The Carbon Market Trading Emissions Contracts February 2009 Contents Introductio

The Carbon Market Trading Emissions Contracts February 2009 Contents Introductio

The Carbon Market Trading Emissions Contracts February 2009 Contents Introductio

Tucker, Wehtahnah, Contributing Writer has reference to this Academic Journal, PHwiki organized this Journal The Carbon Market Trading Emissions Contracts February 2009 Contents Introduction Cap in addition to Trade Kyoto mechanics European market experience Conclusions ECX Why If your house was on fire, would you try to put it out The world is heating up, it is caused by humans (anthropogenic), in addition to we have the chance to address it. The global cost of a Cap in addition to Trade based solution is estimated at 2% of GDP – if we act now. If we don’t act, what legacy are we leaving to future generations

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Underst in addition to ing Cap in addition to Trade The Cap Measure License Limit supply Creating a shortage in something that was always deemed to be limitless Requires great political leadership – those covered will naturally resist Has different resistance points depending on local factors Will never be truly fair – some people will suffer more than others Cap – underlying philosophy Those who continue to pollute at the old levels will have to pay, in addition to the charges will increase as the supply is squeezed. Over time this will make them LESS competitive Those who change early will be rewarded as long as their action. Over time they will become MORE competitive. The overall improvement is the quantum of the reduced supply

Trade Brings buyers in addition to sellers together thereby creating a price as long as mation mechanism Provides transparency in addition to liquidity Allows active financial risk management Facilitates the monetisation of excess credits Cap in addition to trade SIMPLE! Creates a cost in addition to /or an opportunity Kyoto Protocol – key points Divides world into two parts – Annex 1 countries (developed world) in addition to non-Annex 1 countries Covers period 2008 -2012 Reduce Annex 1 emissions by (an average of) 5.2% below 1990 levels National caps applied – but multiple mechanisms as long as compliance

Kyoto Protocol flexible mechanisms Emissions Trading Annex I parties may trade emissions allowances at a national or regional level Clean Development Mechanism (CDM) Annex I parties may implement emission reduction projects in non-Annex I countries in order to meet their own emissions targets Joint Implementation (JI) Annex I parties may implement emission reduction projects in certain other Annex I countries in order to meet their own emissions targets BACK TO CONTENTS Kyoto Implementation Europe – global leadership position Pre-Kyoto trading scheme (Phase I) 2005-2007 Phase II coincides with Kyoto period EUETS legally binding across all 27 member states Average reduction of 8% (from 1990 levels) 12% of allowances can come from CDM (national limits ranging from 0 to 20%) 2013-2020 scheme being finalised Kyoto Implementation United States – failed to ratify agreement The largest per-capita emitter of carbon, responsible as long as approximately one third of Annex 1 pollution Various regional initiatives – Cali as long as nia, RGGI Voluntary (legally binding0 scheme managed by Chicago Climate Exchange Both Presidential c in addition to idates vocal supporters of cap in addition to trade Possible post-Kyoto implementation 2013

Kyoto Implementation ROW – varied responses Canada – scheme commencing 2010 Australia – scheme announced 2010 New Zeal in addition to – scheme to start 2009 (possible link to Australia) Japan – details not yet available Per as long as mance against Kyoto targets Post Kyoto Aiming as long as agreement in Copenhagen 2009 To cover period 2013 – 2020 20-30% reduction by Annex I countries () Number of CER’s to be allowed Commitment from non-Annex I

Corporate structure About ECX European Climate Exchange is the most liquid marketplace as long as trading CO2 EU Allowances (EUAs) under the EU Emissions Trading Scheme. ECX is part of the Climate Exchange plc group of companies, listed on AIM of the LSE ECX in addition to ICE Futures Europe have a partnership where ECX manages marketing in addition to product development as long as its carbon emissions contracts in addition to ICE lists those products as long as trading on its electronic plat as long as m known as WebICE. ECX CFI (Carbon Financial Instrument) contracts are: Listed & traded on ICE Futures Europe electronic plat as long as m, a Recognized Investment Exchange Regulated by the Financial Services Authority Financially guaranteed by LCH.Clearnet ECX Products

About ECX Price in addition to volume ECX EUA Futures Contracts 94 million tonnes of CO2 traded in 2005 with a market value of €2.1 billion 452 million tonnes of CO2 traded in 2006 with a market value of €9 billion 1 billion tonnes of CO2 traded in 2007 with a market value of €17.5 billion Open Interest ECX EUA Futures Contracts ECX EUA Futures Contracts Open Interest currently rests at 171 million tonnes

Volume ECX EUA Options Contracts 341 million tonnes of CO2 have traded in EUA options in addition to 79 million tonnes of CER options on ECX / ICE Futures Europe Who is the Market ICE Futures Members enabled to trade ECX Contracts

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Price Drivers Macro Political will National developments Economic (growth/recession) Innovation Micro Dem in addition to in addition to Supply Oil price Coal price Gas price Weather/temperature Interest rates Other markets EUA-CER Price Spread EUA Price Correlations

ICE ECX Screen Shot BACK TO CONTENTS Where Next US ETS 5,760Mt EU ETS 2,080Mt Aus ETS 445Mt NZ ETS 100Mt Japan ETS 1,272 Mt China/India Canada ETS 400Mt CERs bridge the Regional Schemes Multiple roads to the same destination Behavioural change Renewable energy sources Voluntary markets (CSR in addition to pre-m in addition to atory) M in addition to atory cap & trade

Other In as long as mation Authorised Data Vendors

Tucker, Wehtahnah Contributing Writer

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