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Cs presentation mj april 5th 2013

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Madeleine Allcock
Madeleine Allcock

This document summarizes information about Certified Emission Reductions (CERs) and the carbon markets. CERs are carbon credits issued under the Clean Development Mechanism of the Kyoto Protocol for emission reductions from projects in developing countries. The key points covered are: 1) CERs are mandatory credits used for compliance with programs like the EU Emissions Trading Scheme, while voluntary credits (VERs) are used for voluntary reductions. 2) Changes to the EU ETS in its third phase from 2013-2020 will significantly increase demand for CERs while restricting supply. 3) Investing in CERs now provides exposure to the carbon market which is expected to grow as cap

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Climate Securities Ltd Guy Van Ristell Director Perry Smith Jason Badla
http://youtu.be/ReOj12UAus4
Certified Emission Reductions (CERs)
Certified Emission Reductions (CERs) vs Voluntary Emission Reductions (VERs) VERs are carbon credits which are sold to any business or organisation that wants to voluntarily reduce its carbon footprint. CERs are used by businesses or organisations that have to comply with mandatory emission initiatives under the United Nations Framework Convention on Climate Change (UNFCCC) like the European Union Emission Trading Scheme (EU ETS.)
CERs vs VERs CERs VERs Created through regulated projects Produced from unregulated projects with independently verified under UNFCCC no centralised authority. protocols Exchange traded commodity (liquid, OTC traded transparent pricing) Legislation demands compliance and Buyers have no obligation to engage in supports the market (Kyoto Protocol) long term purchase agreements Clearing through an exchange reduces Easy to purchase hard to sell counterparty risk
The Kyoto Protocol The Kyoto Protocol is an international treaty that sets binding obligations on industrialised countries to reduce emissions of greenhouse gases. 191 countries (all UN members, except Andorra, Canada, South Sudan and the United States), as well as the European Union are Party to the Protocol. The Protocol took effect in February 2005 and consists of three phases that required the developed nation signatories to abate their greenhouse gas emissions by 5.2% for the 2008 2012 period relative to 1990 this second phase ended in December 2012. The third phase will run from 2013 to 2020.
Cap and Trade The consensus is that a free market cap & trade system is the most effective economic approach for tackling climate change. The "cap" sets a limit on emissions, which is lowered over time to reduce the amount of emissions released into the atmosphere. The "trade" creates a market for carbon allowances. Trading lets companies buy and sell allowances, leading to more cost-effective pollution cuts, and incentive to invest in cleaner technology.
Certified Emission Reductions (CERs) Certified Emission Reductions (CERs) are a type of emissions unit (or carbon credit) issued by the Clean Development Mechanism (CDM) for emission reductions achieved by CDM projects and verified under the rules of the Kyoto Protocol. CERs are created primarily from renewable energy projects situated in lesser developed countries (LDC). CERs require full accreditation and undergo a strict verification and validation process. CERs can be used by industrialised countries in order to comply with their emission limitation targets or by operators of installations covered by the European Union Emission Trading Scheme (EU ETS) in order to comply with their obligations to reduce their CO2 emissions CERs can be purchased from the primary market (purchased from the original party that makes the reduction) or the secondary market (resold from a marketplace).
The European Union Emission Trading Scheme ( EU ETS ) The European Union Emissions trading scheme (EU ETS) works on the Cap and Trade principle and is the largest compulsory emission scheme currently in operation and represents 72% of Global carbon market volume and 80% of value. The scheme operates a phased based mechanism; each phase represents a number of years with specific objectives and emission reduction targets.
3 Phases of the EU ETS Phase I 2005 2007 Reduction target to reduce emissions by 2.5% compared to levels recorded in 1990 Included Oil Refineries, Power and Heat Generation and Energy intensive industries Phase II 2008 2012 Reduction target to reduce emissions by 5.2% compared to levels recorded in 1990 Metals and Pulp and Paper industry added
EU ETS PHASE III Like any free market mechanism the emissions market is affected by supply and demand, and has experienced a period of price correction as a result of oversupply. The 3rd phase of the EU ETS takes effect from 2013 and market forces will be significantly affected by the changes during this period. Increases in Demand Emission reduction targets for companies operating within the EU ETS will increase from 5.2% in relation to levels recorded in 1990 during phase 2 to 21.5% in relation to levels recorded in 2005 in phase III. The Aviation and Maritime sectors become part of the EU ETS and companies within those sectors will have to meet emission obligations and surrender CERs and EUAs to meet their liabilities. In 2010 shipping accounted for 15.3% of the EU's transport emissions, airlines accounted for 12.4%. The EU ETS implement an auction process for allowances which previously allocated without charge to companies, in phase III those companies will have to bid and pay for allowances.
EU ETS PHASE III Restrictions on Supply CERs that were created from industrial gas destruction projects including HFCs and nitrous oxide (N2O) will be decommissioned. CERs from these projects will no longer be accepted as legitimate credits within the EU ETS and can no longer be surrendered to meet obligations. It is estimated that this will represent a reduction in the supply of CERs by approximately 75%, The supply will be restricted further through the Reduction of Origination initiative through the CDM where CERs will only be issued from projects registered before the end of 2012. As a result there will tighter control on what projects are accepted, and only projects in truly Least Developed Countries (LDC) will be eligible for consideration.
Carbon Market Value The value of the market at the end of 2012 stood at US$176 billion. (Source World Bank ) In 2012 The EU ETS saw a 26% leap in the total trading volume of carbon allowances to 10.7 billion metric tonnes, equivalent to a third of the worlds total CO2 emissions. (Source Bloomberg New Energy Finance) In January 2013 the traded volume of carbon was more than 5 times higher than the previous year. (Source EEX ( European Energy Exchange)
CERs as an investment From phase I and moving into phase II of the Kyoto Protocol, we saw a huge increase in volumes of credits traded as this market established itself. We then saw prices fall from a high of 17 in 2008 to todays levels of less than 1. The major reason for this slide was a massive oversupply of credits to the market. As we enter 2013 and the changes to legislation are implemented, we will start to see this surplus of credits picked up. Basic supply and demand tenets will then create a positive price environment within the market, supporting the price of the commodity and pushing it upwards throughout Phase III. This investment should be seen as a medium to long term hold (3-8 years)
Future Market Development The issue of Global warming continues to be a key political issue of governments across the Globe and the Cap and Trade methodology of the EU ETS is being adopted by a number of industrialised countries. New Zealands ETS has been running since 2008 and in 2015, Australia and South Korea are due to open carbon markets, while China is beginning its own project this year. The State of California launched its first carbon allowances auction on November 14, 2012. The EU ETS remains the largest market within the emissions sector, a position which they will maintain, controlling the supply of CERs, ensuring EU member states have uniform systems in place. The consensus is that carbon credits will continue to develop into a recognised industrial currency.
Unique Selling Points Secure Asset CERs are produced from projects validated by the United Nations one of the most trusted global organisations under the banner of the UNFCCC. The UNFCCC secretariat under the authority of the CDM Executive Board, holds all details on CERs electronically in the CDM registry, providing a full electronic audit trail. Liquid Market CERs are spot tradable on global exchanges including the European Climate Exchange listed and admitted for trading on the ICE Futures Europe electronic platform, removing counterparty risk and providing enhanced client control of exit strategy. Registry - CERs are held within an FSA regulated registry account with full client access via a web portal. Ground Floor Entry Opportunity The current price of CERs is depressed because of an imbalance in market forces . The start of phase III within the EU ETS which will restrict supply and increase demand indicates a technical buying opportunity to capitalise on low unit price. Ethical Investment Investment in CERs provides green finance to developing countries providing social and economic benefit to the local communities. The CDM projects provide clean sustainable sources of power reducing the need for fossil fuel use in emerging markets which in turn reduces harmful emissions which will have an impact on the reducing the effects of Global warming.
Product Summary CERs purchased at circa 贈1.60 (tbc at time of trade) Minimum investment 贈5,000 and in increments of 贈2,500 thereafter Cash or SIPP investment

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Cs presentation mj april 5th 2013

  • 1. Climate Securities Ltd Guy Van Ristell Director Perry Smith Jason Badla
  • 4. Certified Emission Reductions (CERs) vs Voluntary Emission Reductions (VERs) VERs are carbon credits which are sold to any business or organisation that wants to voluntarily reduce its carbon footprint. CERs are used by businesses or organisations that have to comply with mandatory emission initiatives under the United Nations Framework Convention on Climate Change (UNFCCC) like the European Union Emission Trading Scheme (EU ETS.)
  • 5. CERs vs VERs CERs VERs Created through regulated projects Produced from unregulated projects with independently verified under UNFCCC no centralised authority. protocols Exchange traded commodity (liquid, OTC traded transparent pricing) Legislation demands compliance and Buyers have no obligation to engage in supports the market (Kyoto Protocol) long term purchase agreements Clearing through an exchange reduces Easy to purchase hard to sell counterparty risk
  • 6. The Kyoto Protocol The Kyoto Protocol is an international treaty that sets binding obligations on industrialised countries to reduce emissions of greenhouse gases. 191 countries (all UN members, except Andorra, Canada, South Sudan and the United States), as well as the European Union are Party to the Protocol. The Protocol took effect in February 2005 and consists of three phases that required the developed nation signatories to abate their greenhouse gas emissions by 5.2% for the 2008 2012 period relative to 1990 this second phase ended in December 2012. The third phase will run from 2013 to 2020.
  • 7. Cap and Trade The consensus is that a free market cap & trade system is the most effective economic approach for tackling climate change. The "cap" sets a limit on emissions, which is lowered over time to reduce the amount of emissions released into the atmosphere. The "trade" creates a market for carbon allowances. Trading lets companies buy and sell allowances, leading to more cost-effective pollution cuts, and incentive to invest in cleaner technology.
  • 8. Certified Emission Reductions (CERs) Certified Emission Reductions (CERs) are a type of emissions unit (or carbon credit) issued by the Clean Development Mechanism (CDM) for emission reductions achieved by CDM projects and verified under the rules of the Kyoto Protocol. CERs are created primarily from renewable energy projects situated in lesser developed countries (LDC). CERs require full accreditation and undergo a strict verification and validation process. CERs can be used by industrialised countries in order to comply with their emission limitation targets or by operators of installations covered by the European Union Emission Trading Scheme (EU ETS) in order to comply with their obligations to reduce their CO2 emissions CERs can be purchased from the primary market (purchased from the original party that makes the reduction) or the secondary market (resold from a marketplace).
  • 9. The European Union Emission Trading Scheme ( EU ETS ) The European Union Emissions trading scheme (EU ETS) works on the Cap and Trade principle and is the largest compulsory emission scheme currently in operation and represents 72% of Global carbon market volume and 80% of value. The scheme operates a phased based mechanism; each phase represents a number of years with specific objectives and emission reduction targets.
  • 10. 3 Phases of the EU ETS Phase I 2005 2007 Reduction target to reduce emissions by 2.5% compared to levels recorded in 1990 Included Oil Refineries, Power and Heat Generation and Energy intensive industries Phase II 2008 2012 Reduction target to reduce emissions by 5.2% compared to levels recorded in 1990 Metals and Pulp and Paper industry added
  • 11. EU ETS PHASE III Like any free market mechanism the emissions market is affected by supply and demand, and has experienced a period of price correction as a result of oversupply. The 3rd phase of the EU ETS takes effect from 2013 and market forces will be significantly affected by the changes during this period. Increases in Demand Emission reduction targets for companies operating within the EU ETS will increase from 5.2% in relation to levels recorded in 1990 during phase 2 to 21.5% in relation to levels recorded in 2005 in phase III. The Aviation and Maritime sectors become part of the EU ETS and companies within those sectors will have to meet emission obligations and surrender CERs and EUAs to meet their liabilities. In 2010 shipping accounted for 15.3% of the EU's transport emissions, airlines accounted for 12.4%. The EU ETS implement an auction process for allowances which previously allocated without charge to companies, in phase III those companies will have to bid and pay for allowances.
  • 12. EU ETS PHASE III Restrictions on Supply CERs that were created from industrial gas destruction projects including HFCs and nitrous oxide (N2O) will be decommissioned. CERs from these projects will no longer be accepted as legitimate credits within the EU ETS and can no longer be surrendered to meet obligations. It is estimated that this will represent a reduction in the supply of CERs by approximately 75%, The supply will be restricted further through the Reduction of Origination initiative through the CDM where CERs will only be issued from projects registered before the end of 2012. As a result there will tighter control on what projects are accepted, and only projects in truly Least Developed Countries (LDC) will be eligible for consideration.
  • 13. Carbon Market Value The value of the market at the end of 2012 stood at US$176 billion. (Source World Bank ) In 2012 The EU ETS saw a 26% leap in the total trading volume of carbon allowances to 10.7 billion metric tonnes, equivalent to a third of the worlds total CO2 emissions. (Source Bloomberg New Energy Finance) In January 2013 the traded volume of carbon was more than 5 times higher than the previous year. (Source EEX ( European Energy Exchange)
  • 14. CERs as an investment From phase I and moving into phase II of the Kyoto Protocol, we saw a huge increase in volumes of credits traded as this market established itself. We then saw prices fall from a high of 17 in 2008 to todays levels of less than 1. The major reason for this slide was a massive oversupply of credits to the market. As we enter 2013 and the changes to legislation are implemented, we will start to see this surplus of credits picked up. Basic supply and demand tenets will then create a positive price environment within the market, supporting the price of the commodity and pushing it upwards throughout Phase III. This investment should be seen as a medium to long term hold (3-8 years)
  • 15. Future Market Development The issue of Global warming continues to be a key political issue of governments across the Globe and the Cap and Trade methodology of the EU ETS is being adopted by a number of industrialised countries. New Zealands ETS has been running since 2008 and in 2015, Australia and South Korea are due to open carbon markets, while China is beginning its own project this year. The State of California launched its first carbon allowances auction on November 14, 2012. The EU ETS remains the largest market within the emissions sector, a position which they will maintain, controlling the supply of CERs, ensuring EU member states have uniform systems in place. The consensus is that carbon credits will continue to develop into a recognised industrial currency.
  • 16. Unique Selling Points Secure Asset CERs are produced from projects validated by the United Nations one of the most trusted global organisations under the banner of the UNFCCC. The UNFCCC secretariat under the authority of the CDM Executive Board, holds all details on CERs electronically in the CDM registry, providing a full electronic audit trail. Liquid Market CERs are spot tradable on global exchanges including the European Climate Exchange listed and admitted for trading on the ICE Futures Europe electronic platform, removing counterparty risk and providing enhanced client control of exit strategy. Registry - CERs are held within an FSA regulated registry account with full client access via a web portal. Ground Floor Entry Opportunity The current price of CERs is depressed because of an imbalance in market forces . The start of phase III within the EU ETS which will restrict supply and increase demand indicates a technical buying opportunity to capitalise on low unit price. Ethical Investment Investment in CERs provides green finance to developing countries providing social and economic benefit to the local communities. The CDM projects provide clean sustainable sources of power reducing the need for fossil fuel use in emerging markets which in turn reduces harmful emissions which will have an impact on the reducing the effects of Global warming.
  • 17. Product Summary CERs purchased at circa 贈1.60 (tbc at time of trade) Minimum investment 贈5,000 and in increments of 贈2,500 thereafter Cash or SIPP investment