Post on 15-Dec-2015
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
1
Perspective of Japanese Buyers towards Green-AAUs
-opportunities and barriers-
Facilitating Green Investment Schemes: first lessons learnt and the way forward Central and Eastern Europe, Belarus, Russia and Ukraine
Budapest, April 24-25, 2008
Itsuho Haruta
Natsource Japan Co., Ltd.
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
2
Natsource Japan ~ Organization ~Natsource Japan ~ Organization ~Natsource Japan was established in May 2001, as a unique firm with multi private sectors’
shareholders.
Natsource JapanTokyo: Carbon Transaction
and Advisory
Natsource LLCNew York: Asset Management
Natsource LLCNew York: Asset Management
Totan HoldingsTokyo:Financial Products
Brokerage
Totan HoldingsTokyo:Financial Products
Brokerage
Other Shareholders
•Cosmo Oil Co., Ltd.
•ICAP Totan Holdings Co., Lt
d.
•Mizuho Securities Co.,Ltd.
•Nippon Petroleum Refining
Co.,Ltd.
•Osaka Gas Co.,Ltd.
•Sumitomo Corp
•The General Environmental T
echnos Co., Ltd.
•Tokyo Gas Co.,Ltd.
•Tokyo Sangyo Co.,Ltd.
•Toyota Tsusho Corp
Mitsubishi CorporationTokyo: Trading Company
Mitsubishi CorporationTokyo: Trading Company
Mitsubishi InternationalNew York
Mitsubishi InternationalNew York
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
3
Natsource Japan ~ ActivitiesActivities ~sustainable development in the 21st century
Pro
vidin
g B
est So
lutio
n
Th
rou
gh
Ma
rket
Mech
anism
Pro
vidin
g B
est So
lutio
n
Th
rou
gh
Ma
rket
Mech
anism
Advisory ServiceAdvisory Service
Natsource Japan
Transaction ServiceTransaction Service
Global WarmingGlobal Warming
CDM / JIProject
Carbon Fund
g-AAUs-AAUsCERs, ERUsCERs, ERUs
GIS
Collaboration with
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
4
Kyoto credits: Buyers
Source: World Bank “ State and Trend of the Carbon Market 2007”
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
5
Demand and Supply of Carbon Credits -1
Demand for Carbon Credits in: a) EU private sector…. 180 ~ 290 mt/y
⇒ NO g-AAUs, limited use of CERs/ERUs b) EU governments…. 20 ~ 110+ mt/y
⇒ Plans to use Flexible Mechanism c) Japan…. 52 ~ 70 mt/y
⇒ -Government (20mt/y=-1.6%); -Private (32-50mt/y)
d) Any other countries? --- 1,100 ~ 2,100 mt/y ?? ---
- Demand -
Source: Commission of the EC
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
6
Demand and Supply of Carbon Credits -2
a) Project pipeline and estimated delivery
(as of Mar, 2008)
CDM+JI ⇒ 3,300+ projects
Credits Volume by ’12 ⇒ 2,700+ million tonnes
Any shortfall in delivery? ?
---1,900~ 2,200 mt---
b) Green-AAUs ⇒ 1,750 - 4,700 ?
- Supply -
Source: UNEP Risoe Centre
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
7
Supply & Demand OverviewGreen-AAUs
Demand by 2012 Supply (likely to sell in the near future only)
EU Gov. 20-200 ?? Russia 1,000-3,000
JPN Gov. 60 ? Ukraine 400-1250
JPN Private 30 ? Poland 200-300
NZ Gov. 10 ? Czech 95
Canada Gov.
0 Latvia 30
U.S. 0 Hungary 30
TOTAL 120-400 TOTAL 1,750-4,700
There is a significant GAP!
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
8
-0.6%
-6%
Japan’s GHG Emissions (FY 2006 - preliminary draft)
1,100
1,200
1,3001,261 mt
1,359 mt1,341 mt
1,185 mt
Sink: 3.8%Kyoto: 1.6%
Further 7%Reductionsare required
Base Year Emissions ('90 +) FY2005Emissions
FY2006Emissions
Kyoto PeriodEmissions('08-'12)
million tonnes
Japan’s GHG Emissions
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
9
Demand of g-AAUs in Japan -1
Demand of Green-AAUs in Japan Maximum Demand for g-AAUs in: a) JPN private sectors…up to 10mt per host country ⇒ unlikely to purchase bulk g-AAUs from one
country = “country diversion” policy b) JPN public sector… >100mt in total but..
(1) has purchased approx. 20mt through CDM (2) has entered into MoU with Hungary and Poland -20mt? (3) expressed that it would reduce by domestic measures for
its 7% surplus (4) is only planning to purchase “Kyoto Units” for 100mt
⇒ no assurance for future national budget to purchase more than planned…⇒ price limitation on g-AAUs against other Kyoto Units (i.e. Chinese Primary CERs)
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
10
Demand of g-AAUs in Japan -2
Price expectation of g-AAUs in Japan What are the initial asking prices of the
sellers? Indicatively € 12-15 from a few host countries
Where are the appetites? € 4? to €10??
Depends on domestic measures in the host country (i.e. Degree and credibility of Greening)
Lower price attracts more demand There is a gap!
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
11
Demand of g-AAUs in Japan -3
Expectation towards host countries
-Regulatory-1. MoU between the parties
MoU w/ Japanese Government is in place; or The host country does not require MoU
2. Legislative development Transparency in legal authority for the handling of g-AAUs Traceability of the funds (preferred less than 10 y) Transparent reporting system of emission reductions by GIS Robust human resources development programmes
3. Kyoto requirements Kyoto Eligibility for International Emission Trading
4. Preferable Greening Project Nothing particular but “No Go” to Nuclear
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
12
Demand of g-AAUs in Japan -4
Expectation towards host countries
-Commercial-1. Payment on Delivery of g-AAUs
Potential buyers maintain high creditworthiness - Aa to A by Moody’s
2. Without escrow arrangement for the paymentDitto -high creditworthiness
3. Price Competitiveness Buyers compare g-AAUs with Primary CERs Buyers are anticipating bearish market on g-AAUs
4. Contract Neutral governing law
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
13
Demand of g-AAUs in Japan -5
Other Information to be aware…Private Sector1. Timing of Purchase
Some are ready for g-AAU transaction “First mover” may proceed next transaction with same buyer in larger volume We are ready to represent the demand
2. Eligibility of the private buyers for g-AAUs Confirmed: “Legal entities who opened registry account” are eligible.
…approx 120 entities had opened their accounts3. Mandate for the private buyers;
Keidanren’s voluntary target Any Kyoto Units are eligible for its compliance (Tangible replacement may be required for t/l-CERs)
4. ITL Connection: Japanese registry has linked with ITL since Nov 15, 2007 Barrier for EU member states to deliver g-AAUs to JPN by CITL-ITL connection
Natsource Japan +81-3-5275-1710 www.natsourcejapan.com
14
(A) Direct Acquisition as a Project Implementer
Non-Annex Iproject implementer
NEDO
UNFCCC EBCredits
ERPA
Sharing contract
Issuance
Annex I project implementer
Project Participants
NEDO is aiming to acquire credits through the following methods this fiscal year: (A) Direct Acquisition as a Project Participant - Participate in projects and sign emission reduction purchase agreements (ERPA) with other project
implementers, NEDO will acquire credits directly from the credits issuers (the UN CDM Executive Board (CDM) and Annex I countries (JI and GIS)).
(B) Indirect Acquisition from Annex I countries (i.e. through Natsource Japan/Affiliate) - Purchase AAUs with ERPA from Annex I countries who have eligibility of IET.
(B) Indirect Acquisitionfrom Annex I country
GIS Host CountryGIS Host Country
NEDO
Natsource Japan / Affiliate
ITL
AAUs
ERPAPurchase agreement
ERPA
AAUs
Transfer
Transfer
CDM Project Scenarios GIS Scenarios
Public sector’s purchase programme