Transcript Chicago Climate Exchange - Carbon Finance at the World

Murali Kanakasabai, Ph.D
Carbon Expo
Vice President & Senior Economist
Cologne
[email protected]
May, 2008
© 2008
Chicago Climate Exchange®, Inc.
Recent CCX Volume/Price
$6.00
12,000,000
$5.00
10,000,000
$4.00
8,000,000
$3.00
6,000,000
$2.00
4,000,000
$1.00
2,000,000
$-
-
Mar 08 to date
Feb-08
Jan-08
Dec-07
Nov-07
Oct-07
Sep-07
Aug-07
Jul-07
Jun-07
May-07
Apr-07
Mar-07
© 2008
Feb-07
Jan-07
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Chicago Climate Exchange®, Inc.
Volume Traded (Metric Tons)
CFI Price (USD)
Volume Traded (metric tons)
CFI Price (USD)
0
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© 2008
2003 start
31
30
29
22
22
19
11
9
4
Denmark
Slovakia
Hungary
Sweden
Ireland
Estonia
Lithuania
Slovenia
Latvia
130
300
400
2009
2012
Chicago Climate Exchange®, Inc.
Luxemborg 3
33
45
Finland
Austria
56
New South Wales
37
60
Belgium
Portugal
71
86
The Netherlands
Greece
94
Czech Republic
California
150
171
Spain
France
174
Australia
188
232
Italy
US NE States (RGGI)
237
100
Poland
200
245
300
United Kingdom
Canada
Germany
540
600
CCX
Hundred Million Metric tons CO2
CCX Baseline Emissions Greater than
Largest EU National Allocation Plan
Size of Live, Emerging, Possible GHG Trading Markets
500
496
Live Market
Market in development
Under discussion
CCX: A Global Exchange Platform
In development:
New York Climate Exchange™ and Northeast Climate Exchange™ : Developing financial instruments for northeast
Regional Greenhouse Gas Initiative (RGGI)
California Climate Exchange™: Developing financial instruments relevant to the California Global Warming Solutions Act,
AB32
India Climate Exchange™
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Chicago Climate Exchange®, Inc.
How do we reduce CO2 Emissions
•
Lower carbon fuel: natural gas, CO2 neutral fuel, nuclear
•
More efficient fuel use: MPG, lighting, insulation
•
Methane capture/combustion
•
Abatement devices, alternative chemicals
•
Carbon sequestration:
– reforestation, carbon accumulation
– agricultural soils, geologic
• How to orchestrate these to maximize benefits per dollar?
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Chicago Climate Exchange®, Inc.
CCX Market Architecture
© 2008
Chicago Climate Exchange®, Inc.
CCX Legally Binding Reduction Schedule
For Direct-Emitting Members (2003-2010)
Phase I: Members made legally binding commitments to reduce or trade 1% per year from 2003-2006, for a
total of 4% below Baseline.
Phase II: Members make a legally binding commitment to reduce to 6% below baseline by 2010.
Baseline = Avg. emissions from years 1998-2001 (Phase I), emissions from year 2000 (Phase II)
CCX is synergistic with and complementary to all emerging policy, precludes none –
Whether state, regional, national, voluntary or mandatory.
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Chicago Climate Exchange®, Inc.
CCX Emission Offsets
Purpose:
− Low cost mitigation option
− Participation from sectors not amenable to cap and trade
Eligibility:
−
−
−
−
Beyond regulation, rare, recent
Verifiable: eligibility, quantities, ownership
Avoid perverse incentives
No cherry picking – emitters must take entity-wide reductions
Target Actions with Major Mitigation Potential:
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−
−
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Non-CO2 gasses: low-cost, multi-benefit
Agriculture: soils hold 183 years of global CO2 emissions
Forestation: forests hold 75 years of global CO2 emissions
Advance broader societal goals: sustainable agriculture and forestry, energy efficiency,
renewable
General provisions:
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Conservative crediting
Reserve pools for sequestration assurance
NB: Only the planet is carbon (source) neutral!
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Chicago Climate Exchange®, Inc.
CCX Emission Offset Projects
Verified Offset projects sequester or eliminate GHGs to earn Carbon Financial
Instruments (CFI) sold on CCX electronic platform to CCX membership
Current pre-defined offset types:
• Agricultural Methane
• Landfill Methane
• Agricultural Soil Carbon
• Forestry
• Renewable Energy
• Coal Mine Methane
• Rangeland Soil Carbon
• Ozone Destruction
• Others in development
Independent verification required by
authorized entities: SGS, DNV, First
Environment, BvQi
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Minnesota dairy farmer receives first check from sales of CCX
Offsets for methane destruction (Approx. $10k for 1 year)
Chicago Climate Exchange®, Inc.
CCX Offsets for Continuous Conservation Tillage and
Grassland Planting
• Conservation tillage removes carbon from air
(IPCC, Kyoto etc.)
• Rare practice (<5% of U.S. cropland)
• Avoid perverse incentives
• No offsets for historic practices, reduced fuel burn,
reduced run off and improved land value
• Revenue potential in Colorado crediting rate
(at $4.50 per metric ton):
• No till: 0.2 to 0.6 mt/acre-yr = $0.90 to
$2.70/ac-yr
•Grassland: 0.4 to 1.0 mt/acre-yr = $1.8 to $4.50
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Chicago Climate Exchange®, Inc.
Carbon Financial Instrument (CFI)
• Carbon Financial Instrument (CFI) = 100 metric tons of carbon dioxide
equivalent (CO2e)
• “Allowances” pre-issued to emitters in declining blocks
• “Offsets” from eligible verified reduction projects
• Allowances and Offsets treated equally in annual compliance
• Cash Contract =100 mtons (overnight delivery/settlement)
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CCX® Comprehensive Market Structure
Electronic Market Registry
Comprehensive Rules System
•Emitters: Standard baseline,
multi-year allowance stream
equal to reduction targets
• Offset Providers (project credits)
• Emission audits, project verification
• Liquidity Providers
• Associate Members
Webaccessible
Electronic
Trading
Platform
© 2008
Chicago Climate Exchange®, Inc.