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Overview of the Carbon Market Olga Gassan-zade Director, Point Carbon

Overview of the Carbon Market Olga Gassan-zade Director, Point Carbon UNFCCC Technical Workshop on JI 16 October 2007. About Point Carbon Kiev. Founded in April 2004 Focus: JI, AAU markets and CDM Central Europe, Russia, Ukraine, Belarus, Kazakhstan, other FSU republics

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Overview of the Carbon Market Olga Gassan-zade Director, Point Carbon

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  1. Overview of the Carbon Market Olga Gassan-zade Director, Point Carbon UNFCCC Technical Workshop on JI 16 October 2007

  2. About Point Carbon Kiev • Founded in April 2004 • Focus: JI, AAU markets and CDM • Central Europe, Russia, Ukraine, Belarus, Kazakhstan, other FSU republics • Analysis, news, conferences • In house production of Carbon Project Manager • 20 employees: 10 analysts, 1 PhD

  3. Physical volume (2,397 Mt CO2e) Financial value (€23.6 billion) Other 2% Other 2% CDM 23% CDM 18% JI 1% JI 2% EU ETS 73% EU ETS 79% Source: Point Carbon 2007

  4. Market Activity (Forecast)

  5. Kyoto Gaps (2008-12) EU 15 Japan Net Kyoto Gap NTP GPP Canada ETS Others 0 500 1,000 1,500 2,000 2,500 3,000 [Mt CO e] Source: Point Carbon, June 06 2

  6. Supply: Majority already in pipeline 94% Existing projects - not risk-adjusted 19 % JI Upcoming projects - not risk-adjusted 70% 30% 81 % CDM 57% 43% Total 0 1000 2000 3000 4000 5000 Mt Source: Point Carbon

  7. Overview of JI Activities (as of Sept. 2007)

  8. Up-coming CDM projects 900 800 Existing projects - not risk-adjusted 700 Upcoming projects - not risk-adjusted 600 500 Mt 400 300 200 100 0 Other Waste LULUCF Gas flaring Renewable Fuel switching Energy efficiency Geosequestration Fugitive emissions Industrial processes Source: Point Carbon

  9. Up-coming JI projects 250 Existing project - not risk-adjusted 200 Upcoming projects - not risk-adjusted 150 Mt 100 50 0 Waste LULUCF Fuel switching Energy efficiency Fugitive emissions Renewable energy Industrial processes Source: Point Carbon

  10. Issuance 100% 80% 60% Issuance rate 40% 20% 0% Industrial Fuel Renewable Energy Waste Total processes switching efficiency Source: Point Carbon

  11. Adjusting JI deliveries - 56% 300 250 Not risk-adjusted Risk-adjusted 200 Mt 150 - 36% - 60% - 35% 100 - 39% - 38% 50 - 38% 0 Fugitive Renewable Industrial Energy Waste Fuel LULUCF emissions energy processes efficiency switching Source: Point Carbon

  12. Dominated by Russia? 400 High estimate 300 Best estimate Low estimate Mt 200 100 0 Russia Ukraine Poland Romania Bulgaria Others Source: Point Carbon

  13. What we say they will deliver 5,000 4,066 4,000 - 38 % 3,000 -35 % 2,505 Mt 2,000 1,000 - 52 % 0 CDM face CDM PCA est JI face value JI PCA est Total face Total PCA est value value Source: Point Carbon

  14. Demand in EU ETS Phase II (2008-12) • Will NAPs ensure scarcity? • Emissions 2270 Mt/year • Cap + reserves ÷ 2050 Mt/year • EU ETS demand 220 Mt/year • Will CERs/ERUs cover the shortage? • Total supply 390 Mt/year • Government purchase ÷ 140 Mt/year • Non-EU demand ÷ 40 Mt/year • CERs/ERUs available for EU ETS 210 Mt/year • CER/ERU supply will be a key price driver in the EU ETS

  15. Supply and demand - reference scenario • Phase II supply and demand balance • But, annual shortage until 2011 • Companies will have to borrow for compliance

  16. Outlook • Watch for the final battle • Post-2012 puzzle • Japan to open demand 2010 • Will Russia ever issue ERUs? • Green Investment Schemes • Supply/Demand • Will the be post-2012 demand? • Non-Kyoto markets? • How will supply markets react?

  17. Thank you for your attention! Olga Gassan-zade +380-50-3838-968 +81-90-442-02641 ogz@pointcarbon.com www.pointcarbon.com

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