1. The Carbon Credit Market And what went wrong Ford & Eric

2. What are Carbon Credits? Representation of one ton CO2 or equivalent emissions Tradable commodity The Global Market o Cap and trade Specific emission limit o Country to Country Certified Emissions reduction o Instead of buying from another country o Invest in a project

3. Private Trading The Voluntary Market: Buying credits without necessity 90% of voluntary offset volumes were contracted by the private sector -- corporations Corporate Social Responsibility (CSR) or for Public Relations/Branding primary motives for offset purchases

4. Did the market work initially? Yes – very fast growing market through the late 2000s Major component of financial services in the City of London o About €30 billion industry in 2007 o Predicted by Barclays to become world’s biggest commodity market Advantage over proposed ‘carbon tax’ o Investment goes directly to green energy development o More flexibility in cost – self-regulating market

5. What happened to the market? 2011: €96bn 2012: €62bn 2013: €38.4bn

6. Why did it fail? Price of carbon needs to be above €20 o to give utilities incentive to make serious switches to lower carbon energy generation Market was too easy to exploit o Very little oversight on projects – largely self-verified o Stockholm Environmental Institute recently found that up to 80% of projects were of ‘low environmental quality’ Oversupply of permits o due in part to over-generous initial allocations following lobbying by industry

7. What’s the issue now? The carbon credit market has failed to limit carbon emissions Most major banks have closed or scaled back carbon trading divisions since 2009 Too many credits in the market reduced price to the point where it is not an obstacle (about €7 per ton today) CDM projects no longer have any funding o Green energy infrastructure not being built into developing countries

8. How to fix the problem New compromise proposal: market reserve o 1.6 billion excess credits will be taken off the EU market o Starts at the end of 2018 Floor prices for carbon credits o £18 in the UK o Goal of €30 in the EU Much more regulation is necessary to make market viable o Strict verification of projects granted carbon credits o But is it possible to verify?

9. Sources http://www.ft.com/cms/s/0/cbb749ba-506b-11e3-9f0d- 00144feabdc0.html#axzz3r8cEl1nJ http://www.ft.com/cms/s/0/cbb749ba-506b-11e3-9f0d- 00144feabdc0.html#axzz3r8cEl1nJ http://www.theguardian.com/environment/2015/aug/24/kyo to-protocols-carbon-credit-scheme-increased-emissions-by- 600m-tonnes http://www.theguardian.com/environment/2015/aug/24/kyo to-protocols-carbon-credit-scheme-increased-emissions-by- 600m-tonnes http://www.fca.org.uk/consumers/scams/investment- scams/carbon-credit-trading http://www.fca.org.uk/consumers/scams/investment- scams/carbon-credit-trading http://energetskaefikasnost.info/wp- content/uploads/2012/02/carbon-prices600.jpg http://energetskaefikasnost.info/wp- content/uploads/2012/02/carbon-prices600.jpg https://en.wikipedia.org/wiki/Carbon_credit