Post-2020 EU ETS Business as usual or a brave new world? ICIS Tschach Solutions customer seminar 11 November 2016 Milan

Transcription

1 Post-2020 EU ETS Business as usual or a brave new world? ICIS Tschach Solutions customer seminar 11 November 2016 Milan

2 About ICIS Tschach Solutions ICIS Tschach Solutions is the leading provider for global carbon market analysis We cover the carbon markets in the EU (our home market), California/Quebec, RGGI, China und international offset markets. Our products and analysis includes: Price forecasting: short-, mid-, und long-term horizon Estimated trading activities of compliance companies Forecasting of fundamental data, e.g. emissions Qualitative analysis, with a focus on policy developments Market relevant news from journalists

3 Agenda 09:30-10:00 Registration & coffee 10:00-11:00 Latest market developments Jan Ahrens 11:00-11:30 Coffee break 11:30-12:30 Market impact of the Post-2020 review Philipp Ruf 12:30-14:00 Lunch break

4 Agenda 14:00-15:30 Panel discussion Current market state of play and outlook Ben Lee (moderator) Manuela Ojan Carolina Villalibre Calderon Liv Rathe Alexandros Katsiampoulas 15:30-16:00 Coffee break 16:00-17:00 An international perspective US markets Chinese markets COP21 Judith Schröter Simon Chen 18:00 End of day drinks

5 Latest market developments 11 November 2016 Milan Jan Ahrens Business Director Carbon Market Analytics

6 Agenda 1) State of the EU ETS Price Developments 2) Our view on the market the TIM 3) Fundamentals 4) Behaviour 5) Traded Positions 6) Price Forecast

7 State of the EU ETS: Price Developments

8 ICIS performance in 2015 so far Quantity 164 analyst updates 11 monthly reports + 5 research reports 2 full-day seminars Monthly emissions updates and 4 cap updates Quality Short term indicator 59.2% correct, /t profit Mid term forecast Q off (forecast 9.20 /t realized 7 /t) Q /t off (forecast 8.90 /t realized 7.25 /t) Q /t (forecast 9.60 /t realized 8.15 /t) Q4?? (forecast 9.50 /t realised??) Analyst Updates 2015 January 15 February 27 March 24 April 24 May 17 June 7 July 21 August 4 September 8 October 17

9 price [ /tonne] trading volumes [m EUAs] Price development Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 volume price 0

10 price [ /tonne] trading volumes [m EUAs] Price development highest quarterly auction supply on record energy complex loses 10%-50% in value no aviation compliance double aviation compliance m EUAs withheld from auctions 300m EUAs withheld from auctions Warmest year on record 0.00 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 volume price 0

11 price [ /tonne] trading volumes [m EUAs] Price development Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 volume price Linear (volume) Linear (price) 0

12 Our view on carbon markets: the TIM

13 Carbon markets are special Carbon markets are commodity markets, but a carbon allowance is a hybrid between a normal and a financial product Normal commodity Emission rights Financial product Storage costs high only capital costs only capital costs Transportation costs yes no no Purchase prior to consumption yes no - Needed for production yes yes no

14 The TIM: Behaviour changes the game Price Forecast Traded Positions Behaviour Fundamentals

15 Price Forecast Traded Positions Behaviour Fundamentals The Fundamentals

16 weather effect compared to norm in million tones (except hydro) 2015 sees same weather effect like 2014 Price Forecast Traded Positions Behaviour Fundamentals Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

17 Power demand up across EU Price Forecast Traded Positions Behaviour Fundamentals Key countries show growing power demand ytd PL 2.0% IT 2.1% ES 2.5% FR 3.5% GB -0.7% DE 4.3% 60,000 50,000 40,000 30,000 20,000 Power Demand 10,000 0 Jan Mar May Jul Sep Nov PL IT ES FR GB DE

18 Coal & wind fill the gap in Germany Price Forecast Traded Positions Behaviour Fundamentals Conventional Low Carbon 16,000 16,000 14,000 14,000 12,000 12,000 10,000 10,000 8,000 8,000 6,000 4,000 2,000 0 Jan Mar May Jul Sep Nov Hard Coal Lignite Gas 6,000 4,000 2,000 0 Jan Mar May Jul Sep Nov Nuke & Hydro Wind Solar Biomass

19 Less fuel switch in UK in 2015 <>2014 Price Forecast Traded Positions Behaviour Fundamentals Conventional Low Carbon 14,000 14,000 12,000 12,000 10,000 10,000 8,000 8,000 6,000 6,000 4,000 4,000 2,000 2,000 0 Jan Mar May Jul Sep Nov 0 Jan Mar May Jul Sep Nov Hard Coal Gas Nuke & Hydro Wind Biomass

20 production index Industry will recover slowly Price Forecast Traded Positions Behaviour Fundamentals Cement & Lime Metals Oil & Gas Pulp & Paper Ceramics & Glass Other

21 2015 emissions record low Price Forecast Traded Positions Behaviour Fundamentals [in Mt] Power&Heat 1,288 1,177 1,194 1,166 1,164 1,113 1,025 1,008 1,065 1,059 1,057 1,062 1,050 - Nordic Great Britain Central Europe Mediterranean Eastern Europe Industry Cement & Lime Metals Oil & Gas Pulp & Paper Ceramics & Glass Other Aviation Sum: 2,120 1,879 1,939 1,904 1,952 1,963 1,871 1,869 1,927 1,921 1,921 1,931 1,925

22 Allowances in million 2015 supply record low Price Forecast Traded Positions Behaviour Fundamentals 3,500 3,000 2,500 2,000 1,500 1, Allocation Power & Heat Allocation Industry Allocation Aviation Allocation through NER Auctions NER300 & Innovation Fund Offsets

23 Annual Balance in million tonnes Cumulated Balance in million tonnes System 800m oversupplied in 2020 Price Forecast Traded Positions Behaviour Fundamentals Fundamental balance Cumulative fundamental balance -1000

24 Price Forecast Traded Positions Behaviour Fundamentals Behaviour

25 Hedging slowing down slightly Price Forecast Traded Positions Behaviour Fundamentals

26 But picture not consistent Price Forecast Traded Positions Behaviour Fundamentals

27 Utilities use EUA hedge to generate cash-flows Price Forecast Traded Positions Behaviour Fundamentals The result developed differently than cash flows in part because we have paid for most of the CO2 emission allowances required for 2014 in 2015, whereas we covered our need in 2013 before the end of that year. RWE Annual Report 2014 RWE generated 1.3bn cash flow from this 2014 RWE postion was around 146Mt average hedge price was 8.90 per tonne But: Open Interest did not show this volume!

28 Open interest shows awkward pattern Price Forecast Traded Positions Behaviour Fundamentals 200,000 Open Interest of Y+1 March EUA contracts at ICE 180, , , , ,000 80, ,000 40,000 20,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

29 Open interest shows awkward pattern Price Forecast Traded Positions Behaviour Fundamentals 200,000 Open Interest of Y+1 March EUA contracts at ICE 180, , , , ,000 80,000 60, ,000 20,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

30 Open interest shows awkward pattern Price Forecast Traded Positions Behaviour Fundamentals 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

31 TIM demand estimate spot on Price Forecast Traded Positions Behaviour Fundamentals 1,400,000 1,200,000 1,000, , , , ,000 0 Jan 2012 Jul 2012 Jan 2013 Jul 2013 Jan 2014 Jul 2014 Jan 2015 Jul 2015 Jan 201 Demand forecast

32 TIM demand estimate spot on Price Forecast Traded Positions Behaviour Fundamentals 1,400,000 1,200,000 1,000, , , , ,000 0 Jan 2012 Jul 2012 Jan 2013 Jul 2013 Jan 2014 Jul 2014 Jan 2015 Jul 2015 Jan 201 Auctions (Operator) Exchange between compliance players Demand forecast

33 The bigger market picture Price Forecast Traded Positions Behaviour Fundamentals 1,400,000 1,200,000 1,000, , , , ,000 0 Jan 2012 Jul 2012 Jan 2013 Jul 2013 Jan 2014 Jul 2014 Jan 2015 Jul 2015 Jan 201 Auctions (Operator) Exchange between compliance players Open Interest RWE band Demand forecast

34 TIM demand estimate spot on Price Forecast Traded Positions Behaviour Fundamentals 1,400, ,200, ,000, , , , , Jan 2012 Jul 2012 Jan 2013 Jul 2013 Jan 2014 Jul 2014 Jan 2015 Jul 2015 Jan 2016 Auctions (Operator) Exchange between compliance players Open Interest RWE band Demand forecast Price

35 2014 saw game-changing behaviour Price Forecast Traded Positions Behaviour Fundamentals 800, , , , , , , ,000 0 Jan 2014 Apr 2014 Jul 2014 Oct 2014 Auctions (Operator) Exchange between compliance players Open Interest RWE band Demand forecast Price

36 Price Forecast Traded Positions Behaviour Fundamentals The Traded Positions

37 Annual Balance in million tonnes Cumulated Balance in million tonnes System 900m short in 2020 Price Forecast Traded Positions Behaviour Fundamentals Fundamental balance Traded balance Cumulative fundamental balance Cumulative traded balance -1000

38 Annual Balance in million tonnes Cumulated Balance in million tonnes The bank is depleted in 2018 or earlier Price Forecast Traded Positions Behaviour Fundamentals Total Banked Traded balance Cumulative traded balance -1000

39 The bank is owned by the metals sector Price Forecast Traded Positions Behaviour Fundamentals Other 16% Power 9% Aviation 5% Cement 17% Metals 53%

40 H Traded positions Price Forecast Traded Positions Behaviour Fundamentals [In m tonnes] Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Compliance buying Compliance selling Auctions (EUAs & EUAAs) Allocation from NER NER 300 Market impact of strategic reserves Traded demand Traded supply Traded balance Cumulative traded balance Q3 price rise was not high enough to balance positions We foresee further gains in rest of year, and a break in January Current rally fuelled by compliance buying will be lasting

41 Price Forecast Traded Positions Behaviour Fundamentals Price Forecast

42 Rally to continue through 2016 Price Forecast Traded Positions Behaviour Fundamentals

43 price [ /tonne] Further price jump after 2018 Price Forecast Traded Positions Behaviour Fundamentals Range Base Average

44 11:00 11:30 Coffee Break

45 Market impact of the Post EU ETS proposal 11 November 2016 Milan Philipp Ruf Lead Analyst EU Carbon Markets

46 Agenda 1) The 4th trading period in the pre-2020 world 2) Mitigation of the CSCF 3) The complete picture 4) The policy 5) Questions

47 The 4th trading period in the pre-2020 world

48 The cap Phase % 1.92% Phase % 2.00% 2.42% 42.60% 52.40% 38.00% 55.00% auctions allocation NER NER 300 innovation fund modernisation fund

49 Allocation rules Preliminary allocation based on production baseline and benchmarks Allocation baseline Post-2020: average production Benchmark: one-off revised calculation of the benchmarks CSCF functioning as in Carbon leakage: same list as in

50 production index Production baseline Cement & Lime Metals Oil & Gas Pulp & Paper Ceramics & Glass Other

51 preliminary free allocation [m tonnes] Preliminary allocation (incl. heat) 1,200 1, preliminary free allocation

52 allowances [m EUAs] CSCF [%] The CSCF 1, % 1, % % % % % 0 0% allocation use of left-over allocation cut left-over industry cap CSCF

53 Mitigation of the CSCF

54 The cap (NER) NER in phase 4 not filled with phase 4 allowances Breathing NER starts with approx. 395m in 2021 Sourced by phase 3 allowances 145m left-over allocation 250m from MSR stock Phase % 2.00% 40.42% 55.00% Increase of max allocation volumes by 375.2m auctions innovation fund allocation modernisation fund

55 allowances [m EUAs] CSCF [%] The cap (NER) 1, % 1, % % % % % 0 0% allocation use of left-over allocation cut left-over industry cap CSCF

56 Avoidance of left-over volumes The allocation procedure in the third trading period could have produced two left-over pots As the CSCF was triggered every year, the first pot did not materialise The second pot was filled with 145m EUAs which the Commission intends to transfer to the NER for the fourth trading period preliminary free allocation compare limit of free allocation preliminary > limit preliminary < limit CSCF allocation 100% CL 80-30% non CL allocation free of charge left-over 1 left-over 2

57 The first flow back Commission proposed to use the first left-over pot in phase 4 to mitigate the impact of the CSCF in later years Preliminary free allocation > Max. free allocation CSCF triggered Preliminary free allocation Max. free > allocation surplus used to mitigate CSCF in next years Increase of max allocation volumes by 272.3m

58 The second flow back Commission proposed to adjust the allocation with the carbon leakage exposure factor (CLEF) before calculating the CSCF and consequently avoid the second left-over pot completely preliminary free allocation 100% CL 30% non CL compare allocation allocation > limit allocation < limit CSCF allocation free of charge limit of free allocation left-over 1 Decrease of preliminary allocation volumes by 1,003.6m

59 allowances [m EUAs] CSCF [%] Flow backs 1, % 1, % % % % % 0 0% allocation use of left-over allocation cut left-over industry cap CSCF

60 The benchmark flat rate reduction Commission proposes to adjust the benchmark with a yearly flat rate of 1% of the base period benchmark period base period allocation period # of adjustment years years 2023 example years * (100 * 1%) decrease of preliminary allocation by 324.1m

61 allowances [m EUAs] CSCF [%] The benchmark flat rate reduction 1, % 1, % % % % % 0 0% allocation use of left-over allocation cut left-over industry cap CSCF

62 The two period approach In order to use more up to date production and benchmark numbers the Commission proposes to make two allocation period production baseline production baseline benchmark 2023 benchmark st allocation period nd allocation period decrease of preliminary allocation by 34.2m

63 allowances [m EUAs] CSCF [%] The two period approach 1, % 1, % % % % % 0 0% allocation use of left-over allocation cut left-over industry cap CSCF

64 The carbon leakage list The Commission proposes to slightly reduce the carbon leakage list in the fourth trading period It is expected that still around 93% (97% in phase 3) of industrial emissions will be on the carbon leakage list Only sector with very low carbon intensity will switch to the noncarbon leakage exposed group

65 allowances [m EUAs] CSCF [%] The carbon leakage list 1, % 1, % % % % % 0 0% allocation use of left-over allocation cut left-over industry cap CSCF

66 The benchmark flexibility In order to account for different technological progress in the covered sectors, the Commission proposed to use 3 different flat rates to adjust the benchmarks default flat rate 1% improvement rate between 0.5% and 1.5% high flat rate 1.5% improvement rate between > 1.5% low flat rate 0.5% improvement rate between < 0.5% fluctuation of preliminary allocation by 595.7m

67 preliminary allocation [m EUAs] cumulative left-over of industry cap [m EUAs] The benchmark flexibility 700 1, , % 1.00% 1.50%

68 allowances [m EUAs] CSCF [%] The low rate 1, % 1, % % % % % 0 0% allocation use of left-over allocation cut left-over industry cap CSCF

69 allowances [m EUAs] CSCF [%] The high rate 1, % 1, % % % % % 0 0% allocation use of left-over allocation cut left-over industry cap CSCF

70 The complete picture

71 Additional features Breathing NER Filled by cessation/closures Depleted by new installations & production increases Transitional free allocation 10 eligible member states Up to 40% of their auction volume Innovation fund 50m pre-2020 filled by MSR stock 400m post-2020 sourced from cap Modernisation fund 2% of the cap approx. 310m Along with regular auctions

72 allowances [m EUAs] Cumulative fundamental balance 2,800 2,400 2,000 1,600 1, cumulative fundamental balance yearly abatement

73 allowances [m EUAs] Cumulative fundamental balance 2,800 2,400 2,000 1,600 1, MSR cumulative fundamental balance

74 price [ /tonne] Price forecast EUA price

75 The policy

76 Important stakeholder Parliament ENVI Ian Duncan, rapporteur ECR Ivo Belet, shadow rapporteur EPP Jytte Guteland, shadow rapporteur S&D Gerben-Jan Gerbrandy, shadow rapporteur ALDE ITRE Frederick Federley, rapporteur ALDE Esther de Lange, shadow rapporteur EPP Edouard Martin, shadow rapporteur S&D Hans-Olaf Henkel, shadow rapporteur ECR

77 Important stakeholder Council Groups of member states Green Growth Group (13 members) BE, DK, EE, ES, FI, FR, DE, IT, NL, PT, SI, SE, UK Visegrad Group (4 core + 2 affiliates) CZ, HU, PL, SK, BG, RO CZ, FR, SK, FR tiered approach for carbon leakage Presidency: LU (H2 '15); NL(H1 '16); SK (H2 '16); MT (H1 '17) Single member states Germany France UK Poland

78 Discussed topics Linear reduction factor not discussed However the Visegrad group already prepares for a post-cop discussion about an higher target CSCF - key topic Carbon leakage list key topic Benchmarks key topic Use of MSR volumes key topic Dynamic allocation medium topic Fixed auction share medium topic Price floor on the side-lines

79 Policy timeline in Parliament Jan Feb Mar Apr ITRE exchange of views consideration of draft amendments deadline for AM ENVI public hearing consideration & deadline for AM Plenary

80 Policy timeline in Parliament May Jun Sep Nov ITRE vote in ITRE ENVI consideration of AM vote in ENVI Plenary vote in plenary

81 Questions

82 12:30 14:00 Lunch Break

83 The compliance view Stakeholder opinion on Post-2020 issues ICIS Tschach Solutions customer seminar 11 November 2016 Milan

84 Panellists Moderator Ben Lee Lead Reporter Carbon ICIS Panellists Manuela Ojan Climate Protection Manager Italcementi Group Carolina Villalibre Calderon Commodities Derivatives Trader Repsol Liv Rathe Director Norsk Hydro Ltd Alexandros Katsiampoulas Environment, Quality & Sustainable Development Manager TITAN Cement

85 15:30 16:00 Coffee Break

86 An international perspective ICIS Tschach Solutions customer seminar 11 November 2016 Milan

87 US Markets Judith Schröter Lead Analyst US Carbon & Global Offsets

88 How will the post-2020 discussions impact California s cap-and-trade? (1) CCA price in $ Trading Volumes 13.5 CCA Price Developments Trading Volume Price Price Floor Auction Clearing Price Source: ICE and ARB

89 Millions Millions How will the post-2020 discussions impact California s cap-and-trade? (2) Supply Emissions Cumulative Balance Market is oversupplied significantly through 2020 Discussion on the post-2020 framework include: 40% below 1990 levels target REDD addition to offset program Clean Power Plan Complimentary mechanism RPS LCFS Yearly Traded Positions Fundamental Balance Cumulative Traded Positions Cumulated Fundamental Balance

90 Millions How will the post-2020 discussions impact California s cap-and-trade? (3) target: 40% below (100.00) (200.00) 2050 target: 80% below 1990 (300.00) (400.00) Emissions California Base Case Cap Cumulative Balance

91 RGGI: An example of a successful program redesign (1) Small ETS in the North-East Yearly Emissions: 87m short tons Only the power sector covered Close to no free allocation

92 [m tonnes] RGGI: An example of a successful program redesign (2) $30.00 $25.00 $20.00 $15.00 $10.00 $ Effective Cap Cap Adjustments Covered Emissions Average price $0.00

93 RGGI: An example of a successful program redesign (3) RGGI price in $ Trading Volumes Traded Volume Price Auction Clearing Price

94 Chinese Markets Simon Chen Analyst Chinese Carbon Markets

95 Agenda ICIS exposure in China carbon markets Pilot ETSs National ETS

96 Agenda ICIS exposure in China carbon markets Pilot ETSs National ETS

97 Our exposure in Chinese carbon markets 6 members in China carbon team We cover: Compliance companies updates and forecast, educating and consulting etc. Non-compliance players updates and forecast, risk management, marketing opps etc. Local and National DRCs policy design and commenting In H1 2016, we plan to: Update price forecasts for pilots and NETS Keep a close eye on any development of NETS develop CCER pricing for NETS Host the 1 st China Carbon Expo with partners (under discussion now)

98 Agenda ICIS exposure in China carbon markets Pilot ETSs National ETS

99 140 Allowances price movement in pilot ETS /06/ /09/ /12/ /03/ /06/ /09/ /12/ /03/ /06/ /09/2015 Average Price for SZ Average Price for SH Average Price for BJ Average Price for GD Average Price for TJ Average Price for HB Average Price for CQ

100 CCERs available for 2015 compliance Shenzhen Guangdong Beijing Shanghai Tianjin Hubei Chongqing Total issuance (by 2016 H1) (estimated) Surrendered CCERs for 2014 compliance CCERs available for 2015 compliance m m m m m m m 0.9m (primarily pre-cdm CCERs) 0.4m 0.06m 0.5m 0.3m (out of which, 50% were ineligible CCERs) 0.6m Unknown but expected to be close to m m m m m m m Above figures are based on issued volumes or MR volumes (if the final approved MR has not been published) Note: When calculating the CCERs available for 2015 compliance, there will be some double-counting of the CCERs surrendered for 2014 compliance

101 Current challenges in pilot ETS Illiquid market No derivatives Uncertainties Delay in compliance deadline Ad-hoc auctions Adjustment of allowances Unstable rules and regulations Ever-changing rules (e.g. CCERs)

102 Agenda ICIS exposure in China carbon markets Pilot ETSs National ETS

103 NETS Highlights Regulator Registry Exchanges Emissions coverage Geographic coverage Emissions threshold Allowances allocation Offset Penalty Linkage China's National ETS Overview National Development and Reform Commission National Registry System (incl. creation, transfer and cancellation of carbon allowances and offsets) Target to have a total of 7 10 exchanges; the existing 7 pilot exchanges might possibly remain. Initial phase to include: Power, Steel, Non-ferrous metals, Building Materials, Chemical, Paper-making and Aviation. Compliance companies already enrolled in the Chinese pilot scheme may be included regardless of whether they are from the listed sectors to include more sectors in later phases. Not announced. Most probably the 7 existing pilot regions and other more developed pilot regions 26,000 tonnes emissions annually Will adopt free allocation and auctions; NDRC sets caps for each enrolled provinces and the local DRCs will allocate allowances to the compliance companies. Detailed allowances allocation mechanism not yet announced. Chinese Certified Emissions Reduction (CCER) Not announced. NDRC will explore the possibility of linking the National ETS with other ETSs around the world at an appropriate time in the future. Note: The information provided in the table above are gathered through various documents, announcements and speeches released by the NDRC.

104 Concens/challenges: pilot allowances No clear instructions from the NDRC yet Slightly less than one year back, we hold the view that there is a high possibility that the pilot allowances cannot be banked into the National ETS. Currently, we see an increased possibility that the pilot allowances can be banked, but at a discount/exchange rate. Full banking of excess pilot allowances might be undesirable for the national market excess pilot allowances might exceed 100m tonnes. Possible ways to transit: Allow compliance companies to use their excess pilot allowances in the first / second year (probably up to 5% - 10%) Reward pilot ETS DRCs with slightly more free allocation in the first year (probably up to 5% - 10%) Possible buybacks from Hubei and Guangdong DRCs but we ll not bet our money on that

105 Concerns/challenges: allocation policy Allocation methods Benchmarking Power, Cement and Chemicals Grandfathering (historical carbon intensity) Steel, Cogeneration, Aviation ICIS s evaluation Benchmarks for Power quite stringent more stringent than Guangdong and close to Shanghai Therefore, we expect Power sector to be short Industry as a whole to be long (but not as severe as in EU ETS cause reduction in production is taken into consideration in the allocation)

106 Chinese National Emissions Allowances Price forecast (CNY) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Allowance price (base case) Allowance price (base case - purely compliance companies' seasonal behaviour) Allowance price (low case) Allowance price (high case)

107 COP21 Judith Schröter Lead Analyst US Carbon & Global Offsets

108 COP 21 who, when, and why? COP 21 Conference of the Parties or the UNFCCC CMP 11 Meeting of the Parties of the KP 31 Aug - 4 Sep ADP Bonn, Germany Oct ADP Bonn, Germany 30 Nov - 11 Dec COP & CMP Paris, France Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP) Mandate develop another instrument with legal force to be completed COP 21 and be implemented from 2020

109 Targets (INDCs) 149 countries, 86% global emissions 2.7 C warming by 2100 Countries CO2 reduction Target CO2 intensity target China Peak by 2030 at latest 60% to 65% by 2030 vs 2005 USA % by 2025 vs 2005 EU 40% by 2030 vs 1990 India 33% to 35% by 2030 vs 2005 Russia 6-11% by 2030 vs 1990 South Korea 37% by 2030 vs BAU

110 State of play (1/2) New ADP co-chair text 20 pages (86 before) 5 Oct Draft agreement: 9 pages Draft decision: 11 pages Draft agreement Purpose: Global average temperature at or below 2 C Mitigation National targets: INDCs, communication period unclear (147 countries, 87% of global emissions Global target: language unclear Parties may cooperate on mitigation activities implementation Compliance: mechanism to be facilitative, non-punitive, nonadversarial, non-judicial Climate finance: Scaled up from [USD 100bn/year] from 2020

111 State of play (2/2) New ADP co-chair text 20 pages (86 before) 5 Oct Draft agreement: 9 pages Draft decision: 11 pages Draft decision Discuss how to continue existing mechanism of the UNFCCC Allow transfer of mitigation outcomes (+ domestic reduction) Promotes voluntary cancellation of emission reductions incl. CERs Develop mechanism based on CDM for use towards obligations

112 Questions

113 Contact ICIS Tschach Solutions GmbH Steinhäuserstrasse Karlsruhe / Germany Direct: +49 (0)