Overview of Global Carbon Market Presented by Iftekhar

Overview of Global Carbon Market Presented by: Iftekhar Enayetullah, Director, Waste Concern April 8, 2008

Presentation Outline 1. 2. 3. 4. 5. What is Carbon Financing? Structure of Global Carbon Market Relevant for Bangladesh How Big is the Global Carbon Market? Current Trends in the Carbon Market web: www. wasteconcern. org

What is Carbon Financing? q Carbon financing can be defined as financial resources provided to projects generating (or expected to generate) green house gas emission reductions in the form of the purchase of such emission reductions. q In simple term, carbon finance is a purchase contracts whereby one party pays another party in exchange for a given quantity of Green House Gas (GHG) emission reductions. Payment made in different forms to abate GHG CASH EQUITY DEBT/ SOFT LOAN IN KIND CONTRIBUTION FOR TECHNOLOGIES web: www. wasteconcern. org

Global Warming Potential (GWP) of Key GHG Green House Gas Global Warming Potential Carbon dioxide (CO 2 ) 1 Methane (CH 4) 21 Nitrous Oxide (N 2 O) 310 HFC’s 140 -11, 700 Perflorocarbons (PFC’s) 7, 000 -9, 200 Sulphur Hexafluoride (SF 6) 23, 900 web: www. wasteconcern. org

investment $$ Industrialized country Emission reduction credits) Project Reducing GHG emissions in developing country web: www. wasteconcern. org

Structure of the Global Carbon Market Global CARBON market Compliance Markets Kyoto Markets EU ETS New South Wales GHG Abatement Scheme Voluntary Markets UK ETS Chicago Climate Exchange CDM -> CERs JI -> ERUs AAUs + RMUs EUAs NGACs CCLAs VERs

Carbon Market Compliance Market Voluntary Market CER VER Compliance markets generate and trade green house gas emission reductions known as Certified Emission Reductions (CERs) that are regulated and directly initiated under the Kyoto Protocol’s Clean Development Mechanism (CDM). Voluntary markets generate and trade greenhouse gas emission reductions that are not regulated or directly initiated by the Kyoto Protocol and known as Verified Emission Reductions or (VERs). Certified Emission Reduction (CERs): Green house gas reduction of any CDM project is measured according to internationally agreed methods and are quantified in standard units called Certified Emission Reductions (CERs). These are expressed in tons of carbon dioxide (CO 2) equivalents. Verified Emission Reduction (VERs): Green house gas reduction outside Kyoto Protocol is measured according to internationally agreed methods and are quantified in standard units called Verified Emission Reductions (VERs). These are also expressed in tons of carbon dioxide (CO 2) equivalents.

Investment Opportunity from CDM/VER maximum minimum

Carbon Market at a Glance 2005 -2007 and projected 2008 Annual Volumes and Values of Transactions Type 2005 2006 2007 2008 (Projected) Volume Value (MTCo 2 e) (M US$) (MT Co 2 e) (MUS$) Allowances EU-ETS New South Wales CCX Uk-ETS 328 7971 1131 24620 2690 43000 70, 000 CDM JI Others 382 2894 508 5477 947 17000 1200 22, 000 Total 710 10, 864 1639 30, 098 3637 60, 000 4200 92, 000 CDM 351 2638 475 5257 947 17000 1200 22000 Source: 2005 -2006 World Bank and IETA; 2007 and 2008 Point Carbon (Press Release Feb 26, 2008)

Billion US $ Carbon Market at a Glance 2005 -2007 and Projected 2008 Source: 2005 -2006 World Bank and IETA, May 2007 and 2008 Point Carbon (Press Relaese Feb 26, 2008)

Overview of the CDM market • CDM has the largest CO 2 project based offset system in the world – 979 registered projects by April 1 2008 – Approx. additional 2021 projects in pipeline – 49 countries – 134, 993, 328 CERs issued (certified emission reductions) – 2. 7 billion CERs expected to end of 2012 • CDM has a legal basis in the Kyoto Protocol – Run by Executive Board (EB) answerable to KP Parties – EB back-stopped by UNFCCC secretariat with support for: • Registration and issuance • Accreditation of third-party validators • Methodologies for emissions baseline setting and monitoring

No. of Projects/ CERs before 2012 (million) Overview of the CDM market

Overview of the CDM market Map and statistics accessible at http: //cdm. unfccc. int/

Overview of the CDM market

Overview of the CDM market Bangladesh 0. 2% Overview of the CDM market

Registered CDM projects all over the World Sectoral Scope Registered Projects 1 Energy Industries (renewable -/ non-renewable sources) 650 2 Energy distribution 0 3 Energy demand 16 4 Manufacturing industries 69 5 Chemical Industries 23 6 Construction 0 7 Transport 2 8 Mining / mineral production 7 9 Metal production 1 10 Fugitive emissions from fuels (solid, oil and gas) 98 11 Fugitive emissions from production & consumption of halocarbons & sulphur hexafluoride 16 12 Solvent use 0 13 Waste handling and disposal 256 14 Afforestation & reforestation 1 15 Agriculture 83 www. wasteconcern. org

Overview of the CDM market

carbon trading Present Price of CERs and VERs (Carbon Credits) Both the CERs and VERs are represented in terms of carbon dioxide equivalent (CO 2 e). The present price (As of 1 April, 2008): CERs : US $ 18. 50 -23/ton VERs : US $ 7 to US $ 10/ ton Crediting Period for CERs and VERs Emission reductions can be claimed for maximum ten years, without revision of the project baseline, or for a period of seven years with two extensions of seven year each, provided the project baseline is revised at the time of each extension.

Carbon Market at a Glance 2005 -2007 and Projected 2008 Source: 2005 -2006 World Bank and IETA, May 2007 and 2008 Point Carbon (Press Relaese Feb 26, 2008)

Price drivers – Evolution of the CER Price (secondary market, in EUR) Source: Reuters – TFS Energy Overview of the CDM market

CURRENT TRENDS IN THE CARBON MARKET • CDM experienced a strong growth (from US $ 5 b to 17 b) throughout 2007. • With increase in the volume of emission reduction, price of carbon credits ( CERs and VERs) is also increasing ( $ 7. 5 in 2005 to $ 23 in 2008). • CERs have consolidated as a reliable carbon asset class. • Increasing interest in CERs for voluntary offsetting purposes may constitute another price driver in the future. • Voluntary GHG market has also seen strong performance based on: National/regional/domestic initiatives Corporate social responsibility (CSR) issues

Country wise Number of CDM projects Country Number of Projects Sri Lanka 4 Thailand 5 Tunisia 2 Uganda 1 United Republic of Tanzania 1 Uruguay 1 Viet Nam 2 www. wasteconcern. org

• Assigned Amount Units (AAUs) – Each Annex I Party that ratifies the Kyoto Protocol has a GHG emissions limitation commitment for 2008 -2012, which is its "assigned amount. " If a country's emissions are lower than that amount, it may sell the unused units. • Certified Emission Reductions (CERs) - These are credits issued for emission reductions achieved by a project under the CDM. CERs can be used by an Annex I Party to help meet its emissions limitation commitment under the Kyoto Protocol. The credits issued for sink enhancements achieved by afforestation or reforestation projects under the CDM are either temporary CERs (t. CERs), or long-term CERs (ICERs) that are subject to provisions to protect against possible reversals of the sink enhancements. • Emission Reduction Units (ERUs) - These are credits issued for emission reductions or removals achieved by a project under the JI mechanism as defined in Article 6 of the Kyoto Protocol. ERUs can be used by an Annex I Party to help meet its emissions limitation commitment under the Kyoto Protocol. Each ERU equals 1 tonne of carbon dioxide equivalent (CO 2 e). • Removal Units (RMUs) - These are credits issued for net sink enhancements achieved by eligible activities under Articles 3. 3 and 3. 4 of the Kyoto Protocol. RMUs can be used by an Annex I Party to help meet its commitment under the Kyoto Protocol. Each RMU equals 1 metric tonne of. CO 2 e.

Country wise Number of CDM projects Country Number of Projects Argentina 10 Armenia 3 Bangladesh 2 Bhutan 1 Bolivia 2 Brazil 113 Cambodia 1 Chile 21 China 139 Colombia 6 Costa Rica 5 Cuba 1 Cyprus 2 Dominican Republic 1 Ecuador 9 Egypt 3 El Salvador 4 Fiji 1 Georgia 1 Guatemala 5 Honduras 12 India 296 www. wasteconcern. org

Country wise Number of CDM projects Country Number of Projects Indonesia 11 Israel 7 Jamaica 1 Lao People’s Democratic Republic 1 Malaysia 21 Mexico 99 Mongolia 3 Morocco 3 Nepal 2 Nicaragua 3 Nigeria 1 Pakistan 1 Panama 5 Papua New Guinea 1 Peru 8 Philippines 14 Qatar 1 Republic of Korea 16 Republic of Moldova 3 South Africa 12 www. wasteconcern. org