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The Carbon Market

The Carbon Market. Trading Carbon in Europe. Dublin November 09. Understanding Cap and Trade. Cap and. Trade. Kyoto Implementation. Europe – global leadership position Pre-Kyoto trading scheme (Phase I) 2005-2007 Phase II coincides with Kyoto period

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The Carbon Market

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  1. The Carbon Market Trading Carbon in Europe Dublin November 09

  2. Understanding Cap and Trade Cap and Trade

  3. Kyoto Implementation • Europe – global leadership position • Pre-Kyoto trading scheme (Phase I) 2005-2007 • Phase II coincides with Kyoto period • EUETS legally binding across all 27 member states • Average reduction of 8% (from 1990 levels) • 12% of allowances can come from CDM (national limits ranging from 0 to 20%) • 2013-2020 scheme being finalised

  4. Climate Exchange PLC (CLE) European Climate Exchange (ECX) Chicago Climate Exchange (CCX) Chicago Climate Futures Exchange (CCFE) Corporate structure

  5. ECX & ICE Partnership WebICE Platform ECX Carbon • Product Development • Client Relationships • Marketing • System infrastructure • Clearing and Settlement • Regulation • Supervision and Helpdesk 5

  6. Futures and Options based on underlying: EUAs European Union Allowances CERs (secondary) Certified Emission Reductions EU ETS - European Union Emissions Trading Scheme CDM - Clean Development Mechanism project credits ECX Products

  7. Hedgers Investors Speculators Eg. Banks, funds Arbitrageurs Who is the Market? Eg. Industrials, utilities Eg. Algo’s, proprietary traders Eg. Banks, specialised traders

  8. Price and volume ECX EUA Futures Contracts•94 million tonnes of CO2 traded in 2005 with a market value of €2.1 billion• 452 million tonnes of CO2 traded in 2006 with a market value of €9 billion•1 billion tonnes of CO2 traded in 2007 with a market value of €17.5 billion

  9. Macro Political support National developments Economic (growth/recession) Innovation Micro Demand Oil price Coal price Gas price European weather/temperature Interest rates Exchange rates Other markets CDM supply Price Drivers Key asset characteristics – EUA supply is theoretically fixed so demand leads price formation. CER supply is variable but needs long-term signals.

  10. EUA-CER Prices (Dec 09) 10

  11. Where Next? Aus ETS 445Mt EU ETS 2,080Mt NZ ETS 100Mt CERs bridge the Regional Schemes Japan ETS 1,272 Mt US ETS 5,760Mt Canada ETS 400Mt China/India?

  12. Multiple roads to the same destination Behavioral change Renewable energy sources Voluntary markets (CSR and pre-mandatory) Mandatory cap & trade

  13. Watch this space! “The total global carbon market value could reach €2 trillion ($3.1 trillion) by 2020.” - POINT CARBON, May 2008

  14. Proud sponsors of the Catlin Artic Surveywww.catlinarticsurvey.com www.ecx.eu Patrick.birley@ecx.eu

  15. Upcoming Events Climate Change Forum: What is at stake in Copenhagen? Venue: European Parliament Office, 43 Molesworth Street, Dublin 2. Date: Friday 20th November, 9.00 am - 12.30 pm. Speakers: John Gormley, Minister for the Environment, Mary Kelly, Director General of the EPA, Tom Arnold, CEO of Concern and others. The Case for a Climate Change Law Venue: The IIEA Date: 23 Nov 2009 Speaker: Liz McManus View www.iiea.com for more details

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