Session 1 presentation from the 5th Strategic Dialogue of the Carbon Market Platform, 4-5 November 2020

1. Global carbon markets in COVID
Working to deliver a net-zero future
Strategic Dialogue of the Carbon Markets Platform
Dirk Forrister– President and CEO, IETA
4 November 2020
1

2. * Carbon allowances are dominant type of trade
* Carbon offsets are used in both voluntary + compliance markets
* Given limits on use, offsets trade at a discount to allowances
* Voluntary market prices vary widely, reflecting ESG co-benefits
* TCFD* is strong driver of new demand
* Taskforce on Climate-related Financial Disclosure
2
Scene setter: today’s carbon compliance markets
Source: International Carbon Action Partnership 2020

3. EU ETS 2020 market during COVID 19
Source: ICE Futures (Oct 2020)
Market observations
• COVID shut-downs, economic slow-
down and energy demand decline
• EU ETS dropped 36% in March
• Environmental targets remain in
place, with robust future outlook
• Prices gradually returned to pre-
COVID range
-36%

4. EU ETS 2020 market during COVID 19 (II)
Source: ICE Futures (Oct 2020)
Market observations
• COVID shut-downs, economic slow-
down and energy demand decline
• EU ETS dropped 36% in March
• Environmental targets remain in
place, with robust future outlook
• Prices gradually returned to pre-
COVID range
• Market now anticipating 2021 start of
Phase 4
Avg 2019 price = EUR 24.91
Avg 2020 price = EUR 24.02

5. 5
US carbon compliance markets during COVID-19
California carbon market 2020
Allowances
s
Offsets
s
US federal aviation market
• US volunteered for ICAO CORSIA program pilot phase
• Pilot baseline changed due to COVID (2019 only)
• Little demand in pilot phase, except voluntary action
• Approved US offset standards / programs (Mar 2020)
• American Carbon Register
• Verified Carbon Standard
• Climate Action Reserve
Source: Clear Blue Markets (June 2020)
California market observations
• With COVID shut-downs, California demand slipped
• Impacts for both allowance and offset markets
• Allowance auctions unsold
• Prices on exchanges declined below floor price
• Offset prices also dropped
• All market prices recovered to near floor price

6. 6
COVID 19 impacts on WCI auctions
Source: WCI / Quebec Ministry of Environment and the Fight Against Climate Change (2020)

7. Voluntary carbon market trends
7
* Strong appetite from private sector to act on climate, despite Covid-19 impacts and Article 6 uncertainties
* 1,100 + companies committed to Net Zero targets globally
* Cumulative voluntary carbon market volume tops 1.3 billion tons, with value exceeding $5.5 billion
* Growing list of initiatives looking into ways to mobilize more climate finance
Source: Ecosystem Marketplace (2020)
Transacted Voluntary Carbon Offset Volume, Value, and Weighted
Average Price by Project Category, 2019
Annual Voluntary Carbon Offset Issuances and Retirements, 2007–2019

8. Vision: carbon offsets market accelerate transition to net-zero
Source: International Carbon Reduction and Offset Alliance (2020) - All rights reserved
8
tCO2e
Time
Zero emissions
BAU emissions
Residual emissions: IPCC-
aligned decarbonization
pathway and procurement of
green electricity
Carbon credits from
reduced and avoided
emissions
Carbon credits from
biological and technological
sequestration

9. DRAFT PRESENTATION—DO NOT QUOTE, SUBJECT TO CHANGE
9
What is the potential value of Article 6?
If Article 6 were implemented
perfectly …
* How much could costs be
reduced?
* If those cost savings were applied
to enhance ambition, how much
more ambition might there be?
2030 Article 6 Potential
Cost reduction (billions 2015 USD/year),
Ambition increase (GtCO2/y)
Reduction in
Cost
Increased
Ambition
Fossil Fuels
Only
~$165
billion/yr
~4.3 GtCO2/yr
Land Use
incremental
change
~$210
billion/yr
~4.5 GtCO2/yr
Combined
~$375
billion/yr ~9 GtCO2/yr
Source: Jae Edmonds and Sha Yu, University of Maryland, Draft analysis -
Comments welcome (Oct 2020)

10. NDC Shadow Prices:
Nature-based Solutions
Significantly reduce shadow prices in
the near term
10
2030 2050
Independently
Implemented NDCs
Fossil Only
$0 to
$243/tonCO2
$0 to
$290/tonCO2
Cooperatively
Implemented NDCs
Fossil Only
$38/tonCO2 $54/tonCO2
Cooperatively
Implemented NDCs
Fossil & Nature-
Based
$22/
tonCO2
$56/
tonCO2
Source: Jae Edmonds and Sha Yu, University of Maryland, Draft Analysis/Comments Welcome - Presentation to 20th
IEA-IETA-EPRI GHG Trading Workshop (Oct 2020)

11. DRAFT PRESENTATION—DO NOT QUOTE, SUBJECT TO CHANGE
11
Potential changes in CO2 Emissions
Sellers
Buyers
=
Buyers and Sellers under Article 6
+
Source: Jae Edmonds and Sha Yu, University of Maryland, Draft Analysis/Comments Welcome - Presentation to 20th
IEA-IETA-EPRI GHG Trading Workshop (Oct 2020)

12. * Paris temperature goals require deep decarbonization + enhanced
cooperation
* Market linkages are essential to deliver the “net” of sources and sinks
* Corporates will respond to this potential, but good Art 6 rules are still
essential
* IETA’s economic modeling, spurred on at the Halifax meeting of the CMP,
has demonstrated the potential for economics and ambition
* Economic modeling continues in 2021 – pending funding commitments
* Economic potential of a carbon buyers club
* Implications of net zero targets
* SDG value in market cooperation
12
Why market cooperation matters

13. Thank you!
For more information:
forrister@ieta.org
www.ieta.org
13