Developing the Carbon Markets: Overview of Phased Approach Developing - - PowerPoint PPT Presentation

Developing the Carbon Markets: Overview of Phased Approach Developing the Carbon Markets: Overview of Phased Approach

Near Term

• Med. Term

Long Term

• del
• Voluntary carbon

markets

• Limited number of pilot
• ODS Climate Facility
• Donor-led fund

to ensure demand and

• Link to demand from the

compliance carbon markets Key Mo

• Limited number of pilot

projects (incl. ‘resource mobilization’ projects) to ensure demand and purchase credits

• Oversight framework

to ensure quality and avoiding perverse markets nt

• Concerns regarding

long-term suitability of voluntary markets as a

• Objective is to give

market and policy- markers confidence in g p incentives

• Cost of financing ODS

climate benefits now fully internalized into ‘capped’ Commen voluntary markets as a financing source for ODS

• Quality
• Price
• Demand

markers confidence in high quality ODS credits internalized into capped economies

• This phase is only

pursued if ODS Climate p Facility regarded as successful

Voluntary Markets Concerns: Supply/Demand Voluntary Markets Concerns: Supply/Demand

Current TOTAL Voluntary Market Estimated Annual Emissions from Developing Country ODS Banks – Low and Medium Effort (2)

(1)

300 - 350 - 400 -

Voluntary Market Low and Medium Effort ( )

t CO2e) 150 - 200 - 250 - missions (Mt 50 - 100 - 150 Annual E 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2007 2008

The voluntary market is unlikely to be able to absorb

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Source: (1) State of the Carbon Markets 2009. Project -based voluntary carbon markets; (2) TEAP Decision XX/7 Report , Phase 2. Combined ‘Total Appliances & Foams’ and ‘Other Refrigerants’ categories

The voluntary market is unlikely to be able to absorb the supply of ODS credits.

ODS Climate Facility: Potential Architecture ODS Climate Facility: Potential Architecture

Technical A i t Demand Oversight /Q tifi ti Supply Assistance Demand /Quantification Supply ODS Climate Facility Oversight Framework Fund (MLF MLF MLF Implementing Individual

Credits Credits Credits

ODS Climate Facility Framework (MP bodies) (MLF or MLF

• Imp. Agencies)

Implementing Agencies projects

$ $ $ $ $ $ $

Architectural components of ODS Climate Facility addressed in issues paper:

• Possible structural configurations
• Project types

2

• Fund’s investment approach
• Oversight framework
• Co-financing
• Timing

ODS Climate Facility: Considerations for ExCom ODS Climate Facility: Considerations for ExCom

The ODS Climate Facility in a ‘Nutshell’

• A facility to develop and establish the compliance carbon markets as the source
• f financing for ODS climate benefits. It recognizes that the voluntary carbon

markets may not be sufficient.

• Precedents exist e g UN REDD; Prototype Carbon Fund (CDM)
• Precedents exist, e.g. UN-REDD; Prototype Carbon Fund (CDM)

For Donors

• It is not an open commitment to fund all future costs of ODS climate benefits
• It is a limited fund to ‘prime the pump’ with the aim that the compliance carbon
• It is a limited fund to prime the pump , with the aim that the compliance carbon

markets will subsequently finance ODS climate benefit costs

• The fund will cover the climate benefit cost of a defined number of high quality,

diverse demonstration carbon projects. Payment from the fund will be p j y incremental-cost based, in the form of the accounting units of carbon credits For A5 Parties

• It will not require mandatory participation

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• It is an optional, non-obligatory, mechanism, similar to the CDM, whereby projects

in A5 Parties can freely choose to fund activities through this financial incentive