Issue 44 02.11.2009
CONTENT
GLOBAL CDM NEWS
01
CDM NEWS FROM ASIA
03
Emission Trading Schemes (ETS)
01
Latest CDM Statistics
03
UNFCCC Politics and Post 2012
02
Highlights from China and India
03
Political Events outside Kyoto
02
CARBON PRICE ANALYSIS
05
ECOLUTIONS EDITORIAL
GLOBAL CDM NEWS
With the last round of climate negotiations starting today
Emission Trading Schemes (ETS)
in Barcelona, the general atmosphere is getting warmer
as time is clearly running out. However, the new treaty’s
details are still far from concrete. Some have begun to
lower their expectations, suggesting that many important
issues will most likely be postponed until 2010. Also, it is
still not clear whether or not India and China will speak in
the same voice at the Copenhagen Climate summit next
December. Both countries have repeatedly emphasized
that it is the responsibility of developed countries to
finance climate change in developing nations, though both
are actually taking increasing measures to deal with it
themselves.
Reform of the current CDM is among the key topics to be
discussed this week, and India has emphasized on the
proposal to accept whole programs (as opposite to single
projects) as part of the crediting scheme. Last week, the
number of projects in the CDM pipeline improved in
relation to the performance seen in previous weeks,
especially in relation to the number of issuances to
projects, with China continuing to lead and India following
suit. Among renewable energy projects, hydropower and
wind projects have received most of the issued CERs so
far.
Finally, carbon prices saw a bearish week, with both
EUAs and CERs remaining stable or retreating on the
back of a weak energy complex.
www.ecolutions.de
Global carbon market to see continued growth starting in
Q4 2009
In a press release published last Monday, New Energy
Finance (NEF) said that the global carbon market has
shrinked in the third quarter of 2009, but that they expect
activity to grow in the near future on the basis of increased
activity both in the US and the international credit market.
According to their latest analysis, the volume of the
world’s carbon market fell 27% in Q3 compared to Q2,
largely due to a drop in the European emissions market
which has not been compensated by increased trading
volumes in the North American and international offset
market. By the end of 2009, NEF expects the global
carbon market to be worth USD 122bn, what would
represent a 3% increase on 2008.
The EU ETS is to remain the hub of the global carbon
market with 71% of the emissions traded and 83% of the
value traded in the worlds’ carbon market. Other markets,
however, are also making inroads, and the EU ETS share
still represents a decrease compared to last years’ figures.
The press release also said that for the first time this year,
the market for international offsets registered under the
UN gained ground for the first time this year. The volume
of secondary CERs traded increased by 36% on Q2 with
an increase in value of 46% as CER prices held their
ground throughout the period. Traded volumes of
secondary CERs have tended to increase quarter on
1/7
Issue 44 02.11.2009
quarter since the start of 2008 as more CERs are
only five weeks to go before that meeting. Post-
gradually issued by the UN and exchanges have
Copenhagen, Ban emphasized to reporters that countries
introduced spot as well as futures products. The Bluenext
must endeavor to ensure that any agreements reached
exchange launched its spot CER contract in Q4 2008,
during the technical negotiations in Denmark can be built
followed by the European Climate Exchange in Q1 2009.
upon to become legally binding. Negotiators are set to
Interest in CERs has also picked up for speculative
meet next week in Barcelona, Spain, for the last round of
reasons, as near term CER supply concerns have
negotiations before the two-week Copenhagen gathering
increased interest in December 2009 CERs. This has
kicks off on December 7.
resulted in higher CER prices in 2009 than in future years
and increased trading activity.
Others, however, have shown less optimistic to the
outcomes to be reached in December, suggesting that
In the US market, the Regional Greenhouse Gas Initiative
many important issues will most likely be postponed to
(RGGI) has seen increased levels of trading activity in Q3,
2010. Among them is Yvo de Boer, the UN climate
following on from the rapid ramp up in trading activity
change chief, who said also on Wednesday that though
across RGGI in Q2. NEF also reported that in anticipation
reaching a final global warming treaty will be impossible
of the 5th auction of RGGI credits, trading activity
this year, the principles of that accord must be determined
increased slightly, by 8% on Q2.This is in spite of prices
in December. He said that the treaty's details can be filled
decreasing, leading to a decline in the overall value of the
in over the next year, but that the political deal must be
market by 10%.
struck at the Copenhagen conference and that "time is
running out."
Source: Press Release NEF (26 October 2009)
Based on: http://news.xinhuanet.com and http://news.yahoo.com (28
UNFCCC Politics and Post 2012
October 2009)
UN chief voices cautious optimism ahead of Copenhagen
Political Events outside Kyoto
UN Secretary-General Ban Ki-moon said last Wednesday
that he is optimistic that world leaders will reach an
Trade carbon credits on new Singapore exchange
ambitious agreement in December's climate change
As part of its plan to become the Asia-Pacific's carbon
conference in Copenhagen, Denmark. "On climate
hub, Singapore may start trading emissions on a new
change, I'm still optimistic. This Copenhagen meeting will
exchange, Bloomberg reported last week. The Financial
be an important milestone in our common efforts to
Technologies Group plans to establish the Singapore
address climate change issues," Ban told reporters at his
Mercantile Exchange (SMX) by the end of the year, said
monthly press conference at UN Headquarters.
Senior Minister of State for Trade and Industry S. Iswaran
on Monday. He said that SMX will offer an electronic
There could be "a hallmark of success on climate
trading platform for futures and options trading on a
change," if states can agree on four political elements --
diversified range of commodities, including energy,
ambitious mitigation targets; adaptation measures; the
metals, agricultural commodities, currencies, commodity
provision of financing and technology for poorer nations;
indices and carbon credits.
and the creation of an equitable global governance
structure, he noted. "We are not lowering expectations"
Singapore plans to become a carbon-trading centre by
ahead of the Copenhagen meeting, the secretary-general
providing incentives to developers of carbon projects, said
stressed, noting that he has been working closely with
Bloomberg. The country - Asia's biggest oil-trading centre
Danish Prime Minister Lars Lokke Rasmussen, who is
- is offering tax breaks and setting up a clean-energy
holding discussions with governments on the substance
industrial park to boost the carbon-trading business, said
and form of an agreement that could emerge from the
Mr Iswaran. The Monetary Authority of Singapore's
summit. "There is a long way to go still," he said, with
incentive schemes for commodity derivatives trading and
www.ecolutions.de
2/7
Issue 44 02.11.2009
fund management were expanded earlier this year."Where
at the past weeks and months registrations, it is easy to
previously these were limited to tangible commodities,
see that both in China and India, hydropower projects
such as oil, metals and agri-commodities, these incentive
have dominated the CDM pipeline. The second preferred
schemes have since been enhanced to include emissions
project type (though still far away to hydro) was wind, with
derivatives," Mr Iswaran said at the launch of the Carbon
equal number of projects having been registered since
Asia Forum at Raffles City Convention Centre. Sweden-
July in both countries. Biomass projects came third after
based Tricorona the second-largest buyer of emission
wind projects, though most of them were registered to
allowances, set up its global trading hub in Singapore this
other countries different to China and India. These
year, he said.
numbers indicate that despite regulatory uncertainties that
may exist (as is the most discussed case of wind projects
in China), CER buyers still prefer these kind of project
Source: http://business.asiaone.com (27 October 2009)
types to others, as they benefit from higher environmental
reputation, receive higher prices for CERs and therefore
CDM NEWS FROM ASIA
yield higher returns over time.
Latest CDM Statistics
CERs Issued (millions) / Weekly*
16
5
Weekly Analysis
12
The UN issued 3.88 million CERs last week to 14 projects,
3
thus taking the total amount of credits issued to date to
8
340 million. This was the largest amount in eight weeks,
as the CER supply has been notoriously decreasing amid
more stringent Executive Board decisions. One third of
2
4
0
0
these credits - some 2.9 million - were awarded to one
cw32
cw35
cw38
cw41
cw44
Total
China
India
Nr. of Projects with CER issued (right axis)
single Chinese HFC 23 decomposition project in
Shandong province. The project is expected to reduce
over 10 million tons of carbon dioxide per year. About half
of the CERs issued to date stem from this type of large
industrial projects, mostly HFC23 and N2= reduction
No. of Registered Projects by sector/ Weekly*
projects.
8
Only two further projects were awarded credits in China
last week, namely a large scale biomass heat and power
4
project in the same province and a 20MW power
generation project in Shanxi province. Four renewable
energy/energy efficiency Indian projects also received
Hydro
Solar
LFG
India
India
Tot.CW44
India
Tot.CW43
India
Tot.CW42
India
Tot.CW41
India
Tot.CW40
India
Biomass
Tot.CW39
India
India
Wind
energy efficiency through steam optimization project.
Tot.CW38
substitution of coal with jute biomass residue and an
Tot.CW37
a 12MW bundle project in Tamilnadu province), a
Tot.CW36
0
CERs last week, including two small wind farms (including
Other
.*Based on http://cdm.unfccc.int/index.html
Together, these projects received, however, less than
55,000 CERs.
Meanwhile, four projects were registered between the 24
th
th
and 30 of October by the CDM executive board. All of
them where hydropower projects: two of them in India,
one in China and another one in Colombia. Having a look
www.ecolutions.de
3/7
Issue 44 02.11.2009
Highlights from China and India
including transmission line improvement, street lighting
upgrades and biomass gasifiers to generate power. The
Mass-market programmatic CDM finds favour in India
street lighting scheme swaps out old systems for more
Reuters carbon market community reported last week on
efficient ones. "We are starting with a couple of cities and
two leading carbon offset project developers in India that
have made concrete proposals regarding how the new UN
the program will be valid for 28 years and we hope to
include 70-80 cities," Pandey said.
scheme should look like. One of the criticisms made to the
current CDM is its single project based structure, which
Source: Reuters (30 October 2009)
allows for approval of individual projects which can take
up to two years to fully develop and that are too costly.
The proposed scheme, called program of activities (PoA),
China is doing more to tackle climate change than it gets
credit for
aims to allow the launch of identical emissions-reduction
According to a new report from the World Resources
projects across a much wider user base in a single
Institute, China is on track to meet its main climate change
program (thus allowing for economies of scale), and this
target, which is a 20 percent reduction in energy intensity
way cutting overall costs and simplifying the processes.
by the end of next year. In spite of all its polluting factories
Although not yet broadly spread, this type of scheme
and coal-fired power plants, China might be better than its
already exists under the current UN scheme, and is
reputation climate-wise, New Scientist reported on a new
already spreading clean energy technology to millions of
report from the World Resources Institute (WRI). They
people, especially in India, promising to cut carbon
believe the country is doing more to tackle climate change
emissions and help investors earn valuable carbon
than it gets credit for. In fact, its environmental standards
credits.
exceed those of the United States in some key areas.
"China is making substantial progress in controlling its
“India's the best place for PoAs. There's a lot of hunger to
emissions of climate gases," says Deborah Seligsohn,
do these renewable projects because they know the
author of the report.
government is committed," said Chandra Shekhar Sinha,
head of environmental markets in Asia for J.P. Morgan.
According to the WRI study, China is on track to meet its
J.P. Morgan informed Reuters that they are already
main climate change target, which is a 20 percent
developing three PoAs in India and is evaluating others.
reduction in energy intensity – the amount of energy used
One scheme involves the deployment of 1.2 million solar
per US dollar of gross domestic product – by the end of
lanterns in the northern state of Bihar. The other two cover
next year. This would put a brake on the growth of the
the roll-out of more fuel-efficient commercial cooking
country's carbon dioxide emissions. China is also making
stoves in restaurants and biomass boilers and gasifiers for
good progress towards its goal of generating 15 percent of
agro industries, such as sugar mills. All three are
its electricity from renewable sources by 2020, according
estimated to yield about 12 million CERs by 2012, Sinha
to the report. By the end of the next decade the country
said. “I've seen many new projects coming up in
will have 150 Gigawatts of wind power installed – over five
programmatic CDM," Ashutosh Pandey, CEO of Emergent
times the current US level. One in 10 Chinese homes
Ventures India, told Reuters. He said interest in PoA has
already have solar heaters, with the number growing by
surged over the past 6 months once some of the teething
20 percent each year. Coal-fired power plants are also
troubles of the scheme were overcome and he expected
more efficient in China than in the US. The thermal
15-20 programmatic CDM projects to be launched in India
efficiency of US stations – the fraction of heat turned into
over the next 6 to 12 months.
electrical energy – settled at just under 33 percent in the
early 1960s. The efficiency of China's plants has been
UN data shows that, globally, one PoA project is already
rising steadily and now exceeds 35 percent.
formally registered and 15 more are being checked out by
UN-approved auditors. Several are in India. Emergent
Source: http://en.cop15.dk (30 October 2009)
Ventures has several PoA projects under development,
www.ecolutions.de
4/7
Issue 44 02.11.2009
China to stick by India against western pressure on
climate change
reject any attempt to impose a global regime of verification
and reporting, he said.
Two Indians, Amartya Sen and Rajendra Pachauri,
opened and closed the International Conference on
A lot of work has been done in China to develop renewal
Environment and Development in Beijing last weekend.
energy and even India has shown impressive progress
But there is still a big question mark on whether India and
although it started out a little late in this direction, he said.
China will speak in the same voice at the Copenhagen
Pachauri said he was also impressed by China’s efforts at
Climate summit next December. “I doubt China will dilute
developing renewal sources of energy and building a
its stand or go with the United States on the issue,”
massive network of railways that is much less polluting
Pachauri, chairman of the Intergovernmental Panel on
than road vehicles.
Climate Change told TNN on the sidelines of the
conference on Friday. He did not agree with people who
st
Source: http://timesofindia.indiatimes.com (1 November 2009)
felt that China might break away from India on the issue.
CARBON PRICE ANALYSIS
At present, both India and China are opposing western
pressure to enforce mandatory limits on emissions and
Contract
Price Friday
Weekly Changes
even punish countries that fail to meet emission standards
EUA (Dec. 2009)
€14.54
€0.15 (1.04%)
that will be set at the Copenhagen conference. But there
sCERs (Dec. 2009)
€13.62
€0.27 (2.02%)
are many who fear that the United States might succeed
EUA/CER spread
€0.92
in getting China to change its stand. “I am concerned
pCERs
about a possible under cover agreement between the
VER CFI (Dec. 2009)
$0.15
= (0%)
United States and China. That would produce a weak
RGGI (Dec. 2009)
$2.31
-$0.03 (-1.28%)
agreement at Copenhagen, which would not be good
* The registration and volume risk are taken by the buyer
either for Europe or India,” Laurence Tubiana, director,
Sources: ECX,CCX, IDEAcarbon and CCFE
-€0.12 (-11.54%)
€ 8 - 13*
global public goods at European Union’s ministry of
foreign and European Affairs told this correspondent.
Weekly Analysis
Carbon prices have retreated last week amid a weaker
The worst case scenario would be every country does
energy complex, which saw Brent crude prices going
what it likes and there are no binding limits of any kind.
down to a weekly minimum of $75/bbl from about $79. On
That would result in a backlash from the industry in
Monday, German power had also dropped, accompanying
Europe, which is already implementing rules on emission
the fall in oil prices. The amount of allowances traded that
restrictions, she said. Pachauri, who is also on an
day was below the daily average of around 16 million in
advisory panel of the Chinese government, feels Beijing
October. Prices continued to come down on Tuesday to
will not come under pressure from either western
close at an intra week low on Wednesday, when the
governments or multinational companies operating in
December 2009 EUA contract closed at €75.6. On
China. “China is very good at resisting pressures. Chinese
Thursday, carbon gained some lost territory in the
leaders never sacrifice their national interests under
afternoon as the news broke that the US has finally begun
external pressures,” he said. His views on the issue may
to recover from the recession and is beginning to grow.
be somewhat different from that of Jairam Ramesh, the
Also the energy markets were stronger that day, with
Minister of State (Independent Charge) for Environment
front-month Brent crude futures surging past the $78/bbl,
and Forests, who has been wary about possible changes
more than $2/bbl higher than at the same time the
in China’s position. Pachauri, who received the Nobel
previous day. Volumes traded in their average rate that
Prize on behalf of the IPCC, said India will not come under
day. Finally, prices firmed higher on Friday, closing the
any pressure to agree on issues it is opposing, India will
week at €14.54, up €0.15 with respect of the previous
not agree to any mandatory limits on emissions and would
Friday.
www.ecolutions.de
5/7
Issue 44 02.11.2009
Meanwhile, in the secondary CER market, the 2009
contract traded in the week in the range of €13.08 and
€13.78, and finally closed on Friday at €13.62, up 2%
respect of the previous week. The spread between both
contracts is now less than €1, a remarkable 11%
decrease compared to the previous week.
Prices EUAs / CERs (€/tCO2e)
18
10
14
5
10
6
0
01.01.09
01.06.09
Spread (right axis)
30.10.09
EUAs Dec 2009
CERs Dec 2009
Energy Prices – Brent Crude Oil (USD/bbl)
75
65
55
01.07.09
30.08.09
29.10.09
Sources: ECX, Ariva
www.ecolutions.de
6/7
Issue 44 02.11.2009
Disclaimer
This information does not constitute a recommendation to buy or an offer to sell. The above statements are for the sole purpose of
information and subject to change without prior notification. They are to be understood in respect to the solely binding subscription
offer for securities of ecolutions GmbH & Co. KGaA. Notwithstanding the above information to be accurately and duly researched,
neither ecolutions nor Altira or their respective affiliates shall be liable explicitly or implicitly for the accuracy, completeness or
timeliness of the information. Performance in the past cannot by any means be used to draw conclusions for future performance.
CONTACT
ECOLUTIONS GMBH & Co. KGaA
Grüneburgweg 18 / 60322 Frankfurt am Main / Germany
Tel +49 (0)69 915 010 80 / Fax +49 (0)69 915 010 811 / [email protected]
ECOLUTIONS CARBON INDIA PVT. LTD.
Mahender Chambers 15 Opp. Duke Factory / Chembur / 400 071 Mumbai / India
Tel +91 (0)22 252 00 500 / Fax +91 222 520 1743 / [email protected]
ECOLUTIONS NEW ENERGY INVESTMENT CO. LTD
1505 Block 15, China Central Place, 89 Jianguo Road / 10025 Beijing / China
Tel +86 (0)10 5203 6828 / Fax +86 (0)10 5203 6827 / [email protected]
ECOLUTIONS SINGAPORE PTD LTD
Level 30, Six Battery Road / Singapore
Information request / Newsletter subscription: [email protected]
www.ecolutions.de
7/7