REDD and the Carbon Market
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REDD and the Carbon Market 2 March 2010 Henry Derwent, IETA REDD after Copenhagen – the Way Forward IISD / ASB–ICRAF Workshop, Nairobi
Transcript of REDD and the Carbon Market
REDD and the Carbon Market
2 March 2010
Henry Derwent,IETA
REDD after Copenhagen – the Way ForwardIISD / ASB–ICRAF Workshop, Nairobi
Forest Offset markets so far
Source: Ecosystem marketplace State of the Forest carbon markets 2009, World Bank State of the Carbon Market 2009
All Carbon Market project-based 1,535.0 33,487 All Carbon Market 4,811.0 126,345
Volumes of Forest Credits voluntary still driving the market
Source: Ecosystem marketplace State of the Forest carbon markets 2009
Distribution by type and location
Region Mt of transaction credits originating
Value US£m
North America
7.2 32.0
Latin America 3.9 35.5Oceania 2.8 37.8Africa 2.0 20.9Asia 1.1 9.9Europe 0.7 6.0
Source: Ecosystem marketplace State of the Forest carbon markets 2009
Historical Total:Hectares affected
Historical Total:Voluntary market
The shape of the market• Division of historical total of forestry offsets between primary sales and sales by intermediaries
Primary sales Sales by intermediaries
Total
13.2Mt 2.0Mt 15.3Mt$111.9m $17.8m $129.7m
Pre-2002 2007 2008
45% 8% 7%
• Changing share of forestry credits in voluntary market total
Source: Ecosystem marketplace State of the Forest carbon markets 2009
Who owns the land?
Source: Ecosystem marketplace State of the Forest carbon markets 2009
Prices – volume weighted averages
Source: Ecosystem marketplace State of the Forest carbon markets 2009
What has kept the market at these prices and levels?
• Inherent quantity limitations in voluntary market
• Especially if early compliance action is not much of a motive
• Enviromental integrity concerns about forest biosequestration or avoided deforestation/degradation
• Constraining compliance scheme rules• Maybe a REDD-shaped gap
State Purchases in the Future• Total pledges currently not impressive• May be preference for not going through
carbon market• Competition from AAUs, CERs• Extent of international harmonisation in
future becoming less clear• Political sympathy for REDD• Suspicion of offsets won’t die
The Current Trading Scheme World
National or broader schemes in operationState schemes in operation, or closeNational scheme before legislature National scheme in preparationNational scheme under considerationMajor offset suppliers
Demand from Compliance Markets past 2012
• EU-ETS:• CPRS and GGAS:• NZETS:• Japan:• US Federal:• US State and CCX:• US EPA scheme:• Canadian Federal and
Provinces:• Korea and Mexico:• Advanced developing
countries:• International sectors:
o Limited space at -20%o Sizeable market once it startso Not a major sourceo Status of pledge and of trading?o Is cap and trade dead?o Impacts of Congress debateo Just possible to have offsetso Many schemes, little appetite
o Too early?o Much too early?
o Odds currently against
Midwest Greenhouse Gas
Reduction Accord (MGA)
Signed: Nov 2007Scheduled launch: 2012
Western Climate
Initiative (WCI)Signed: Feb 2007
Scheduled launch: 2012
Regional Greenhouse
Gas Initiative (RGGI)
Signed: 2005 Launch: Jan 2009
North American Patchwork
ObserversIndependentaction..and 6 Mexican States
also in WCI
EPA ACTION
Future Demand from Voluntary Markets
• Largely dependent on development of compliance markets
• Whether they exist, and how far they extend• Bets on pre-compliance• Intrinsic market attractions of voluntary
products• Vulnerable to push-back on integrity and
confusion on methodologies
Supply side issues• Competition with AAUs, CERs, non-
biosequestration domestic offsets, other voluntary/non-Kyoto projects, CCS, geo- engineering, new mechanisms,
• Timing, throughput and cost of REDD credits unclear
• Possibility of limits on volume, fungibility and price in individual trading schemes (to protect domestic investment signals despite cost implications)
• Discounting, buffers and insurance• Potential volatility created by temporary credits• Sectoral crediting, sectoral trading and JI parallels
Forest and REDD standardsGreenhouse Friendly™
The question won’t go away: Where’s the demand?
• Whatever the politics, REDD demand does not exist in a vacuum
• Vague expectations of developed country Government funding need to be clarified
• No maket if no demand; expectations built up by REDD work may be dashed or postponed
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