1. Cost Efficient Emissions Reduction
Agenda
History
Taking global action
CDM
Carbon Finance ... ?
Future options

2. The history of Carbon Finance

3. Addressing the challenge: Reducing Greenhouse Gas Emissions
Fundamental problem:
Reducing emissions affects every single element of human life: eating, drinking, living, transporting, working, consuming - everything
Action1: UNFCCC in 1992
‘Common but differentiated responsibilities’
Action 2: Kyoto Protocol 1997
‘Flexible mechanisms’
CDM and JI – the Clean Development Mechanism and Joint Implementation thrive on ‘Setting a price for carbon’...
A new commodity: the allowance to emit 1 ton of CO2

4. Differentiated responsibilities
Developed countries shall reduce emissions –
Developing countries shall ‘avail themselves at hosts of reduction activities’
Fundamental idea: It is cheaper to reduce emissions in developing countries than in developed ones
Investment driver: The ‘production cost of the allowance to emit 1 ton of CO2’
Intended investor: Developed country developers with reduction requirements
Carbon finance: The finance that is driven by the demand for allowances to emit 1 ton of CO2

5. Allowances
- a European power utility ‘Carbon Credits’ Total emissions Emission allowance

6. Carbon Credits and The Clean Development Mechanism
The choice: Reducing own current emissions, reducing emissions somewhere else – or buying off-sets The CDM: A mechanism, governed by the UN, to account for tons of CO2 emission reduced Philosophy: The value of the emissions reduction turn unviable projects viable Process: PDD – validation – registration – monitoring – verification – issuance Finance: Emissions Reduction Purchase Agreement ... ? Collateral: Emissions Reduction Purchase Agreement ... ? Development cost: UNFCCC Loan Scheme

7. Investment decisions – strategic reach
Point of departure
Market and business diversification
Market diversification
Business diversification

8. Carbon Credits and The Clean Development Mechanism
The choice: Reducing own current emissions or buying off-sets The CDM: A mechanism, governed by the UN, to account for tons of CO2 emission reduced Philosophy: The value of the emissions reduction turn unviable projects viable Process: PDD – validation – registration – monitoring – verification – issuance Finance: Emissions Reduction Purchase Agreement ... ? Collateral: Emissions Reduction Purchase Agreement ... ?

9. nevertheless: China and the CDM

10. Carbon Finance ? - the investment capital that never came ...
The colour of your bottom line
Time
ERPA Issuance
Bridge financing needed ...
But in the case of China: Investments not wanted!

11. Cash flow contribution – for cost efficient reductions...?

12. BREAK

13. What happened to the carbon finance... ?
The end of Kyoto: ERPA is no collateral anymore – if it ever was The CDM: Continues in Europe for Least Developed Countries The PoA: The loophole in Programmes of Activities Scenario 1: The amount of CERs may significantly exceed demand Scenario 2: Supply or demand restrictions may shift it around Finance: New players on the block ... ? Or just the old ones ... ? Collateral: Power Purchase Agreement ... ? Or the UNFCCC: ? – just a thought: turn procedures upside down

14. The future carbon finance...
The start of NAMA:
Nationally Appropriate Mitigation Action
cost
CDM-like structure
reductions
International finance
( billion US$/year
by 2020) – no crediting
National finance

15. Thanks for your attention
Pledges in Copenhagen
80% of global emissions now under some sort of pledge
China 40-45% emission intensity reduction from 2005 to 2020
EU 25% absolute reduction by 2020 compared to 1990
some conditional – some unconditional
A significant challenge to the flexible mechanisms
If we ever reach an agreement
But bear in mind: investments are already happening...
Thanks for your attention