review of carbon marketsindia: 20-25% cut in emissions/gdp. 55 countries, accounting for 78% of...
TRANSCRIPT
Review of Carbon MarketsJukka Tissari
Forestry Officer, Trade and MarketingForest Products ServiceFAO, Rome
UNECE-FAO Timber Committee Market Discussions
12 Oct. 2010
Geneva
Contents
1. COP-15 outcomes
2. Who moved carbon in 2009?
3. Forest carbon
4. Main factors for the future
COP-15 Outcomes
• Wider recognition of forests in mitigation of climate change, funding pledges to kick-start REDD+
• Mandate to:– review data on Harvested Wood Products (HWPs)– work on additional accounting methodologies in Land-use, Land-
use Change and Forestry (LULUCF)– work on the expanded scope for CDM
• The most important part of work is the new rules governing carbon accounting on forest management, which would increase the offsets from forests available to Annex 1 countries of the KP
How is Forestry Negotiated under UNFCCC?
Discussions on REDD-plus focus on two major aspects:
1. Policy approaches and positive incentives to address the broad architecture of a REDD-plus instrument under UNFCCC.
2. Methodological issues: methods for measurement, verification and reporting (MRV) and method for setting reference scenarios.
Forestry was the sole sector that was specifically addressed in the Copenhagen Accord
REDD+ methodologicalissuesREDD+
policy approachesand positive incentivesADAPTATION
LULUCFCDM
UNFCCCKyoto Protocol
CMP
Forestry Issues under UNFCCC Structure
Ad-hoc bodies
COP
SBSTA
AWG-LCA
SBI
AWG-KP
Subsidiary bodies
Convention Bodies
Policy Instruments
Issues most relevant to ECE members:
1. ECE member commitments
2. Expanding the scope of CDM
3. Reference levels and accounting rules of forest mgmt
4. HWPs
REDD+ defined but not yet agreed
Scope for REDD+ defined:• reducing emissions from deforestation & forest degradation; • sustainable management of forest; • conservation of forest carbon stocks; • enhancement of forest carbon stocks.
• BUT, REDD+ cannot be agreed before further commitments under UNFCCC, and substance of second commitment period for Kyoto Protocol are agreed
• Countries took a fast-track action: established REDD+ Partnership Agreement (May 2010), to accelerate REDD+ pilot activities in the field
Emission reduction targets announced by main countries after COP-15 (31 January 2010)
Developed country Announced target Comments
United States 17% below 2005 3.5% below 1990
European Union 20/30% below 1990 30% condit. to global agreement
Japan 25% below 1990
Canada 17% below 2005 3% below 1990
Russia 15-25% below 1990
Australia 5-25% below 2000 13% above 1990
New Zealand 10-20% below 1990
Switzerland 20/30% below 1990
Norway 30-40% below 1990
Developing country Announced targets Comments
China 40-45% cut in emissions/GDP
Brazil 36-39% below 2020 below 2020 BAU scenario
South Korea 30% below 2020 below 2020 BAU scenario
Indonesia 26% below 2020 below 2020 BAU scenario
India 20-25% cut in emissions/GDP
55 countries, accounting for 78% of global emissions from energy use, formally submitted their national targets to cut and limit GHGs by 2020 by the deadline.
Some pledges were conditional to the success of COP-15, while others showed a varied degree of ambition, announ-cements and timeframes.
Who Moved Most Carbon in 2009?
Who Moved Most Carbon in 2009?
- Global carbon market moved 8.7 bill. t CO2e, worth $ 143.7 billion
- EU-ETS is the flagship: $ 118.5 billion
- CDM: $ 20.2 billion (prim. Project supply halved in a year)
- Voluntary markets down: $ 387 million(OTC + CCX)
- RGGI grew fast
Market segment 2008 2009
Volume million tons CO2e
Value million $
Volume million tons CO2e
Value million $
Project-based transactions subtotal:
429 6,878 237 3,032
- Primary CDM 404 6,511 211 2,678
- JI 25 367 26 354
Voluntary markets subtotal:
127 728 94 387
- OTC 57 422 53 338
- CCX 69 307 41 50
Secondary CDM 1,072 26,277 1,055 17,543
Allowances markets subtotal:
3,209 101,183 7,320 122,773
- EU-ETS 3,093 100,526 6,326 118,474
- NSW 31 183 34 117
- RGGI 62 198 805 2,667
- AAUs market 23 276 155 2,003
- Alberta’s SGER 3 34 5 61
Total carbon markets 4,840 135,143 8,719 143,735
Carbon prices
• Freefall until Feb. 2009• Slow recovery,
Flopenhagen dip-down• Recovery up to April 2010 • Reason: the financial
strain caused by the slump in the global economy -more than the supply and demand dynamics
• Sellers: heavy industries falling below their emission caps, having excess supply of allowances
• Buyers: energy sector firms seeking compliance
0
5
10
15
20
25
August 2008
October 2008
December 2008
February 2009
April 2009
June 2009
August 2009
October 2009
December 2009
February 2010
April 2010
June 2010€
per
tCO
2e
Daily closing price spot EUADaily closing price spot CER
What is the Future for Forest Carbon?
Voluntary carbon markets (VCM):– at least 434 forest projects have been identified up to date in all types of
carbon markets– in VCM a 2008 base of 226 forest-based projects in 40 countries– a combined transaction volume estimated at 20.8 million tons of CO2
equivalent in the past 20 yearsClean Development Mechanism (CDM):
– has approved 17 forest carbon projects as of mid-2010, doubling from 2009– only represent 0.6% of all CDM projects and thus far have not issued any
carbon credits to the market– expansion of CDM scope (REDD, A/R, re-vegetation, wetland restoration,
agriculture: grazing/crop lands, soil C mgmt)US cap-and-trade scheme:
– up to one billion tons of CO2 equivalent of land-use and forestry offsets could be deployed both domestically and in tropical countries
Forest projects in other cap-and-trade schemes / sub-regional climate initiatives
CDM forestry projects registered since Sept. 2009
Title and year registered Host Parties Other Parties
Reduction in CO2e
Reforestation of croplands and grasslands in low income communities of Paraguarí Department, 2009
Paraguay Japan 1523
Afforestation and Reforestation on Degraded Lands in Northwest Sichuan, 2009
China 23030
“Reforestation, sustainable production and carbon sequestration project in José Ignacio Távara´s dry forest, Piura”, 2009
Peru 48689
Humbo Ethiopia Assisted Natural Regeneration Project, 2009
Ethiopia Canada 29343
Assisted Natural Regeneration of Degraded Lands in Albania, 2010
Albania Italy
22964
The International Small Group and Tree Planting Program (TIST), Tamil Nadu, 2010
India UK 3594
Forestry Project for the Basin of the Chinchiná River, an Environmental and Productive Alternative for the City and the Region, 2010
Colombia 37783
Nerquihue Small-Scale CDM Afforestation Project using Mycorrhizal Inoculation in Chile, 2010
Chile UK 9292
Afforestation/Reforestation
Developed in partneships
Small projects and reduction potentials
Why large corporate off-setters look favourably on forest projects in voluntary markets?
• More activities being eligible under VCM than in compliance markets: – Afforestation and Reforestation (AR), – Reduced Emissions from Deforestation and Forest Degradation
(and more broadly, REDD+), – Improved Forest Management (IFM), and – Carbon stocks associated with Harvested Wood Products (HWP).
• Positive co-benefits for community livelihoods, biodiversity conservation, etc.
• Forest carbon credits can be certified against recognized standards
• Good for CSR
Main Factors Shaping Forest Carbon Markets
• COP-16 Cancun
• US cap-and-trade system postponed to 2013-2014
• Kick-start REDD+: 100 bill. $ yr by 2020: potential to become the overarching platform of forest-based carbon
• “Interim COP”• Prepare ground for agreement in
COP-17 South Africa• Offsets from forest mgmt in
developed countries, CDM
• Passing bill through the legislature, water-down effect
• Stagnation (Kerry-Lieberman bill aka American Power Act)
• White House
• Big money, strings attached• Governance, local capacities,
CO2 tenure• 100 b$=1/4 forest prod. export / yr.• Partnerships, not under UNFCCC
Factors in Immediate Future Main challenges
Possible Elements of the Cancun Outcome
1. Shared vision– on global long-term goals and cooperative actions for emission reductions
2. Adaptation– framework and institutional arrangement, approach to address loss and damage
3. Mitigation– economy-wide emission reduction commitments or actions by developed countries– MRV for developed countries’ commitments or actions – nationally appropriate mitigation action (NAMAs) of developing countries and
associated support– MRV for developing countries; NAMAs– readiness phases of activities that contribute to mitigation actions in forest sector
(REDD+)– approaches to enhance the cost-effectiveness of, and to promote, mitigation actions,
including using markets
4. Finance, technology and capacity building– reporting on fast-start finance for 2010-2012– new fund, mobilization of long-term finance, MRV– technology mechanism, Climate Technology Centre and Network
(06 Oct. 2010)