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CDM market overview

Comprehensive analysis of CDM demand and supply, factors impacting low prices, buyer preferences, future price scenarios, and key market insights.

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CDM market overview

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  1. CDM market overview Jorund Buen, Partner, Point Carbon SE Asia Forum on GHG Mitigation, Market Mechanisms and Sustainable Development, Manila 11 September 2003

  2. Outline of presentation • Brief overview of Point Carbon • CDM demand analysis • CDM supply analysis • Summary: Why is the price low? Which factors may influence this?

  3. News and market information: CDM Monitor, Carbon Market News, Carbon Market Europe Research and analysis: Carbon Market Analyst, Carbon Market Quarterly, Carbon Market Projects, JI Country Profiles Transaction database Structural models Empirical models Trading systems database CER forecaster Country ranking (JI/CDM) Expert polls Products and tools Analytical tools Product Portfolio

  4. Demand

  5. CERs: Funder’s keepers? Other CERUPT NCDF PCF • Annex I governments dominate CDM buyer side at present • Might keep for compliance rather than trade • However: New public-private partnerships emerge CERs issued 2005 (produced -2004)

  6. ADB/IETA study: Key insights • Planned CER procurement -2012  100 MtCO2e; will likely increase (JPN, IT, SP distance to target) • Dutch dominance (MoUs; market experience; breadth of initiatives; volumes) • Preferred project type: Renewables • MoUs centred in Latin America; SE Asia gains popularity • Price preference: indicatively 3-6.5 USD/tCO2e (limited data); some willing to pay more for “quality CERs” • Investment preference: neighbouring countries; Latin America; large, well-known countries • Internal Annex I resource competition CDM vs JI?

  7. CDM’s part of the cake

  8. Kyoto gaps

  9. EU Gaps

  10. Payment and price preferences

  11. MoUs

  12. Project types

  13. Supply

  14. The CDM Pipeline PDD DB PDD DB PDD DB PDD DB PDD DB PDD DB Baseline Baseline Baseline Baseline Baseline Baseline • • • • • • Project Market Project Market Project Market Project Market Project Market CER estimate CER estimate CER estimate CER estimate CER estimate CER estimate • • • • • • Host approval Host approval Host approval Host approval Host approval Host approval • • • • • • Risk: Risk: Risk: Risk: Risk: PDD PDD PDD PDD PDD Not validated Not validated Not validated R R R V V V Delay Delay Delay R R R R Approval, Approval, Approval, Approval, Approval, DA DA DA DA Executive Board Executive Board Executive Board Executive Board Executive Board Non Non Non Non Non - - - - - approval approval approval approval approval R R R R R NA NA NA NA NA Failure Failure Failure Failure Failure R R R R R F F F F F Implementation Implementation Implementation Implementation Implementation Delay Delay Delay Delay Delay R R R R R D D D D D Certification, Certification, Certification, Certification, Certification, Uncertified Uncertified Uncertified Uncertified Uncertified R R R R R U U U U U CER CER CER CER CER Noncommercial Noncommercial Noncommercial Noncommercial Noncommercial CER CER CER CER CER R R R R R M M M M M Kyoto Market Kyoto Market Kyoto Market Kyoto Market Kyoto Market

  15. CERs to market • About 2 MtCO2e to market in 2005 • About 0,1 % of total emissions • Dwarfed by annual variations

  16. CDM host countries

  17. Why are prices low? • Considerable supply of PINs to few, dominant buyers that may co-ordinate actions • Demand for potential CERs limited due to uncertainty and risk • Will Kyoto enter into force? • Will CDM host country approve? • Will host country impose restrictions making project economically unviable? • Will CDM EB approve methodology & project? • Will we fail to implement the project? • Dominant CDM buyers have probably had important influence on carbon prices so far

  18. Future price drivers: Scenarios • Upward: • First CERs issued (only Kyoto risk left for most buyers) • Host country and CDM EB approval standardised • CER price stratification • Early CER supply limited due to barriers • Accumulated 3-3.5 MtCO2e to enter the market within 2005 • Linking Directive approved • Possible to convert CERs and ERUs to EU allowance units • No significant barriers to CER supply • EU ETS Allocation Plans concluded; many actors short • Russian ratification, Kyoto entry into force • Downward: • CDM awareness  no. of low-cost projects  • Sinks modalities and guidelines clarified • Host country skepticism towards pure mitigation projects  complicated approval processes • Price competition AAUs v CERs

  19. Prepare yourself! To access our analyses, order at:www.pointcarbon.com Selected clients: BP, Deutsche Bank, DuPont, Electrabel, ENEL, ENI, GdF, Holcim, J-Power, Norsk Hydro, Nuon, PCF, RWE, Shell, Statoil

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