Alberta Greenhouse Gas Summit Calgary October 23, 2014 Chelsea Erhardt

Transcription

1 Alberta Greenhouse Gas Summit Calgary October 23, 2014 Chelsea Erhardt 1

2 CPX Environmental Commodities History CPX has been involved in environmental markets for over 10 years Evolved from voluntary initiatives and ramped up post- SGER (2007) Team of six professionals Strong proponent of the offset system Over $100mm invested to support GHG reduction projects Eight million offsets procured Market activities include Hedging Portfolio optimization Proprietary trading

3 CPX supports innovation through the GHG market

4 Capital Power s Alberta CO2e Intensity Clear GHG price trajectory is critical to long-term investments

5 Benefits Cut Across Organisation Renewables and Emissions Portfolio 3 rd party hedging service across NA Proprietary trading Origination and Marketing Green power and gas products Market insight for customers Business Development Manage new asset risk Portfolio optimization of new assets Investors Carbon disclosure project Lower costs Lower risk CPX to turned a risk into a source of competitive advantage

6 Regulation Big Oil Anticipates 10-Fold Surge in Carbon Emission Cost (Bloomberg, December 6, 2013) Big Oil Anticipates 10-Fold Surge in Carbon Emission Cost (Bloomberg, December 6, 2013) Climate change will plague energy industry: DOE (Market Watch, July 11, 2013) First US carbon (RGGI) market in membership talks with five states (Point Carbon, October 11, 2013) China's national carbon market to start in 2016 official (Reuters, August 31, 2014) Investors Coal Seen as New Tobacco Sparking Investor Backlash: Commodities (Bloomberg, November 20, 2013) Oil sands firms urged to reveal risks of carbon crackdown (Globe and Mail, October 24, 2013) A New Divestment Focus on Campus: Fossil Fuels (New York Times, Sept 5, 2013) Pension funds are now waking up and starting to make the connection between their investments in fossil fuels (Globe and Mail October 30, 2013) Regulation is expanding across North America and, critically, investors are taking note

7 Carbon Disclosure Part of Investors Criteria Google now publishes the Carbon Disclosure Project score for every publicly traded company

8 What is the most effective policy tool? Policy Instrument: Command & Control Rigid, provided limited incentive to innovate Example: CST (Capital Stock Turnover) standards Policy Instrument: Carbon Tax Simple to implement, reduced flexibility and incentive to innovate Example: BC carbon tax Policy Instrument: Market Mechanism Flexible, relies on private sector to allocate capital, incentivises innovation and efficiency, low aggregate cost Example: California AB 32 (Cap & Trade), RGGI, EU-ETS Markets are favoured because they are cost effective and work

9 Success Story : The Acid Rain Program SO2 Allowance Trading Program in the US ( ) Probably the greatest Green success story of the past decade. The Economist, July 6 th 2002 Existing GHG markets showing similar success

10 Regional Greenhouse Gas Initiative (RGGI) RGGI Cap and Trade Nine states, third largest carbon market 100% of power sector emissions only AB equivalent price $42/t $1.84bn in auction proceeds since mm allowances auctioned and 328mm traded in secondary market 29% drop in GHG emissions in participating states

11 GHG Power Emissions Within RGGI Power prices have declined an average of 8% across RGGI states

12 California and RGGI Markets in Action Commoditized products enable transparent price discovery California and RGGI markets are active and liquid

13 Five Key Takeaways 1. GHG markets work, they are well established and they are growing 2. GHG markets are not causing economic dislocation 3. GHG regulations/markets create risks, but also opportunities 4. Investors are aware of and focused on how companies manage GHG emissions 5. A clear, long-term price signal is key

14 Questions? 14