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UN To Open Carbon Market Offices In Bogota And Manila
Last updated on 29 July 2013, 4:04 pm New offices are a “leap of faith” says CDM chair Stiansen, as UN takes steps to revive interest in flagship scheme Bogota (pictured) and Manila have been identified as the new regional bases for the UN’s carbon market (Pic: David Berkowitz/Flickr) The UN plans to open two new offices aimed at boosting the world’s flagging carbon markets by promoting trading in Latin America and South East Asia. The move is part of a new strategy targeted at stimulating interest in the UN-run Clean Development Mechanism (CDM) in developing countries. The CDM allows developed nations to offset their emissions by investing in low-carbon projects in poorer parts of the world. Prices of CDM certified emission reductions (CERs) collapsed by 80% in 2013 to around 55 Euro cents due to an over-supply of credits, weak economic growth and unambitious climate policies. “The choice was to drop anchor or stay the course. We ultimately decided to take this time to maintain and improve the CDM and seek opportunities where they might be found,” said Executive Board Chair Peer Stiansen. “This meant engaging with stakeholders through partnerships in key locations, especially in underserved areas showing interest and potential.” According to UN documents , the new offices are set to be based in Bogota and Manila, and will complement similar regional centres operational in Africa and the Carribbean. “Setting up the centres required a leap of faith. We have a responsibility to implement the mechanism and feel strongly about its value, so we made that leap,” said Stiansen. “We’re in a constrained market, and will of course be keeping a close eye on progress, but the early results from the centres are encouraging, for the CDM and Africa.” The CDM board has also revised the application process for new projects, which it says will promote transparency and reduce costs. The CDM currently operates in 88 countries, and has spurred more than USD 215 billion of low-carbon investment in developing countries, issued credits equal to 1.3 billion tonnes of CO2, and added more than 110,000 Mega Watts of renewable energy to global electricity grids. Earlier this month it passed the 7000 project mark after certifying a biogas capture plant in a Philippine chicken farm, which will reduce emissions by 48,000 tonnes, equivalent to 10,000 cars. – See more at: http://www.rtcc.org/…h.mXnqXtay.dpuf Continue reading
This Gamble On Carbon And The Climate Could Trigger A New Financial Crisis
There is little evidence that institutional investors have recognised that they are sitting on a carbon-asset timebomb Kevin Watkins theguardian.com , Friday 2 August 2013 Summer 2013: eastern Europe is facing one of the heaviest floodings in the last 50 years (Photograph: Ruben Neugebauer/Corbis If you want to see market irrationality in action, look no further than current stock market valuations for the world’s major oil, gas and coal companies. At a time when governments are supposedly preparing for a global climate change deal that will cut carbon emissions , energy multinationals are investing in carbon assets like there’s no tomorrow. Put bluntly, either we’re heading for a climate catastrophe, or the carbon asset bubble will go the way of sub-prime mortgage stock. Yesterday’s disappointing second-quarter results for Royal Dutch Shell provided a useful guide to the future. Over the past couple of years the company has invested heavily in exploration. It has pumped billions of pounds into fracking for natural gas in Ukraine and Turkey; the development of tar sands in Canada, and drilling in the Arctic. The market verdict, prompted by a dip in prices, reduced profits, and concern over costs: a drop in share prices. You can’t help wondering what will happen when carbon prices are aligned with climate imperatives. We are now just two years away from the crucial 2015 UN climate negotiations. If successful, they will put a price on carbon, driving down returns on fossil-fuel investments by capping carbon emissions. Market reactions will make Shell’s results look positively healthy. Yet there is little evidence that institutional investors have recognised that they are sitting on a carbon asset timebomb. You don’t have to dig too hard to find the gap between market valuation and real world ecology. Avoiding dangerous climate change, defined as a temperature rise of 2C, will require the global community to operate within a constrained carbon budget. That budget has a ceiling of 545 gigatons in carbon dioxide (GTCO2) emissions to 2050. Today, state energy firms and private companies are sitting on reserves amounting to three times that level. Carbon arithmetic points in only one direction. If governments are serious about reaching a 2015 multilateral agreement that avoids dangerous climate change, fossil fuel reserves need to left where they are. The Grantham Research Institute on Climate Change at the London School of Economics estimates that only 20-40% of oil, gas and coal reserves held by the 200 largest energy companies can be exploited if we are to avoid dangerous climate change. Yet the market valuation of these “unburnable carbon” reserves is over $4tn, to which can be added $1.5tn in company debt. The misalignment between our planet’s ecological boundaries and energy markets is set to worsen. High energy prices and concerns over power shortages in emerging markets are fuelling a global scramble for carbon assets. Collectively, the 200 largest energy companies invested $674bn (£441.4m) on the development of new fossil fuel reserves in 2012. If financial markets are mispricing risk, governments around the world have yet to recognise some basic cost-benefits realities. Companies investing in Arctic oil and gas exploration stand to gain revenue streams that will be counted in billions of dollars. But as highlighted in a recent Cambridge University study, the rapid melting of Arctic sea ice and permafrost threatens to unlock methane emissions that will generate costs of up to $60tn, much of it associated with the impact of floods, droughts and storms in developing countries. In effect these companies are taking what they see as a one-way bet on governments failing to tackle climate change. It’s a dangerous play. If governments fail to act on their climate change commitments, financial exposure to fossil fuel assets could become a systemically destabilising liability. Five of the 10 top companies listed on London’s FTSE 100, accounting for a quarter of the indexes’ capitalisation, are almost exclusively high carbon. The Australian Securities Exchange has a recklessly high exposure to coal. The New York exchange is also sitting on a large carbon bubble. Energy companies are exposing institutional investors, mutual funds and banks to dangerously mispriced assets, yet current regulatory frameworks are failing to address the systemic threat. Unfortunately, governments are actively encouraging energy companies to bet on dangerous climate change. The European Union has driven the world’s largest carbon market into freefall by oversupplying permits, undercutting incentives for investment in renewable energy in the process. As a group, rich countries spend over $800bn annually actively subsiding fossil fuels , creating markets for oil, gas and coal companies. Britain’s recent decision to grant tax concessions to companies involved in fracking is a recent example of a wider failure to align fiscal policy with climate commitments. For every $1 invested in renewable energy support in the OECD another $7 is spent on carbon-intensive fuels. From a climate change perspective, this is the policy equivalent of a government running an antismoking campaign while removing the tax on tobacco and subsidising cigarette consumption. Developing countries are also trapped in a cycle of policy-induced carbon-intensive growth. Currently, they are spending over $1tn annually to subsidise fossil fuel use, according to the IMF. These transfers often dwarf budgets for health and education. As research at the Overseas Development Institute has highlighted, most of the benefits go to industry, large-scale agriculture and middle-class consumers. Eliminating subsidies for fossil fuels could open the door to a win-win scenario. It would cut energy-related CO2 emissions by 13%, slowing the drift towards the dangerous climate-change cliff. Coupled with signals to indicate that carbon prices will rise and early investment in renewables, it would unlock the private investment and spur the technological breakthroughs needed to drive a low-carbon transition. Diverting fossil fuel subsidies into low-carbon energy cooperation would also generate wider benefits. Developing countries such as India and China are already investing heavily in wind and solar power. But if emerging markets are to break their dangerous addiction to coal and other fossil fuels, they need financial support to phase out their carbon-intensive stock. Providing that support through the reallocation of fossil fuel subsidies would help create markets for low-carbon investors – and it would go a long way towards building trust in international climate negotiations that are too important to fail. •Kevin Watkins is executive director of the Overseas Development Institute, a UK development think tank. Continue reading
Report: Carbon Markets Offer ‘Cheap’ Aviation Emissions Cuts
New research finds using existing, high-integrity carbon credits would meet emission goals at around $4 per tonne By Will Nichols 30 Jul 2013 Controlling CO2 emissions using market mechanisms could cost airlines less than the revenue they make from checked bags, extra legroom, and in-flight snacks, new analysis has found. The industry could be paying as little as $4 a tonne of CO2 in 2015 by purchasing high-integrity carbon credits already available in the world’s carbon trading systems, according to a new report by Bloomberg New Energy Finance and NGO the Environmental Defense Fund (EDF) that urges the industry to adopt tougher emissions targets. The findings will heap further pressure on international leaders and the International Civil Aviation Organisation (ICAO) to reach a decision on implementing a global market-based mechanism to control aviation emissions when it meets in September. Aviation accounts for between two and three per cent of global and some analysts expect this to quadruple by 2050 if no action is taken to curb emissions across the sector. In 2010, ICAO agreed non-binding targets of improving fuel efficiency by two per cent a year and delivering carbon neutral growth from 2020, before then halving net emissions by 2050 compared to 2005 levels. Airlines and manufacturers have also experimented with new technology such as lighter planes and biofuels in order to help curb emissions. However, many airlines were fiercely opposed to EU regulations forcing them to buy carbon credits to cover emissions during flights in and out of its airports, raising concerns that efforts to deliver an international emissions management mechanism could be thwarted. The EU’s firm stance on aviation carbon trading was eventually softened when it announced the rule would be suspended for a year to ease the passage of an ambitious global deal at ICAO . Since then, the industry has responded to pressure from NGOs, investors, and customers to curb its impact , and in June the International Air Transport Association (IATA) called on world governments to agree measures to manage emissions from 2020 – although the resolution fell short of the detailed plans green campaigners want to see. Today’s research argues the estimated 4.4 billion tonnes of surplus credits in world carbon markets could present an opportunity for aviation to harness other industry’s emissions reductions, alongside its own, to meet its carbon targets. BNEF and the EDF say these credits could, in principle, meet almost half of airlines’ potential emission reduction requirements for the 30 years between 2020 and 2050. They calculate that if governments adopt tough criteria to ensure offsets represent real emission reductions, the cost of these credits to the aviation industry would be between $4 and $6 per tonne in 2015. These costs would represent less than 0.5 per cent of the industry’s total revenue over this period – three times less than the share of revenue collected last year from checked bags, extra legroom and in-flight snacks – and would add less than $2 to a typical transatlantic fare. Guy Turner, chief economist at BNEF, said the widespread availability and low cost of carbon credits through a market-based mechanism could enable the indsutry to take on more ambitious targets. “These findings show that the international aviation sector can control its CO2 emissions relatively cheaply by using market-based mechanisms,” he said. “The small cost and the ability to pass any costs through into ticket prices, should encourage the international aviation sector to accelerate and deepen its emission reduction pledges. More ambitious emission reductions now look much more doable, than mere stabilisation from 2020.” Increased demand for carbon offset credits could also help breathe some fresh life into a market that has suffered in recent years as a result of an oversupply of allowances that has led to low prices. Continue reading
