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The CDM: a review of its development and status of the carbon markets Dr. Oscar Coto II National CDM Workshop Belize August 2011.

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Presentation on theme: "The CDM: a review of its development and status of the carbon markets Dr. Oscar Coto II National CDM Workshop Belize August 2011."— Presentation transcript:

1 The CDM: a review of its development and status of the carbon markets Dr. Oscar Coto II National CDM Workshop Belize August 2011

2 Topics 1.Responses to climate change and the CDM 2.Current trends in the CDM 3.Status of the carbon markets and expectations

3 Source: CC Sinthesys Report IPCC (2007) Increase on key parameters

4 Relevant subject

5 Responses based on international and local levels, efficient and effective, with equity both in Mitigation as well as Adaptation

6 Responding to Climate Change Long and complex international negotiations UNFCCC in 1992 The Kyoto Protocol in 1997 On-going negotiations and dilemmas

7 Looking back in time … mitigation responses

8 Carbon Financing Area of environmental financing Explores implications of living in a carbon constrained world, emissions of GHG carry a price due to externalities Apply to emission reductions projects and associated transactions under the carbon markets

9 The Kyoto Protocol

10 High historical relationship between carbon markets and political decisions

11 Carbon Markets 3main markets in existence Voluntary emission reduction certificates Emission allowances Project based emission reductions certificates

12 Carbon markets: how do they work?

13 Chicago Climate Exchange New South Wales Certificates.12 Carbon Markets CDM 2.7 EU ETS Allowances Voluntary.34 Secondary CDM 17.5 JI % +18% Assigned Amount Units 2.0 RGGI % +1000% +626% (US$ billions) Projects Allowances

14 General historic trends 2010 stalls for the first time Domination of european systems

15 The Clean Development Mechanism (CDM)

16 ¿Then, What is it? Global effort to resolve an issue of public interest through application of a market based mechanism Supply of CERs located in the developing world can be bought by developed countries for their assumed compliance Based on principles of cost effectiveness for the develop world and contribution to sustainable development in the developing world Aiming at contributing to the objectives of the UNFCCC (stabilization of GHG concentrations Several types of implications

17 Number of projects into the CDM stream / per month ( )

18 Recent trends

19 Current situation of the CDM (August 4 th, 2011)

20 Who´s selling CDM CERs?

21 CDM sectors

22 CDM trends Decreases over the last 2 years (lower demand, regulatory uncertainty, competition) Still important activity in project formulation

23 CER price continues to be indexed to the European signals

24 CER post 2012 high quality vintage 6-7 Euro CER futures with a medium risk Euro CER futures with low risk Euro CER registered CDM projects 10,5-11 Euro CER spot market9.33 Euros CDM CER prices Source CDM Highlights, GIZ (July 2011)

25 The future of the carbon markets Uncertainties Dependencies Expectations

26 At the project level …

27 Carbon revenue is an additional source of earnings

28 Relationship between investment and net present value of carbon contract for different types of projects (World Bank experience)

29 Carbon revenues and project returns

30 What is going on with the CDM? Regulatory decisions out of COP 16 in Cancun Expectations from market players

31 Decisions related to CDM Regional distribution Integrity of the CDM and its requirements Objectivity, efficiency of the CDM and its requirements Enhance transparency of the CDM Out reach Simplification and standardization Inclusion of CCS in CDM (Decision 7/CMP.6)

32 Expectations from market players

33 Plans for CDM Involvement in 2011

34 Interest in investing in LDCs, SIDs, PoAs

35 Concluding Remarks Continued interest but challenging issues Attention to regulatory developments Act now !! if you have a sound project


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