CO 2 Markets. Maria Mansanet Bataller

Transcription

1 CO 2 Markets Maria Mansanet Bataller

2 Motivation Climate Change Importance Increasingly Kyoto Protocol: International Response to Climate Change Flexibility Mechanisms EMISSIONS TRADING CARBON MARKETS

3 The presentation is organized as follows Carbon Trading Origins. Carbon Trading in Europe : the EU ETS. Carbon Markets in Europe. Linking with UN Carbon Markets. Conclusion and final remarks

4 The presentation is organized as follows Carbon Trading Origins. Carbon Trading in Europe : the EU ETS. Carbon Markets in Europe. Linking with UN Carbon Markets. Conclusion and final remarks

5 Origins of the EU ETS Kyoto Protocol ( UNFCCC) & Parts of the Convention including the developed countries representing 55% of their total emissions. Global emissions by 5% from Commitment period GHG: CO 2, CH 4, N 2 O, HFCs, PFCs, and SF 6.

6 Commitments by Country Canada Liechtenstein New Zealand Australia Japan Switzerland United States Norway Monaco Croatia Iceland Russian Federation Ukraine Kyoto Target Real emissions change (%) Distance to the Kyoto Protocol

7 Commitments in Europe Spain Austria Luxembourg Italy Portugal Denmark Ireland Slovenia EU-15 Belgium Netherlands Germany Greece France Finland United Kingdom Sweden Czech Rep. Slovakia Poland Hungary Romania Bulgaria Estonia Lithuania Latvia Kyoto Target Real emissions change (%) Distance to the Kyoto Protocol

8 Kyoto Flexibility Mechanisms Realization Emission Reduction Projects Joint Implementation (art. 6) By an Annex I country in another Annex I country. Projects lead to Emission Reduction Units (ERUs). Clean Development Mechanism (art. 12) By an Annex I country in a developing country. Projects lead to Certified Emission Reductions (CERs). Emission Trading (art. 17)

9 Kyoto Objective 95% of the 1990 emissions Kyoto Flexibility Mechanisms JI CDM EMISSIONS TRADING ERU Other non European countries Trade Linked to Eligible Countries Registries Compliance Other non European companies CER Other Emission Trading Schemes Directives 2003/87/EC and 2004/101/EC Trading sectors Companies Compliance Member States Compliance EU ETS EUA Non-trading sectors : Trades supervised by CITL : Trades supervised by ITL

10 Previous Allowance Trading Experiences SO 2 : USA, the Netherlands, Slovakia. Reduce lead in petrol: USA. Renewable Energy Certificates: Italy, the Netherlands, Sweden, UK, Finland, Denmark. Quotas in fisheries: New Zealand, Canada, Iceland, the Netherlands, UK, Denmark, Portugal, Italy. Climate Change: UK, Denmark.

11 The case of UK and Denmark UK 03/2002 to 12/ participants. Voluntary emission reduction targets against levels million tco 2 -e. Denmark Launched large emitters energy sector (30% total Danish GHG emissions) Cap and trade system Grandfathering allocation (reference period ) Penalty : DKK 40 Superseded by the EU ETS

12 The presentation is organized as follows Carbon Trading Origins. Carbon Trading in Europe : the EU ETS. Carbon Markets in Europe. Linking with UN Carbon Markets. Conclusion and final remarks

13 EU ETS (2003/87/EC and 2004/101/EC) 1 st January Phase I ( ) and Phase II ( ). It is the largest Emission Trading Scheme: Over energy intensive installations Close to 50% Europe CO 2 emissions). Supervisor : CITL Linked to UN Trading Scheme (CERs, ERUs). Sectors: combustion plants, oil refineries, coke ovens, iron and steel plants, and factories making cement, glass, lime, brick, ceramics, pulp and paper. NAPs.

14 The NAPs Allowances allocated in total trading period, by sectors and by installations. Sectors covered and not by the directive 95% (90%) freely allocated Phase I (Phase II) Grandfathering Limit of CDM/JI as a percentage of total of allocated.

15 Member State 1st period cap ( ) 2005 verified emissions Proposed cap European NAPs Cap allowed (in relation to proposed) JI/CDM limit in % Source: European Commission. Austria (93.6%) 10 Belgium (92.4%) 8.4 Bulgaria (62.6%) Cyprus (77%) 10 Czech Rep (85.2%) 10 Denmark (100%) Estonia (52.2%) 0 Finland (94.8%) 10 France (100%) 13.5 Germany (94%) 20 Greece (91.5%) 9 Hungary (87.6%) 10 Ireland (98.6%) 10 Italy (93.7%) Latvia (44.5%) 10 Lithuania (53%) 20 Luxembourg (63%) 10 Malta (71%) - Netherlands (94.9%) 10 Poland (73.3%) 10 Portugal (96.9%) 10 Romania (79.3%) 10 Slovakia (78.9%) 7 Slovenia (100%) Spain (99.7%) 20 Sweden (90.5%) 10 UK (100%) 8 SUM (89.56%) - TOTALS 11% less than those proposed by countries million tonnes less than the verified emissions million tones less than the allocated for Phase I (without Bulgaria and Romania). Annual million tonnes of CO 2

16 EU ETS (2003/87/EC and 2004/101/EC) Accounts transactions Companies covered by the directive Any natural and legal person The allowances are cancelled once they have been surrendered. Verification Real Emissions => Penalty if not commitment. Banking not allowed between Phases

17 EU ETS deadlines 2 years before 1 year before Emissions take place 1 year after t = -2 t = -1 t = 0 t = +1 NAP notification (Until 30/06) Notification Additional Information NAP Approval (Until 3/12) Verified emissions (Until 31/03) Surrendered Allowances (Until 30/04) Compliance report (Around 15/05)

18 The presentation is organized as follows Carbon Trading Origins. Carbon Trading in Europe : the EU ETS. Carbon Markets in Europe. Linking with UN Carbon Markets. Conclusion and final remarks

19 EUA Trading in Europe OTC trading Organized Markets EUA CER OTC ST FUT OPT ST FUT OPT BlueNext CLIMEX ALICANCE ECX EEX EXAA GME LEBA Nord Pool

20 EUA Spot Trading in EU ETS BlueNext Energy Exchange of Austria (EXAA) Nord Pool Gestore Mercato Elettrico (GME) European Energy Exchange (EEX) Commodity EUA EUA EUA EUA EUA Country France Austria Scandinavia Italy Germany Market 24 th April th 24 th October June nd April th March 2005 Launch 2005 Trading Days From Monday to Friday Weekly trading From Monday to Friday From Monday to Friday From Monday to Friday Delivery Physical Physical Physical Physical Physical Unity 1 EUA 1 EUA 1 EUA 1 EUA 1 EUA Minimum contract size 1000 tco2 1 tco tco2 500 tco2 1 tco2 Tick minimum Registry Seringas ECRA (Emission Certificate Registry Austria ) NEA (Dutch Emission Authority) Sina Group Authority) Registry Management Clearing Caisse des dépôts et consignations LCH Clearnet SA ECRA (Emission Certificate Registry Austria ) APCS (Austrian Power Clearing and Settlement AG) Dutch Emission Authority Nord Pool Clearing ASA APART (Italian Environmental Authority) Gestore Mercato Elettrico (GME) S.p.a. DEHSt (German Emissions Trading DEHSt (German Emissions Trading Authority) Several Banks Phase II EUAs in BlueNext (26 th February 2008) and NordPool (15 th April 2008).

21 EUA Futures Trading in EU ETS European Climate European Energy Nord Pool BlueNext The Green Exchange Exchange (ECX) Exchange (EEX) / Eurex Commodity EUA EUA EUA EUA EUA Country Scandinavia United Kingdom Germany France USA Market 11 th February 22 nd April th In a near October th March 2008 Launch 2005 future From From 6:00 PM Sundays From Monday From Monday to Trading Days From Monday to Friday Monday to through 5:15 PM to Friday Friday Friday Fridays, Eastern Time,. Contract Expiry December December and March from 2006 to 2012 Quarterly contracts for 2005 and From September 2006 to march 2008 monthly contracts. December contracts from 2008 to December contracts form 2006 to 2012 December contracts from 2008 to 2012 Quarterly contracts from December for 2008 to December 2010 December contracts from 2011 to 2012 Delivery Physical Physical Physical Physical Physical Unity 1 EUA 1 EUA 1 EUA 1 EUA 1 EUA Minimum contract size 1000 tco tco tco tco tco2 Tick minimum Nea (Dutch DEHSt (German Emissions Registry Emission Environment Agency Seringas Trading Authority) Authority) Registry Management Clearing Dutch Emission Authority Nord Pool Clearing ASA Environment Agency London Clearing House (LCH.Clearnet) DEHSt (German Emissions Trading Authority) Eurex Clearing AG and the European Commodity Caisse des dépôts et consignations LCH Clearnet SA UK Emissions Trading Registry Environment Agency NYMEX ClearPort

22 Price Evolution OTC FUTURES Euros Euros /02/ /08/ /01/ /07/ /12/ /06/ /11/ /10/ /05/ /11/ /05/ /11/ /06/ /12/2007 EEX 2007 NordPool 2007 ECX 2007 EEX LEBA (I) LEBA (II) EEX 2008 NordPool 2008 ECX 2008 SPOT Euros /03/ /08/ /02/ /07/ /01/ /07/ /12/2007 EEX Pow ernext (I) Pow ernext (II) NordPool

23 Volumes in European Carbon Markets TOTAL VOLUMES EU ETS FUTURES BY PHASES % % % % % SPOT FUTURES OTC Phase I Phase II % SPOT BY MARKETS % % FUTURES BY MARKETS % BLUENEXT EEX NORDPOOL % % EEX NORDPOOL ECX

24 EUA Option Trading in EU ETS European Climate Exchange (ECX) The Green Exchange Commodity EUA EUA Country United Kingdom USA Market Launch 13 th October th March 2008 Trading Days From Monday to Friday From 6:00 PM Sundays through 5:15 PM Fridays, Eastern Time,. Front two contracts plus next six Quarterly contracts from December Contract Expiry December contract months. Currently for 2008 to December 2010 Jan08, Feb08, December contracts December contracts from 2011 to from are listed 2012 Delivery Physical Physical Underlying Exercised into ICE Futures ECX CFI EUA Futures contracts. 1 EUA Futures contract Minimum contract size 1000 tco tco2

25 EUA Option Trading in EU ETS European Climate Exchange (ECX) Fifty-five Strike prices are automatically listed for each contract month covering the price range from Strike price increments The Exchange may add one or more strike prices nearest to the last price listed as necessary. Strike price intervals are Tick minimum 0.01 Premiums are paid at the time of the Option Premium transaction Exercised into ICE Futures ECX CFI Nature of exercise CER Futures contracts. Europeanstyle exercise Registry Registry Management Clearing Environment Agency Environment Agency London Clearing House (LCH.Clearnet)

26 The presentation is organized as follows Carbon Trading Origins. Carbon Trading in Europe : the EU ETS. Carbon Markets in Europe. Linking with UN Carbon Markets. Conclusion and final remarks

27 Kyoto Objective 95% of the 1990 emissions Kyoto Flexibility Mechanisms JI CDM EMISSIONS TRADING ERU Other non European countries Trade Linked to Eligible Countries Registries Compliance Other non European companies CER Other Emission Trading Schemes Directives 2003/87/EC and 2004/101/EC Trading sectors Companies Compliance Member States Compliance EU ETS EUA Non-trading sectors : Trades supervised by CITL : Trades supervised by ITL

28 Linking with UN Carbon Markets International Transaction Log CERs and ERUs may be obtained Realization of a project Secondary market In order to comply with Kyoto obligations EUA CERs ERUs TRADABLE UNITS Possible in both Phase I and Phase II. Limit on CERs and ERUs (fixed by NAPs)

29 Limits on JI/CDM credits Member State 1st period cap ( ) 2005 verified emissions Proposed cap Cap allowed (in relation to proposed) JI/CDM limit in % Austria (93.6%) 10 Belgium (92.4%) 8.4 Bulgaria (62.6%) Cyprus (77%) 10 Czech Rep (85.2%) 10 Denmark (100%) Estonia (52.2%) 0 Finland (94.8%) 10 France (100%) 13.5 Germany (94%) 20 Greece (91.5%) 9 Hungary (87.6%) 10 Ireland (98.6%) 10 Italy (93.7%) Latvia (44.5%) 10 Lithuania (53%) 20 Luxembourg (63%) 10 Malta (71%) - Netherlands (94.9%) 10 Poland (73.3%) 10 Portugal (96.9%) 10 Romania (79.3%) 10 Slovakia (78.9%) 7 Slovenia (100%) Spain (99.7%) 20 Sweden (90.5%) 10 UK (100%) 8 SUM (89.56%) -

30 CERs Trading OTC trading Organized Markets EUA CER OTC ST FUT OPT ST FUT OPT BlueNext CLIMEX ALICANCE ECX EEX EXAA GME LEBA Nord Pool

31 Futures CER Trading in EU ETS Nord Pool European Climate Exchange (ECX) BlueNext Commodity CER CER CER Country Scandinavia United Kingdom France Market Launch 1 st June th March 2008 In a near future Trading Days From Monday to Friday From Monday to Friday From Monday to Friday Contract Expiry December contracts from 2006 to 2012 Quarterly contracts from December for 2008 to December December contracts from 2008 to 2012 Delivery Physical Physical Physical Unity 1 CER 1 CER 1 CER Minimum contract size 1000 tco tco tco2 Tick minimum Registry NEA (Dutch Emission Authority) Environment Agency Seringas Registry Management Dutch Emission Authority Environment Agency Clearing Nord Pool Clearing ASA London Clearing House (LCH.Clearnet) Caisse des dépôts et consignations LCH Clearnet SA

32 Option CER Trading in EU ETS European Climate Exchange (ECX) Commodity Country Market Launch Trading Days Contract Expiry Delivery Unity Minimum contract size Strike price increments CER United Kingdom In a near future From Monday to Friday Quarterly contracts from December for 2008 to December Physical One ICE Futures ECX CFI CER Options contract 1000 tco2 Fifty-five Strike prices are automatically listed for each contract month covering the price range from The Exchange may add one or more strike prices nearest to the last price listed as necessary. Strike price intervals are 1.00.

33 Option CER Trading in EU ETS European Climate Exchange (ECX) Tick minimum 0.01 Premiums are paid at the time of the Option Premium transaction Exercised into ICE Futures ECX CFI Nature of exercise CER Futures contracts. European-style exercise Registry Environment Agency Registry Management Clearing Environment Agency London Clearing House (LCH.Clearnet)

34 CER Prices at Nord Pool Euros /06/07 02/07/07 02/08/07 02/09/07 03/10/07 03/11/07 04/12/07 04/01/08 04/02/08 CERDEC-08 CERDEC-09 CERDEC-10 CERDEC-11 CERDEC-12 ECX 2008

35 Linking with UN Carbon Markets EU ETS Norway Linking Agreement Canada USA: Regional GHG Initiative (RGGI). Japan: Pilot Project of ETS South Korea, New Zealand, Switzerland and Australia. Objective : All those systems linked

36 Linking with UN Carbon Markets Difficulties: Characteristics non comparables. Acceptance of the allowances issued by any other program. Efforts are being done (EU ETS with Norway, Iceland and Liechtenstein first international link) Registry connections with the ITL (only Japan, New Zealand and Switzerland have completed their initialization process).

37 Trading of EUA and CERs other than in Europe The Green Exchange (NYMEX) : Futures on EUAs and CERs Options on EUAs (European Style) Chicago Climate Exchange Auction on CERs from a wind energy farm project in India

38 The presentation is organized as follows Carbon Trading Origins. Carbon Trading in Europe : the EU ETS. Carbon Markets in Europe. Linking with UN Carbon Markets. Conclusion and final remarks

39 Concluding Remarks We have situated the origins of the EU ETS. We have presented the countries Kyoto commitment objectives and situation. We have described the EU ETS. We have presented the Carbon Markets Description of the Contracts Prices and Volumes. We have analyzed the carbon markets linking The EU ETS has succeeded in establishing a price for carbon emissions.

40 Thank you for your attention!