleandevelopment; valuing and reporting carbon assets
Property rights: clarity in ownership of carbon credits, facilitation of
aggregation
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Capacity building in systems
Information assessment and dissemination
Financing for clean technology development
Systems to ualify, register, review, monitor, verify and reportemission reductions
National level emission inventory program
National emission registry and associated systems
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Implications for Corporations
Carbon market is inevitable with or without Kyoto through
various national and international initiatives
Window of opportunity for Kyoto is short next 3-4 years
Corporate India currently not prepared to harness the potential
First, carbon should be viewed as a strategic opportunity
Second, capacity building should be initiated to facilitate
monetising of carbon
Third, lobby for the right policy and regulatory framework
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Benefits for Corporations
Early mover benefits and greater scope to influence policy
Additional benefit from and support for core business strategy
Improve market perception Financial benefits from implementing CDM projects
Cost savings from efficiency gains
Expansion into new businesses
Public relations gain
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