Carbon Markets: A US Perspective
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Transcript of Carbon Markets: A US Perspective
First Climate AG
Carbon Markets: A US Perspective Dr. Sascha Lafeld, Executive Board Member Dr. Sascha Lafeld, Executive Board Member Amsterdam,13.11.2008Amsterdam,13.11.2008
© First Climate | 12/19/08Dr. Sascha Lafeld
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Main Questions
1) What are the latest developments in the potentially largest carbon market worldwide?
2) How can investments in US carbon reduction projects be stimulated?
© First Climate | 12/19/08Dr. Sascha Lafeld
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First Climate
Carbon Investment Advisory
CarbonAsset
Development
Sales & Trading
Climate Neutral
Services
ProjectFinance
Integrated Carbon Asset Management
© First Climate | 12/19/08Dr. Sascha Lafeld
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Global Player: 13 Offices on 4 Continents
Washington, D.C.
Santiago de Chile
Paris
Kolkata Hanoi
Frankfurt Zurich Beijing
San Francisco
London
Partnerships
Offices
Berlin
Luxembourg Singapore
© First Climate | 12/19/08Dr. Sascha Lafeld
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Regional and State Initiatives in the US
Regional Greenhouse Gas Initiative (RGGI) Cap-and-trade program which limits carbon emissions from fossil fuel-fired power
plants larger that 25 MW Start in 01/09, includes 10 northeastern US states Domestic carbon offsets can be used to meet 3.3% of emissions obligations during
each three-year trading phase
Western Climate Initiative (WCI) 7 western US states and 4 Canadian provinces Multi-sector cap-and-trade scheme by 01/12 with overall goal of reducing regional
GHG emissions 15% below 2005 levels by 2020 Domestic & international offsets shall be used to cover approx. 1% of overall cap in
2013 and up to 7.35% by 2020
Midwest Regional GHG Reduction Accord (MRP) Signed in November 2007, newest regional initiative, includes 6 mid-western US
states and 1 Canadian province Market design anticipated to be released in March 2009
© First Climate | 12/19/08Dr. Sascha Lafeld
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California: Assembly Bill 32 (AB 32)
Signed in 2006, GHG reduction measures implemented by 2012 Reduce CA emissions to 1990 levels by 2020, approx. a 30%
reduction from “business-as-usual”
Key Components Energy efficiency Renewable energy Cap-and-trade linked to WCI Aggressive targets for transport related emissions
Pending Decisions Role of offsets Proposed scoping plan released in 10/08, vote in 12/08
© First Climate | 12/19/08Dr. Sascha Lafeld
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RGGI Observer
Midwestern Regional GHG Reduction Accord
MRGHGRA Observer
Regional Greenhouse Gas Initiative RGGI
Western Climate Initiative Observer
Western Climate Initiative •The District of Columbia is a RGGI observer, but does not appear on this map. Source: Pew Center on Global Climate Change.
US States Participating in GHG Programs
© First Climate | 12/19/08Dr. Sascha Lafeld
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Federal Level: Lieberman/Warner - Dingell-Boucher
Climate Security Act (Lieberman-Warner) Introduced to Senate in 10/07
Latest version calls for 19% GHG reductions below 2005 levels by 2020 and 71% below 2005 levels by 2050
Stalled in Senate June 2008
Dingell-Boucher proposal Introduced in the House of Representatives 10/08
Draft has not yet been formally introduced for a vote but will guide federal climate policy discussions in 2009
Weak short-term target: 6% reduction from 2005 by 2020
Strong long-term target: 80% by 2050
Significant use of domestic/international offsets allowed, increasing over time
© First Climate | 12/19/08Dr. Sascha Lafeld
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The Obama Administration
Proposed Policies:
Implement Economy Wide Cap-and-Trade Program GHG Emissions reduction goal of 80% below 1990 levels by 2050
Require 100% auction of pollution credits
Portion of revenue generated from cap-and-trade to be used to accelerate development of low-carbon technologies
Obama’s stance on the role of offsets under federal cap and trade still to be determined
International Efforts Re-engage UNFCCC
Create new Global Energy Forum based on the G8 plus Brazil, China, India, Mexico and South Africa
© First Climate | 12/19/08Dr. Sascha Lafeld
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Potential size of the US Carbon Market
source: Goldman Sachs: Global Climate Change Policy, October 2008
© First Climate | 12/19/08Dr. Sascha Lafeld
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Role of offset credits
© First Climate | 12/19/08Dr. Sascha Lafeld
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How offset credits influence price (Lieberman-Warner)
Current draft: Domestic offsets & International offsets = 15% of compliance obligation
US carbon prices of $35-40/t by 2015 & $45/t by 2020 (New Carbon Finance)
EPA analysis: If the use of domestic offsets and international credits is unlimited,
then allowance prices fall by 71% compared to the bill as written
If domestic offsets and international credits are not allowed, the allowance price increases by 93% compared to the bill as written
© First Climate | 12/19/08Dr. Sascha Lafeld
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Conclusions
Climate change is likely to remain high on the Obama Admin agenda.
The existence of various regional GHG reduction schemes will expedite the development of a federal scheme due to the concerns about effectiveness of a “patchwork” of programs.
Investment in carbon reduction projects stimulated by:
Clear market signals related to use of offsets within federal/regional schemes
Innovative financing approaches to provide equity investment i.e public funding with lower cost of capital
Money from allowance auctions to fund technology research
© First Climate | 12/19/08Dr. Sascha Lafeld
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Obama
“Today we begin in earnest the work of making sure that the world we leave our children is a just a little bit better than the one we inhabit today”
-President-Elect Barack Obama