Carbon assets in a constrained global climate
policy regime: International perspectives and
implications for Africa
Godwel...
Objectives of the Presentation
1. To identify carbon assets and how have they been used in
mitigating climate change globa...
1. INTRODUCTION
The Kyoto Protocol and carbon assets
Generic
Generic

Kyoto Protocol
Mechanisms

Mechanism
s that create
C...
Carbon assets overview

1. Kyoto Protocol created carbon assets
a) Clean Development Mechanism (CDM)
b) Joint Implementati...
2. THE EVOLUTION OF CARBON ASSETS
Carbon assets and conversion factors
Greenhouse gas (GHG)

Global Warming Potential
(GWP...
• Carbon credits are always expressed in terms
of carbon dioxide equivalence (CO2e). For
example, one tonne of CO2 = one t...
Carbon Market Regimes
Non-Kyoto
Mandatory Regimes

UNFCCC

Voluntary
Regimes

New South Wales
(Australia)

Kyoto Mandatory...
3. CARBON ASSETS IN UNCERTAIN CLIMATE
REGULATORY FRAMEWORK

1. Kyoto Protocol meant to end 2012 Copenhagen was
supposed to...
CDM projects pipeline to 2012

4. An estimated 4,200 CDM projects with total carbon
asset amounting to 2.9 billion CERs we...
5. In terms of the CERs from the CDM
mechanism, data from the UNFCCC (2010b)
show that an estimated 2.9 billion CERs could...
7. As of 24 November 2010, an estimated 1.86
billion CERs had been taken up under the
registered CDM projects with a furth...
CDM projects by regions
Carbon Market Trends 2004 - 2009
Voluntary Markets
• Markit indicates that an estimated 54 million
tonnes of carbon dioxide equivalent (Co2e)
were traded o...
• If the voluntary credits traded on the Chicago
Climate Exchange are included, the volume of
the market for 2008 rises to...
4. Carbon Assets in Africa
• Uncertainty of Post Kyoto protocol diminishes the
hopes of having more CDM projects in Africa...
• The challenge for Africa into the future is how
we will manage REDD as our asset and not
mortgage our forests to multina...
Fast Start Climate Finance pledges
and committed amounts

Country
Total pledged

As of 19/09/10

Total committed
As of 28/...
Conclusion
• Carbon assets discussed that are of particular value
to Africa and our future : Clean Development
Mechanism (...
• These statistics are against a backdrop of a contested
post-Kyoto Protocol framework which has resulted in
a huge slowdo...
Thank you !
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Carbon disclosure in South Africa: Corporate green wash of genuine transition to low carbon economy?

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  • Carbon disclosure in South Africa: Corporate green wash of genuine transition to low carbon economy?

    1. 1. Carbon assets in a constrained global climate policy regime: International perspectives and implications for Africa Godwell Nhamo (PhD) Programme Manager: Exxaro Chair in Business & CC, Unisa & Alfred Bimha (Msc) Lecturer: Dept. Finance, Banking & Risk Management, UNISA carbon
    2. 2. Objectives of the Presentation 1. To identify carbon assets and how have they been used in mitigating climate change globally and in Africa 2. To show how Africa is going to be affected with regards to carbon assets as global leaders take longer to agree on a post Kyoto Protocol framework 3. To investigate whether the market for carbon assets continue to exist without a legally binding global climate policy regime and how will Africa be affected 4. To continue raising awareness regarding the new asset regime; and document progress and policy directions regarding carbon assets and Africa. 2
    3. 3. 1. INTRODUCTION The Kyoto Protocol and carbon assets Generic Generic Kyoto Protocol Mechanisms Mechanism s that create Carbon assets Clean Development Mechanism Assigned Amount Units (AAU) Carbon Reduction Units (CER) Generic Carbon Generic Carbon Joint Implementation International Emissions Trading Generic carbon Assets Emission Reduction Units (ERU) 3
    4. 4. Carbon assets overview 1. Kyoto Protocol created carbon assets a) Clean Development Mechanism (CDM) b) Joint Implementation (JI). 2. Other carbon assets discussed in the paper mainly come from the voluntary market a. such as Voluntary Carbon Unit (VCU) or Voluntary Carbon Standard (VCS) credit b. and the Reducing Emissions from Deforestation and Forest Degradation – commonly known as REDD.
    5. 5. 2. THE EVOLUTION OF CARBON ASSETS Carbon assets and conversion factors Greenhouse gas (GHG) Global Warming Potential (GWP) Carbon dioxide 1 Methane 21 Nitrous Oxide 310 Perfluorocarbons 6,500 – 9,200 Hydroflourocarbons 140-11,700 Sulphur hexafluoride 23,900 Source: Authors, after UNFCCC (2010d) 5
    6. 6. • Carbon credits are always expressed in terms of carbon dioxide equivalence (CO2e). For example, one tonne of CO2 = one tonne of CO2e hence in terms of the carbon market, one Carbon Credit = one certified emission reduction (CER). • In terms of methane, two tonnes of CH4 = one tonne of CO2e. Other information necessary is that one carbon credit = one CERs = one metric tonne of CO2e (Carbon Trading Glossary 2010).
    7. 7. Carbon Market Regimes Non-Kyoto Mandatory Regimes UNFCCC Voluntary Regimes New South Wales (Australia) Kyoto Mandatory Regime Chicago Climate Exchange (CCX) Kyoto Protocol CDM Non-Annex 1 countries (Developing Countries) Individual US States (East Coast, California, Oregon) Linking directive Joint Implementation Annex 1 Countries Retail Market European Union Trading Scheme (EU-ETS) 7
    8. 8. 3. CARBON ASSETS IN UNCERTAIN CLIMATE REGULATORY FRAMEWORK 1. Kyoto Protocol meant to end 2012 Copenhagen was supposed to give a regulatory framework post 2012 which was never agreed. 2. The overlap of the Copenhagen Accord and the Kyoto Protocol has important implications on the behaviour of prices of securities in carbon markets. 3. A glance at the factors that influence the value of an asset shows that market expectations, risk aversion, market efficiency, arbitrage opportunities, regulation and demand and supply are some of the important factors feeding into the equation that gives the value of an asset. 8
    9. 9. CDM projects pipeline to 2012 4. An estimated 4,200 CDM projects with total carbon asset amounting to 2.9 billion CERs were expected to materialise by 2012 (UNFCCC 2010b). 9
    10. 10. 5. In terms of the CERs from the CDM mechanism, data from the UNFCCC (2010b) show that an estimated 2.9 billion CERs could be realised by 2012 at the expiry of the Kyoto Protocol. 6. However, there is still a huge backlog in terms of the uptake of these CERs, which is an indication of the potential demand for carbon credits
    11. 11. 7. As of 24 November 2010, an estimated 1.86 billion CERs had been taken up under the registered CDM projects with a further 30 million accounted for by CDM projects seeking registration under the CDM Board. 8. This gives a total of 2.16 billion CERs leaving an estimated 0.74 billion CERs outstanding (25.52% of the potential CDM market).
    12. 12. CDM projects by regions
    13. 13. Carbon Market Trends 2004 - 2009
    14. 14. Voluntary Markets • Markit indicates that an estimated 54 million tonnes of carbon dioxide equivalent (Co2e) were traded over-the-counter (not on exchange) in 2008. • This was in comparison to a figure of 43.1 million tonnes of Co2e in 2007. The over-thecounter trade was worth US$396 million in 2008 compared to US$263 million in 2007.
    15. 15. • If the voluntary credits traded on the Chicago Climate Exchange are included, the volume of the market for 2008 rises to 123.4 million tonnes of Co2e with a market value of US$705 million.
    16. 16. 4. Carbon Assets in Africa • Uncertainty of Post Kyoto protocol diminishes the hopes of having more CDM projects in Africa • The issue of Africa being a risky investment destination. • Concerns of high costs in setting up the CDM projects • Copenhagen Climate Change Summit in 2009 gave hope to Africa of having increased carbon assets. • This summit recognised role that carbon assets from REDD play in GHG emissions mitigation, it also established the Green Climate Fund that will also finance REDD assets (UNFCCC., 2009)
    17. 17. • The challenge for Africa into the future is how we will manage REDD as our asset and not mortgage our forests to multinational corporation, agents and multilateral development banks like the world Bank that are financing some of the REDD projects. • Expectations of COP17 to be done in December 2011 to give a solution to the post Kyoto 2012 debacle.
    18. 18. Fast Start Climate Finance pledges and committed amounts Country Total pledged As of 19/09/10 Total committed As of 28/11/10 Programmes 19/10/10 28/11/10 Australia Belgium Canada Denmark AUD 599 million EUR 150 million CAD 400 million DKK 1 200 million DKK 308 million EUR 42,0 million DKK 308,0 million - 5 - European Union Finland France Germany Luxemburg Malta Netherlands Norway Portugal Slovenia Spain Sweden Switzerland United Kingdom USA EUR 150 million EUR 110 million EUR 1 260 million EUR 1 260 million EUR 9 million EUR 1 million EUR 310 million EUR 36 million EUR 8 million EUR 375 million EUR 800 million CHF 140 million GBP 1 500 million - EUR 50 million EUR 1 260 million EUR 310 million USD 357 million GBP 511 million - EUR 50,0 million EUR 1 260,0 million EUR 291,9 million EUR 9 million EUR 1 million EUR 310,0 million USD 357,0 million EUR 12,0 million GBP 511,0 million USD 1 700,0 million 7 7 11 7 - 8 7 51 2 7 7 2 6 17 7 -
    19. 19. Conclusion • Carbon assets discussed that are of particular value to Africa and our future : Clean Development Mechanism (CDM) from the Kyoto Protocol mechanism and the future of Reducing Emissions from Deforestation and Forest Degradation (REDD) • The CDM is seen as an asset under threat and one that Africa has not benefited in the past and is not likely to benefit from in the near future. • CDM project pipeline had a deficit of more than 25% if one is considering the 2008-2012 period that was set by the UNFCCC system
    20. 20. • These statistics are against a backdrop of a contested post-Kyoto Protocol framework which has resulted in a huge slowdown in CDM project investments globally. • In the short to medium term, CDM investment has also been affected by the global financial crisis with many developed countries (allocated carbon emissions caps - Annex 1) still battling with debt • Africa and other developing country governments need to take a precautionary principle as we engage the REDD. We are faced with a situation where African governments are desperate for foreign investors and foreign direct investment.
    21. 21. Thank you ! 21

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