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CARBON TRADING AND FINANCE: An Emerging Global Opportunity for Australia Michael Molitor

CARBON TRADING AND FINANCE: An Emerging Global Opportunity for Australia Michael Molitor. LEADING THE CHANGE: SUSTAINABLE BUSINESS IN ACTION Brisbane 21-22 May 2007. The Carbon Opportunity for Australia: The Key Question.

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CARBON TRADING AND FINANCE: An Emerging Global Opportunity for Australia Michael Molitor

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  1. CARBON TRADING AND FINANCE:An Emerging Global Opportunity for AustraliaMichael Molitor LEADING THE CHANGE:SUSTAINABLE BUSINESS IN ACTION Brisbane 21-22 May 2007 CarbonSHIFT Ltd.

  2. The Carbon Opportunity for Australia: The Key Question Can we dramatically reduce carbon emissions in Australia and simultaneously create a substantial new source of wealth for the Australian economy? (BP model) CarbonSHIFT Ltd.

  3. The Carbon Opportunity for Australia:The Size of the Challenge • Current level of carbon dioxide in the atmosphere: 390ppm • Level of carbon dioxide before 1800: 180280ppm • Stabilisation target for the year 2050: 450ppm?, 500ppm?, 550ppm? • Current annual human emissions of carbon dioxide into the • atmosphere: 30 billion metric tonnes (5 tonnes per person) • Annual U.S. emissions of carbon dioxide: 25 tonnes per person • (25% of world total) • Annual Australian emissions of carbon dioxide: 28 tonnes per • person (2% of world total) CarbonSHIFT Ltd.

  4. The Carbon Opportunity for Australia:The Global Stabilization Challenge Reduction of 600 billion metric tonnes of carbon dioxide500ppm Equal to global emissions of 2 tonnes per person per year! CarbonSHIFT Ltd.

  5. The Carbon Opportunity for Australia: The Global Size of the Opportunity At US$25/tCO2e, reducing 600 billion tonnes creates a capital market activitation opportunity of US$15 trillion “The biggest investment opportunity in history” John Doerr (Kleiner Perkins) CarbonSHIFT Ltd.

  6. The Carbon Opportunity for Australia:The Global Market has Responded 1 • GE (Ecomagination, US$10 billion in revenue) • Morgan Stanley (US$3billion low carbon fund) • Bank of America (US$20billion low carbon fund) • Citigroup (US$50billion low carbon fund) • Goldman Sachs (TXU buy out: US$42billion) • Clinton Low Carbon Building Fund (US$5billion) • BP-Rio Tinto hydrogen energy project CarbonSHIFT Ltd.

  7. The Carbon Opportunity for Australia:The Global Market has Responded 2 • CARBON DISCLOSURE PROJECT 280 investors US$41trillion under management world’s largest 2000 companies (ASX100) • JP Morgan (Carbon Index for bonds) • Citigroup New York (74 carbon winners) • Citigroup Australia (ASX100 carbon ratings) CarbonSHIFT Ltd.

  8. The Carbon Opportunity for Australia:Capital Markets’ New Carbon Factor Capital markets have created new metrics and analytics that will convert carbon management performance into financial performance. Capital markets have already begun the process of assigning either a discount or premium to the share price of companies on the basis of their carbon management strategies. For many companies across almost all sectors, carbon risks and opportunities will have a material impact on earnings, asset valuations and, ultimately, share prices. CarbonSHIFT Ltd.

  9. The Carbon Opportunity for Australia:Key Questions 2 and 3 How much of the US$15trillion chasing this global carbon challenge do we want to come to Australia? What do we need to do to position the Australian market to capture a large share of this opportunity? CarbonSHIFT Ltd.

  10. The Carbon Opportunity for Australia:A Focus on Managing Costs? The following Terms of Reference were announced by the Prime Minister on 10 December 2006: " Australia enjoys major competitive advantages through the possession of large reserves of fossil fuels and uranium. In assessing Australia’s further contribution to reducing greenhouse gas emissions, these advantages must be preserved. Against this background the Task Group will be asked to advise on the nature and design of a workable global emissions trading system in which Australia would be able to participate. The Task Group will advise and report on additional steps that might be taken, in Australia, consistent with the goal of establishing such a system." CarbonSHIFT Ltd.

  11. The Carbon Opportunity for Australia:The Market Captured in London The UK Emissions Trading Scheme (2002) was the first national carbon trading scheme in the world (quickly followed by the NSW GhG Abatement Scheme) One of the goals in getting started first was to push London as the global center of carbon finance and trading (approx. 68% of all carbon revenues passed through London in 2006) CarbonSHIFT Ltd.

  12. The Carbon Opportunity for Australia:The key elements to success Australia is in a position to be a world leader in the global market for carbon finance, trading, technologies, and services. We have a growing world-class finance market with more than AUD$1 trillion under superannuation management (Babcock & Brown Wind) We have world-class research in the key technology areas (CSIRO and UNSW) We have world-class service firms who are already world leaders in the global carbon market (PwC and Baker & McKenzie) We are the world’s largest net exporter of energy coal and, potentially, uranium. CarbonSHIFT Ltd.

  13. The Carbon Opportunity for Australia:The key requirements for success What we need to compete: • A legal requirement that all public companies in Australia report annually on their carbon risks (ASX Principle 7: materiality) • A national carbon trading scheme that is opportunity driven creating the market signals that drive innovation and leadership for Australian technology and companies • Strong medium term (2025) and long-term (2050) binding national carbon reduction targets • Significantly more investment in CCS CarbonSHIFT Ltd.

  14. Carbon Trading and Finance: The key requirements for success • A strong national renewable energy target that allows Australian technology to stay here and prosper • Significant tax incentives for low carbon buildings • A return to the Kyoto process to create opportunites in the post-2012 regime (Australia and China?) • Shift annual car registration fees to carbon emissions (UK model) • A national carbon registry (interface with EU ETS?) • A national carbon trading platform (ASX?) CarbonSHIFT Ltd.

  15. Carbon Trading and Finance: The “Sydney Carbon Group” More than 20 leading Australian companies have joined forces to start the process of positioning Sydney as the leading center for carbon finance, trading, and services in the Asia-Pacific region (Hong Kong?, Singapore?, Tokyo?, Shanghai?) California has a “Silicon Valley”; Australia will have the world’s only “Carbon Harbor”. CarbonSHIFT Ltd.

  16. THANK YOU Michael Molitor CarbonShift Ltd. Sydney michael.molitor@carbonshift.com CarbonSHIFT Ltd.

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