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The Climate Change Projects Office
The Role of the CDM in the UK An Active Market
Jonathan ThomasThe UK Climate Change Projects Office
Djerba, Tunisia, September 2004www.dti.gov.uk/ccpo
The Climate Change Projects Office
Climate Change is a high political priority in the UK
“Urgent action is needed now to combat the worlds greatest environmental challenge – global warming”
Tony Blair 14th September 2004
The Climate Change Projects Office
The UK Position
• The UK Kyoto target is 12.5% reduction in GHGs (20% domestic CO2 reduction target)
• To achieve this, the Government has in place a Climate Change Programme
• Responsibility for meeting the target partly resides with UK companies
• The Government expects to meet its Kyoto target without the need for importing CDM/JI credits, but companies may want to use them to meet their own targets and for onward trading
The Climate Change Projects Office
Emissions Trading in the UK
• The UK Government launched the world’s first all sector voluntary emissions trading scheme (the UK ETS) in April 2002, as part of the Climate Change Programme
• Rules were devised in conjunction with business
• UK companies, consultants and brokers are now experienced in the way the market works, and carrying out emissions trades
The Climate Change Projects Office
The EU Emissions Trading Scheme
• Allocation based on “National Allocation Plan”
• Up to 5-10% of Allowances can be Auctioned
• “Linking Directive” covers CDM & JI entry
• Not Dependent on Kyoto Ratification !
The Climate Change Projects Office
Linking the EU-ETS and JI & CDM?
• CDM (from 2005) and JI (from 2008) ‘credits’ (=1 tCO2e) can be used by over-emitters in the ETS
• JI and CDM credits may be cheaper than EU allowances– Reduce compliance costs
– CDM could be in short-supply in the early years
• JI and CDM credits need not be converted into EU allowances (more flexibility in market response)
The Climate Change Projects Office
Demand for CDM & JI Credits
• JI and CDM demand is not solely dependent on “toughness” of EU state NAPs
• The key demand drivers for JI & CDM are the Kyoto targets for the EU states
• A weak NAP plan will require states to meet Kyoto commitments by reducing emissions in non-ETS sectors (very difficult!) or by buying CDM & JI at a the national level
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What UK business has to offer
• Experience from the UK and EU Emission Trading Scheme
• A wide range of brokerage, consultancy and legal skills is readily available
• CERs from CDM project are available and ERUs from JI projects are in the pipeline. There is a large demand for good projects
• The City of London is a world centre for emissions trading
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Recent UK CDM Market Activity - 1• The world’s first CDM project submitted for CDM-EB Registration
has UK involvement
• The project is based in India and uses HFC-23 destruction technology supplied by Ineos Fluor UK
• The project is very significant and is expected to generate several tens of millions of tonnes of CO2e over its lifetime
• Ineos are providing 2 million tonnes of CERs under the first private deal in Europe – Facilitated by Natsource
www.ineosfluor.com
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Recent UK CDM Market Activity - 2
• CO2e.com, a prominent UK-based carbon broker, has recently facilitated two of the largest CDM project transactions to date and has an ongoing demand for CERs
• This multi-million dollar deal is based on methane production from the waste of 100,000 pigs at an Agrosuper plant in Chile (~ 0.5 mtonnes of CO2e/yr)
• The CERs are being purchased by buyers in Japan and Canada
• CO2e.com has transacted tens of millions of tonnes of emission reductions to-date
www.co2e.com
The Climate Change Projects Office
Recent UK CDM Market Activity - 3
• The ICECAP fund has been set up in the UK to acquire a portfolio of ~ 40 million tonnes of CERs
• The founders of ICECAP participants are LessCarbon, Cumbria Energy and Investec Bank
• ICECAP is acquiring CERs to sell to buyers in the EU-ETS, Japan and Canada amongst others
• They are keen to source further good quality projects!
www.lesscarbon.com/icecap.asp
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Recent UK CDM Market Activity - 4
• Natsource Europe (based in London) have helped create the GG-CAP carbon asset management tool
• GG-CAP is the world's first large-scale privately run "buyers pool" designed for companies to purchase compliance-ready reductions of greenhouse gas (GHG) emissions.
• Targeted for launch later this year, it will begin purchasing 10 - 20 million tonnes of CERs and JI credits early in 2005 and for several years to come.
www.natsource.com
The Climate Change Projects Office
Recent UK CDM Market Activity - 5
• IT Power, a leading energy & climate change consultancy are Carbon Finance Advisors for China's first CDM project - Huitengxile Wind Farm
• 3 further CDM projects in China in development
• Developing 3 small-scale CDM "bundles" in India & working with IREDA to develop a strategic business unit offering bundling services to small-scale developers
www.itpower.co.uk
The Climate Change Projects Office
Recent UK CDM Market Activity - 6• EcoSecurities is the largest company solely dedicated to
carbon trading and climate change mitigation in the world
• EcoSecurities-Standard Bank Carbon Facility has been set up to purpose to purchase €8 million of emission reductions from JI and CDM credits
• 2E Carbon Access Programme – Joint venture with E&Co concentrating on funding and facilitating small-scale renewable energy CDM
• EcoSecurities has advised more than 60 JI/CDM projects around the world
www.ecosecurities.com
The Climate Change Projects Office
Recent UK CDM Market Activity - 7
• The CCPO is running a major trade mission to India in the first week of October 2004
• The mission comprises 15 UK companies who are keen to develop and invest in CDM projects and acquire CERs
• The mission will be led by the Rt Hon Margaret Beckett, Secretary of State for Environment, Food and Rural Affairs (Defra)
• The CCPO is keen to promote further CDM trade missions around the world
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Recent UK JI Market Activity
• The British Cabinet has recently given clearance for Defra to negotiate with a project developer with a view to hosting the UK’s first Joint Implementation Project
• The project removes nitric oxide emissions from a nitric acid plant and is expected to generate over 2 million tonnes of CO2e reductions per year
www.carbonventures.com
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What can the CCPO provide?
• Basic guidance
• Assistance preparing project proposals
• Advice on potential project partners
• A route to UK Government approval of projects
• Access to UK expertise in emissions trading and climate change project development