Overview of Global Carbon Market Presented by: Iftekhar Enayetullah, Director, Waste Concern April 8, 2008

Presentation Outline 1.What is Carbon Financing? 2.Structure of Global Carbon Market 3.Carbon Market Relevant for Bangladesh 4.How Big is the Global Carbon Market? 5.Current Trends in the Carbon Market web:

What is Carbon Financing? Carbon financing can be defined as financial resources provided to projects generating (or expected to generate) green house gas emission reductions in the form of the purchase of such emission reductions. In simple term, carbon finance is a purchase contracts whereby one party pays another party in exchange for a given quantity of Green House Gas (GHG) emission reductions. web: Payment made in different forms to abate GHG EQUITY DEBT/ SOFT LOAN IN KIND CONTRIBUTION FOR TECHNOLOGIES CASH

Global Warming Potential (GWP) of Key GHG Green House Gas Global Warming Potential Carbon dioxide (CO 2 )1 Methane (CH 4 )21 Nitrous Oxide (N 2 O)310 HFCs140-11,700 Perflorocarbons (PFCs)7,000-9,200 Sulphur Hexafluoride (SF 6 )23,900 web:

Emission reduction credits) Industrialized country Project Reducing GHG emissions in developing country investment $$ web:

Structure of the Global Carbon Market Global CARBON market Compliance Markets KyotoMarkets New South Wales GHG Abatement Scheme EU ETS Chicago Climate Exchange UK ETS CDM -> CERs JI -> ERUs AAUs + RMUs EUAs VERs NGACs CCLAs Voluntary Markets

Carbon Market Compliance Market Voluntary Market CERVER Compliance markets generate and trade green house gas emission reductions known as Certified Emission Reductions (CERs) that are regulated and directly initiated under the Kyoto Protocols Clean Development Mechanism (CDM). Voluntary markets generate and trade greenhouse gas emission reductions that are not regulated or directly initiated by the Kyoto Protocol and known as Verified Emission Reductions or (VERs). Certified Emission Reduction (CERs): Green house gas reduction of any CDM project is measured according to internationally agreed methods and are quantified in standard units called Certified Emission Reductions (CERs). These are expressed in tons of carbon dioxide (CO2) equivalents. Verified Emission Reduction (VERs): Green house gas reduction outside Kyoto Protocol is measured according to internationally agreed methods and are quantified in standard units called Verified Emission Reductions (VERs). These are also expressed in tons of carbon dioxide (CO2) equivalents.

Investment Opportunity from CDM/VER maximum minimum

Carbon Market at a Glance and projected 2008 Type (Projected) Volume (MTCo2e) Value (M US$) Volume (MT Co2e) Value (M US$) Volume (MT Co2e) Value (MUS$) Volume (MT Co2e) Value (MUS$) Allowances EU-ETS New South Wales CCX Uk-ETS ,000 CDM JI Others ,000 Total71010, , , ,000 CDM Source: World Bank and IETA; 2007 and 2008 Point Carbon (Press Release Feb 26, 2008) Annual Volumes and Values of Transactions

Billion US $ Carbon Market at a Glance and Projected 2008 Source: World Bank and IETA, May 2007 and 2008 Point Carbon (Press Relaese Feb 26, 2008)

Overview of the CDM market CDM has the largest CO2 project based offset system in the world –979 registered projects by April –Approx. additional 2021 projects in pipeline –49 countries –134,993,328 CERs issued (certified emission reductions) –2.7 billion CERs expected to end of 2012 CDM has a legal basis in the Kyoto Protocol –Run by Executive Board (EB) answerable to KP Parties –EB back-stopped by UNFCCC secretariat with support for: Registration and issuance Accreditation of third-party validators Methodologies for emissions baseline setting and monitoring

Overview of the CDM market No. of Projects/ CERs before 2012 (million)

Overview of the CDM market Map and statistics accessible at

Overview of the CDM market

Bangladesh 0.2%

Registered CDM projects all over the World Sectoral Scope Registered Projects 1Energy Industries (renewable -/ non-renewable sources)650 2Energy distribution0 3Energy demand16 4Manufacturing industries69 5Chemical Industries23 6Construction0 7Transport2 8Mining / mineral production7 9Metal production1 10Fugitive emissions from fuels (solid, oil and gas)98 11 Fugitive emissions from production & consumption of halocarbons & sulphur hexafluoride 16 12Solvent use0 13Waste handling and disposal256 14Afforestation & reforestation1 15Agriculture83

Overview of the CDM market

carbon trading Present Price of CERs and VERs (Carbon Credits) Crediting Period for CERs and VERs Both the CERs and VERs are represented in terms of carbon dioxide equivalent (CO 2 e). The present price (As of 1 April, 2008): CERs : US $ /ton VERs : US $ 7 to US $ 10/ ton Emission reductions can be claimed for maximum ten years, without revision of the project baseline, or for a period of seven years with two extensions of seven year each, provided the project baseline is revised at the time of each extension.

Carbon Market at a Glance and Projected 2008 Source: World Bank and IETA, May 2007 and 2008 Point Carbon (Press Relaese Feb 26, 2008)

Price drivers – Evolution of the CER Price (secondary market, in EUR) Source: Reuters – TFS Energy Overview of the CDM market

CURRENT TRENDS IN THE CARBON MARKET CDM experienced a strong growth (from US $ 5 b to 17b) throughout With increase in the volume of emission reduction, price of carbon credits ( CERs and VERs) is also increasing ( $ 7.5 in 2005 to $ 23 in 2008). CERs have consolidated as a reliable carbon asset class. Increasing interest in CERs for voluntary offsetting purposes may constitute another price driver in the future. Voluntary GHG market has also seen strong performance based on: National/regional/domestic initiatives Corporate social responsibility (CSR) issues

CountryNumber of Projects Sri Lanka4 Thailand5 Tunisia2 Uganda1 United Republic of Tanzania1 Uruguay1 Viet Nam2 Country wise Number of CDM projects

Assigned Amount Units (AAUs) – Each Annex I Party that ratifies the Kyoto Protocol has a GHG emissions limitation commitment for , which is its "assigned amount." If a country's emissions are lower than that amount, it may sell the unused units. Certified Emission Reductions (CERs) - These are credits issued for emission reductions achieved by a project under the CDM. CERs can be used by an Annex I Party to help meet its emissions limitation commitment under the Kyoto Protocol. The credits issued for sink enhancements achieved by afforestation or reforestation projects under the CDM are either temporary CERs (tCERs), or long-term CERs (ICERs) that are subject to provisions to protect against possible reversals of the sink enhancements. Emission Reduction Units (ERUs) - These are credits issued for emission reductions or removals achieved by a project under the JI mechanism as defined in Article 6 of the Kyoto Protocol. ERUs can be used by an Annex I Party to help meet its emissions limitation commitment under the Kyoto Protocol. Each ERU equals 1 tonne of carbon dioxide equivalent (CO2 e). Removal Units (RMUs) - These are credits issued for net sink enhancements achieved by eligible activities under Articles 3.3 and 3.4 of the Kyoto Protocol. RMUs can be used by an Annex I Party to help meet its commitment under the Kyoto Protocol. Each RMU equals 1 metric tonne ofCO2e.

Country wise Number of CDM projects CountryNumber of Projects Argentina10 Armenia3 Bangladesh2 Bhutan1 Bolivia2 Brazil113 Cambodia1 Chile21 China139 Colombia6 Costa Rica5 Cuba1 Cyprus2 Dominican Republic1 Ecuador9 Egypt3 El Salvador4 Fiji1 Georgia1 Guatemala5 Honduras12 India296

CountryNumber of Projects Indonesia11 Israel7 Jamaica1 Lao Peoples Democratic Republic1 Malaysia21 Mexico99 Mongolia3 Morocco3 Nepal2 Nicaragua3 Nigeria1 Pakistan1 Panama5 Papua New Guinea1 Peru8 Philippines14 Qatar1 Republic of Korea16 Republic of Moldova3 South Africa12 Country wise Number of CDM projects