Cologne Climate Conference & Voluntary Carbon Markets
The world's leading international trade fair and conference for emissions trading, carbon abatement solutions and clean technologies, Carbon Expo 2012, was held from 30 May - 1 June, 2012 in Cologne, Germany. The CO2 market and all participating interest groups addressed a large range of fundamentally significant topics including the effects of the Global Climate Conference in Durban, economic forecasts for the European Union (EU) and their influence on emissions trading. This time the focus was on:
- Interface between industry, technology & climate, and carbon finance
- Meeting point of the green technology and climate financing
- Global crossroads for climate policy development around the world
The total value of the carbon market (compliance plus voluntary) grew by 11 percent year-on-year to US$176 billion from US$148 billion, and transaction volumes reached a new high of 10.3 billion tonnes of carbon dioxide equivalent (CO2e).
Several new domestic and regional carbon market initiatives gained traction in both developed and developing economies in 2011. Five new jurisdictions passed legislation adopting cap-and-trade schemes. “It is heartening to see that, while leading economies continue to experience difficulties and the carbon market faces major challenges, we see increasing interest in, and support for, new market-based mechanisms to mitigate climate change in the long term,” said Joëlle Chassard, Manager, Carbon Finance Unit, World Bank. “Together, these initiatives will drive substantial resources towards low-carbon investments and they have the potential to unleash a truly transformational carbon market in support of a global solution to the climate challenge,” said Alexandre Kossoy, Senior Financial Specialist, Carbon Finance Unit, World Bank.
"It has been proven again that this (Cologne) is the place to be for information on the latest ideas and trends on climate finance and carbon markets. The Carbon Expo remains the best knowledge platform for carbon market stakeholders", said Joëlle Chassard, Manager of the World Bank's Carbon Finance Unit, Dirk Forrister, President and CEO of IETA, and Dr. Christian Glasmacher, Senior Vice President of Koelnmesse, in a joint statement.
Mr Simon Andrews, MD of The Trend Is Blue stated: "Attending the Carbon Expo 2012 in Cologne was a great learning experience. It was interesting to see the intensity in the Carbon markets.It was real pleasure to meet again all our international friends. The lessons learnt at the Expo will be used to provide cutting edge services of international standards for our clients." He added "Carbon Expo 2012 makes it clear that the future is bright, particularly seeing the strong demand for carbon offsets from the corporate sector."
The Carbon Expo opened with a full house and rousing call to action from Christiana Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC).
"We're into year four of international financial turmoil, and despite that, governments are persevering - slowly, but step by step - in evolving the climate regime to where we all know that it has to go", said Figueres. "They're persevering basically because they, and we, know that there is no other option."
Figueres applauded the continued commitment of participants in the carbon market. "Participation in today's market is not for the faint of heart," she said. Figueres added, "There is no such thing as the impossible - it's just a matter of attitude."
Conference participants agreed that offset markets and emissions trading have a future despite a tough market currently, and those who can survive will reap the rewards. The expectation is that market demand, in particular, will increase as a future regulatory framework is created with a number of possible options to address greenhouse gas (GHG) emissions efficiently and effectively. Such an emergence of a suite of simplified instruments both on local and global levels will provide confidence to establish more ambitious targets by countries required to reach the agreed global target of two degrees Celsius.
Though many of the visitors were at the Carbon Expo to share their thoughts on the future, hectic activity was noticed with buyers and sellers of carbon credits finalising deals before the end of the year.
The Carbon Expo 2012 saw the release of “State of the Voluntary Carbon Markets 2012” report by Ecosystem Market Place and Bloomberg New Energy Finance. The report analysed the trends of the voluntary carbon market and highlighted new initiatives, project types, and sources of demand of voluntary offsets. We will take a look at some of the salient features of the report.
The report identifies The Trend is Blue as one of the important voluntary carbon market players providing feedback for the renowned report. According to the report, in 2011 more than $576 million was transacted in the voluntary carbon markets. This figure was a three-year high. The total volume of carbon traded stood at 95 MtCO2e. 2011 saw the highest value ever attributed to OTC (Over the Counter) transactions at $574 million. The total amount of GHG transacted in 2011 stood at 93 MtCO2e. If one excludes a single low-priced, high-volume outlier from the 2010 market, this represents a 28% percent increase over 2010 levels. Despite the debt crisis, European buyers increased their demand, even if at lower prices, while buyers in the US made up for the shortfall.
European buyers transacted 33 MtCO2e, which was worth $204 million. The US topped thje list on a country level, purchasing 19 MtCO2e for purely voluntary purposes, with 12.4 MtCO2e going directly to end users. Australia and New Zealand showed increased offset transactions. Around 7 per cent of market share was due to voluntary offsets transacted in developing countries in Asia, Latin America and Africa. This fall in volumes from 2010 volumes was attributed to the fewer transactions by buyers in Latin America.
Table 1: OTC Volume and value traded by buyers as per region
(Data Source: Developing Dimension: State of the Voluntary Carbon Markets 2012)
Due to various economic factors, many European buyers were attracted to the comparatively inexpensive Asian clean energy projects. Europeans were also the largest supporters of projects in Latin America and Africa. Buyers from developing countries purchased voluntary offsets locally to offset supply chain emissions in their roles as exporters or to prepare for domestic GHG regulations. According to the report, prices of voluntary carbon offsets varied greatly by standard, location and technology, ranging from under US$1 to over US$100 per tonne of CO2e.
Corporates were the largest buyers of voluntary carbon offsets, with a share of 92per cent. Majority of the buyers (54 per cent) purchased voluntary offsets for CSR, public relations and branding purposes. Other reasons for purchase of voluntary carbon offsets included resale (22 per cent), anticipation of direct regulation (12 per cent) and ‘greening’ of supply chain (3 per cent).
Table 2: OTC Market Share by Project Type
(Data Source: Developing Dimension: State of the Voluntary Carbon Markets 2012)
35 MTCO2e or 45 per cent of the transacted volumes were through renewable energy projects. Out of this, wind projects took the lead to amount for 23.5 MtCO2e. This was mainly due to the demand for lower-priced credits, which increased the demand for older Asian renewable energy credits. Afforestation and reforestation projects accounted for the second highest volumes at 7.6 MtCO2e. Landfill projects too were popular, according to the report, but they saw fewer transactions than in 2010.
There is a positive forecast on the status of the voluntary carbon markets by industry players. According to a survey carried out by Ecosystem Marketplace and Bloomberg New Energy Finance, it was predicted that 227 MtCO2e would be transacted in 2012, up 70 per cent compared to 2011. This shows that demand for voluntary offsets is still high. Large corporations such as the Cooperative group, HSBC are striving to offset their emissions and thus stoking the demand for quality voluntary offsets from high-value projects such as efficient cook stove projects in Cambodia and manual irrigation pumps in India. Microsoft too announced plans to purchase offsets funded by imposing a carbon fee internally. Such demand from major corporate players continues to help voluntary markets prosper.