An Introduction to the Voluntary Carbon Markets

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Intervención de Grattan MacGiffin
Managing Director of Global Sustainable Trading Limited, Londres, en el marco de las jornadas de Mercado de Carbono.
16_02_2011
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http://www.eoi.es/portal/guest/evento/1392/i-jornada-mercados-de-carbono-y-reduccion-de-emisiones--carbon-markets-and-emission-reduction

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An Introduction to the Voluntary Carbon Markets

  1. 1. An Introduction to the Voluntary Carbon Markets<br />By Grattan MacGiffin<br />Managing Director, Global Sustainable Trading Limited<br />EOI, Madrid<br />February 16, 2011<br />
  2. 2. Global Sustainable Trading Limited is a part of the Global Sustainable Group Ltd. Offices in Boston, London, Paris and Izmir.<br />
  3. 3. A little joke…<br />El doctor llama por teléfono a su paciente:<br />‘Vera, tengo una noticia buena y otra mala’.<br />‘Bueno... dígame primero la buena’.<br />‘Los resultados del análisis indican que le quedan 24 horas de vida.’<br />‘Pero, bueno, ¿eso es la buena noticia? ¿Entonces cuál es la mala’?<br />‘Que llevo intentando localizarle desde ayer’. <br />
  4. 4. An Introduction to the Voluntary Carbon Markets<br /><ul><li>Introduction
  5. 5. Definitions
  6. 6. Historic data
  7. 7. Components of a VER offset
  8. 8. VER pricing
  9. 9. Transacting VERs
  10. 10. VCM versus Regulated Emissions market
  11. 11. The future
  12. 12. Questions</li></li></ul><li>
  13. 13. Definitions<br />“In a voluntary carbon market, an entity (company, individual, or another ‘emitter’) volunteers to offset its carbon emissions by purchasing carbon allowances from a third party, who then takes this money and uses it towards a project that will reduce carbon in the atmosphere.” National Renewable Energy Lab<br /> “Voluntary Emission Reductions (VERs) are carbon credits that are not certified by the United Nations under the Kyoto Protocol. Some companies and individuals choose to buy carbon credits resulting from carbon-cutting projects that are not certified by the UN, in order to meet their own carbon reduction objectives.” Financial Times, London<br />
  14. 14. Historic Volume in the Voluntary Markets<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  15. 15. Historic Value in the Voluntary Markets<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  16. 16. 2009 – 2010 Trends<br />2009 started strongly, ended quietly<br />Linkages and infrastructure building a key theme<br />Better information<br />Impacts of recessions and regulation<br />Carbon+<br />
  17. 17. The components of a VER offset<br />These include…<br />Standard<br />Project type (‘methodology’)<br />Location<br />Vintage<br />
  18. 18. Offset Standards in the Voluntary Carbon Markets, 2009<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  19. 19. Transaction Volume by Standard, 2008 v 2009<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  20. 20. Transaction Volume by Project Type, 2008 v 2009<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  21. 21. Land-Based Credits Sold OTC, 2008 v 2009<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  22. 22. Transaction Volume by Project Location, 2009<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  23. 23. Transaction Volume by Location and Project Type<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  24. 24. Transaction Volume by Location and Project Type<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  25. 25. Transaction Volume by Vintage, 2008 v 2009<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  26. 26. Pricing<br />
  27. 27. Average Credit Price by Project Type, 2008 v 2009<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  28. 28. Typical Market Pricing Summary<br />
  29. 29. Transacting VERs<br />
  30. 30. Issues in Transacting VERs<br /><ul><li>Not commoditised
  31. 31. No guarantees of enduring appeal
  32. 32. Changing fashions
  33. 33. Beauty in the eye of the beholder
  34. 34. Interference from external agencies e.g. delays by UN, 3rd party verifiers
  35. 35. Legislative uncertainty
  36. 36. Occasional bad press</li></ul>= HARD WORK!<br />
  37. 37. Transaction Volume by Type of Buyer, 2009<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  38. 38. Credit Issuance<br />Connectivity<br />Project Design<br />Project Operation<br />Project Validation<br />Verification<br />Role of Registry Infrastructure in the Building Blocks of an Environmental Market <br />Marketplace: Trading of Credits and Allowances<br />Creation and / or Allocation of Credits<br />Usage<br />Markit Environmental Registry System<br />Pending Issuance Units<br />Post Trade Information & Services<br />Market Establishment Services<br />Track Transfers<br />Track Retirement<br />Monitoring Report upload<br />Register Projects<br />Track Transfers<br />Governments and regulatory agencies<br />Traders / Brokers / Investment Banks<br />Buyers<br /><ul><li>Domestic ETS participants
  39. 39. Governments
  40. 40. Banks
  41. 41. Traders
  42. 42. Retailers
  43. 43. Corporate Buyers
  44. 44. Long term Investors
  45. 45. Speculative Buyers</li></ul>Allowances (tradable permits/credits) <br />allocatedto regulated entities<br /> Offset<br />Exchanges and Clearing Houses<br />Project Funders e.g. banks, investors, non-profits<br />Credits created<br />Settlement<br />Owners/Operators of environmental market project<br />
  46. 46. Transaction Volume by Registry Utilised, 2009<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  47. 47. Tips<br /><ul><li>SELLERs
  48. 48. Select standard carefully
  49. 49. Understand what is selling
  50. 50. Have all info in Registry account
  51. 51. Consider sale size/vintages
  52. 52. Commit to sell
  53. 53. Speak to experts
  54. 54. Don’t cut corners
  55. 55. Be realistic!
  56. 56. Aim for repeat business
  57. 57. BUYERs
  58. 58. Assess carefully what you need
  59. 59. Understand what is available
  60. 60. Have Registry account ready
  61. 61. Buy only what you need
  62. 62. Commit to buy
  63. 63. Speak to experts
  64. 64. Accept unforeseen delays
  65. 65. Be realistic!
  66. 66. Aim for repeat business</li></li></ul><li>Regulated Emissions Market v Voluntary Carbon Market<br />
  67. 67. Transaction Volumes and Values, Global Carbon Market, 2008 and 09<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  68. 68. The Future…<br />
  69. 69. Projected Market Growth for the Voluntary Carbon Markets, according to Participants<br />Source: “State of the Voluntary Carbon Markets 2010”, Ecosystem Marketplace and Bloomberg New Energy Finance<br />
  70. 70. Likely Scenarios..?<br /><ul><li>Bounce back to upward growth trend in global VCM
  71. 71. Continued evolution of standards and market transparency
  72. 72. More REDD; more African projects
  73. 73. More Innovation of new project methodologies e.g. water filters
  74. 74. Broader base of investment – health, education; aid, development budgets
  75. 75. More forward trading as market matures
  76. 76. US offsets and trading to dominate growth e.g. CaT, WCI</li></li></ul><li>Mucho Gracias!<br />grattan@gteglobal.org<br />00 44 7733 365303<br />

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