Carbon Markets: A US Perspective
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Carbon Markets: A US Perspective



Presentation by Dr. Sascha Lafeld at TBLI CONFERENCE EUROPE 2008.

Presentation by Dr. Sascha Lafeld at TBLI CONFERENCE EUROPE 2008.



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Carbon Markets: A US Perspective Carbon Markets: A US Perspective Presentation Transcript

  • Carbon Markets: A US Perspective Dr. Sascha Lafeld, Executive Board Member Amsterdam,13.11.2008
  • Main Questions
    • What are the latest developments in the potentially largest carbon market worldwide?
    • How can investments in US carbon reduction projects be stimulated?
  • First Climate Carbon Investment Advisory Carbon Asset Development Sales & Trading Climate Neutral Services Project Finance Integrated Carbon Asset Management
  • Global Player: 13 Offices on 4 Continents Washington, D.C. Santiago de Chile Paris Kolkata Hanoi Frankfurt Zurich Beijing San Francisco London Berlin Luxembourg Singapore Partnerships Offices
  • 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
  • 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
    • 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 RGGI Observer Midwestern Regional GHG Reduction Accord MRGHGRA Observer Regional Greenhouse Gas Initiative RGGI Western Climate Initiative Observer Western Climate Initiative
  • 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
  • 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
  • Potential size of the US Carbon Market source: Goldman Sachs: Global Climate Change Policy, October 2008
  • Role of offset credits
  • 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
  • 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
  • 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