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The Future of Carbon in China

                      Beijing Energy Network

                      John Romankiewicz




©...
Copyright and disclaimer

•   This publication is the copyright of Bloomberg New Energy Finance. No portion of this docume...
Bloomberg New Energy Finance




                           150 staff in 9 offices worldwide
             Clean energy, en...
Agenda

Carbon: where do we stand?

EU ETS/Kyoto Market Summary

Price Scenarios

CDM uncertainty

China’s domestic market...
Agenda

Carbon: where do we stand?

EU ETS/Kyoto Market Summary

Price Scenarios

CDM uncertainty

China’s domestic market...
Under BAU, global emissions increase 33% by 2020

                                 70,000




                            ...
So…where are the carbon caps?




                         20-30%
                          1990
                 17%     ...
Agenda

Carbon: where do we stand?

EU ETS/Kyoto Market Summary

Price Scenarios

CDM uncertainty

China’s domestic market...
Market prices trading flat

                        Spread remains narrow                                                 ...
Agenda

Carbon: where do we stand?

EU ETS/Kyoto Market Summary

Price Scenarios

CDM uncertainty

China’s domestic market...
Large range of potential demand given ETS possibilities

     Offset demand (MtCO2e)                                      ...
Agenda

Carbon: where do we stand?

EU ETS/Kyoto Market Summary

Price Scenarios

CDM uncertainty

China’s domestic market...
The future of CDM in China?




                                              ?
                         CERs




EU: 1.7 ...
The anatomy of an EB additionality crisis

Meeting            Rejections                     Corr. requests               ...
Post-2012 uncertainty and wind controversy dampening new project activity


     Number of projects                       ...
Agenda

Carbon: where do we stand?

EU ETS/Kyoto Market Summary

Price Scenarios

CDM uncertainty

China’s domestic market...
Will NAMA targets be met with market mechanisms?

 Historic and projected carbon intensity
                               ...
The future of carbon in China?




                            ?         Traded markets
           Regulation

           ...
Services:
                             Industry Intelligence: Data &
                             Analytics
              ...
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Future of Carbon in China - Beijing Energy Network

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The Future of Carbon in China
Presented by John Romankiewicz
Bloomberg New Energy Finance
April 28, 2010
Beijing Energy and Environment Roundtable

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Transcript of "Future of Carbon in China - Beijing Energy Network"

  1. 1. The Future of Carbon in China Beijing Energy Network John Romankiewicz © Bloomberg New Energy Finance, 2004-2010 April 21, 2010
  2. 2. Copyright and disclaimer • This publication is the copyright of Bloomberg New Energy Finance. No portion of this document may be photocopied, reproduced, scanned into an electronic system or transmitted, forwarded or distributed in any way without prior consent of Bloomberg New Energy Finance. • The information contained in this publication is derived from carefully selected public sources we believe are reasonable. We do not guarantee its accuracy or completeness and nothing in this document shall be construed to be a representation of such a guarantee. Any opinions expressed reflect the current judgment of the author of the relevant article or features, and does not necessarily reflect the opinion of Bloomberg New Energy Finance. The opinions presented are subject to change without notice. Bloomberg New Energy Finance accepts no responsibility for any liability arising from use of this document or its contents. Bloomberg New Energy Finance does not consider itself to undertake Regulated Activities as defined in Section 22 of the Financial Services and Markets Act 2000 and is not registered with the Financial Services Authority of the UK. 2 Beijing Energy Network presents BEER April 21, 2010
  3. 3. Bloomberg New Energy Finance 150 staff in 9 offices worldwide Clean energy, energy smart technologies, carbon markets Data and analysis covering policy, finance, technology, markets, and supply chain 3 Beijing Energy Network presents BEER April 21, 2010
  4. 4. Agenda Carbon: where do we stand? EU ETS/Kyoto Market Summary Price Scenarios CDM uncertainty China’s domestic market 4 Beijing Energy Network presents BEER April 21, 2010
  5. 5. Agenda Carbon: where do we stand? EU ETS/Kyoto Market Summary Price Scenarios CDM uncertainty China’s domestic market 5 Beijing Energy Network presents BEER April 21, 2010
  6. 6. Under BAU, global emissions increase 33% by 2020 70,000 60,000 Global emissions (MtCO2e) 50,000 Oceania Asia 40,000 Africa Europe 30,000 Latin America North America 20,000 GE2M 2010 Peak Scenario IEA WEO 2009 Reference Scenario 10,000 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Carbon market value is created when caps are put in place… 6 Beijing Energy Network presents BEER April 21, 2010
  7. 7. So…where are the carbon caps? 20-30% 1990 17% 40-45% 25% - 2005 intensity 1990 30% from BAU 36% from 25% BAU intensity 5-25% 2000 34% from BAU Copenhagen pledges fail the 2°C test 7 Beijing Energy Network presents BEER April 21, 2010
  8. 8. Agenda Carbon: where do we stand? EU ETS/Kyoto Market Summary Price Scenarios CDM uncertainty China’s domestic market 8 Beijing Energy Network presents BEER April 21, 2010
  9. 9. Market prices trading flat Spread remains narrow AAU trading activity picking up Price (€/t) Spread Volume (MtCO2e) 35 80% 200 70% 180 30 160 60% 25 140 50% 20 120 40% 100 15 30% 80 10 60 20% 40 5 10% 20 0 0% 0 Feb-10 Sep-08 Nov-08 Aug-09 Dec-09 Oct-09 Jul-08 Mar-09 Jul-09 May-08 Jan-09 May-09 Jan-09 Nov-08 Jul-09 Nov-09 Sep-08 Sep-09 Mar-09 May-09 CER discount EUA CER AAUs CERs Source: Bloomberg, ECX 9 Beijing Energy Network presents BEER April 21, 2010
  10. 10. Agenda Carbon: where do we stand? EU ETS/Kyoto Market Summary Price Scenarios CDM uncertainty China’s domestic market 10 Beijing Energy Network presents BEER April 21, 2010
  11. 11. Large range of potential demand given ETS possibilities Offset demand (MtCO2e) Price (€/t) 1,200 20 1,000 15 800 600 10 400 5 200 - 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Economy-wide US ETS Power-sector US ETS Australia Japan EU Price (Power-sector US ETS) Price (Economy-wide US ETS) Source: Bloomberg New Energy Finance 11 Beijing Energy Network presents BEER April 21, 2010
  12. 12. Agenda Carbon: where do we stand? EU ETS/Kyoto Market Summary Price Scenarios CDM uncertainty China’s domestic market 12 Beijing Energy Network presents BEER April 21, 2010
  13. 13. The future of CDM in China? ? CERs EU: 1.7 GtCO2e to 2020 Australia: 299 MtCO2e to 2020 Japan: 880 MtCO2e to 2020 US: Don’t count on it, legislation indicates sectoral, forestry, LDC preferences 13 Beijing Energy Network presents BEER April 21, 2010
  14. 14. The anatomy of an EB additionality crisis Meeting Rejections Corr. requests Review Main developments Beginning of reviews regarding tariff EB46 0 0 7 issue EB47 0 7 1 First Chinese wind project rejected* EB notices certain reductions over EB48 0 5 10 time EB49 0 11 4 E+/E- policy discussion begins EB50 0 6 7 “ Application of highest tariff ” EB51 8** 7 20*** 10 rejections ahead of COP15 Clifford Mahlung replaces Lex de EB52 6 27 6 Longe; decision on E+/E- policy guidance postponed Further evidence expected from EB53 0 6 0 DOEs Of 14 Chinese wind projects rejected to date, 8 were in Heilongjiang Highest historic tariff was 18–30% higher than RMB 0.61/kWh. Note: Table data points only include instances where tariff was main issue; *1st rejection not because of tariff issue; **2 unrejected; ***including 6 for 2nd review 14 Beijing Energy Network presents BEER April 21, 2010
  15. 15. Post-2012 uncertainty and wind controversy dampening new project activity Number of projects Reductions (MtCO2e/yr) 200 40 150 30 100 20 50 10 0 0 2005 2006 2007 2008 2009 2010 Projects Reductions Source: UNFCCC 15 Beijing Energy Network presents BEER April 21, 2010
  16. 16. Agenda Carbon: where do we stand? EU ETS/Kyoto Market Summary Price Scenarios CDM uncertainty China’s domestic market 16 Beijing Energy Network presents BEER April 21, 2010
  17. 17. Will NAMA targets be met with market mechanisms? Historic and projected carbon intensity Historic and projected grid capacity (GW) ($GDP/tCO2e [1990 prices]) 793GW 1520 GW (estimate) 0.9 1,600 0.8 0.7 32% 46% 1,200 0.6 reduction % renewables 0.5 800 0.4 45% target 24% 0.3 for 2020 400 0.2 0.1 0 0.0 2008 2020 1990 1995 2000 2005 2010 2015 2020 Thermal Nuclear Historic EIA scenario Large Hydro Small Hydro Wind Biomass and Waste Solar Source: Bloomberg, NDRC, EIA, NBS 17 Beijing Energy Network presents BEER April 21, 2010
  18. 18. The future of carbon in China? ? Traded markets Regulation 18 Beijing Energy Network presents BEER April 21, 2010
  19. 19. Services: Industry Intelligence: Data & Analytics Insight: Research & Analysis John Romankiewicz Forecasting: Carbon & Global jromankiewic@bloomberg.net Energy Custom & Consortium Research News & Commentary Executive Briefings & Workshops Bloomberg New Energy Finance www.newenergyfinance.com sales@newenergyfinance.com Summit Subscription-based news, data and analysis to support your decisions in clean energy and the carbon markets

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