Carbon Trading:

1

• Carbon Trading
• Prospects and Drivers
• Kristian Tangen, Point Carbon
• IETA-seminar Bonn
• June 10 2003

2
Products and tools
Products
Analytical tools

• Carbon Transaction Database
• Worlds most comprehensive
• gt400 transactions, 400 MtCO2e
• Trading Systems Database
• With IETA
• Structural price-model
• Simulation of policy scenarios
• Monte Carlo-simulations
• Parametric sensitivity studies
• Expert Networks
• Polls

• Carbon Market Analyst
• Forecasts and market reports
• Carbon Market Quarterly
• The broader picture
• Country Profiles
• Ranking of JI hosts
• Carbon Market Projects
• Tailor-made package for the CDM JI Markets
• Carbon Market News
• Free daily newsletter
• Carbon Market Europe
• Free weekly newsletter
• CDM Monitor
• Free Monthly service

See www.pointcarbon.com
3
A fragmented market

• Not ONE market
• Domestic schemes
• Project-based programs
• Voluntary programs
• Not ONE commodity
• Payment, risk-sharing
• Standardisation only in domestic schemes
• Not ONE price

4
Trends 2002-2003

• Focus of attention shifting towards Europe
• On-going UK, Danish and Dutch programs
• Planned EU ETS directive
• First trade in EU allowances February 2003
• Volumes in domestic schemes dwarfed by CDM/JI
• But, how much will be offered to the market, and
  when?
• Focus on projects compatible with Kyoto rules
• CDM/JI
• First clean AAU-deal in December 2002

5
No. Transactions 1996-2002
6
Traded Volumes 1996-2003
7
Future Political drivers

• Russian ratification
• Increased Japanese demand
• (Canada)
• EU ETS Directive
• Creates a large market from 2005
• EU JI/CDM Directive
• No sinks or large hydro?
• Ceilings (6)?
• Effects on the CER-market
• CDM Procedures

8
EU ETS Current prices

• Bids and offers, ref. Carbon Markets Europe
• 5 to 7 /tCO2 bid-offer spread, firm bids 5 to
  5.5 /tCO2
• Nuon-Shell deal probably in the indicative
  market
• Why this price-level?
• Maybe Point Carbons September 02 analysis (5
  /tCO2)
• Probably linked to CER prices (4 to 6 /tCO2)
• The CDM is currently influencing EU prices
• The role of CDM, in the longer term?
• What would be the volume?

9
Prospects for the CDM

• Developing CDM-projects is time-consuming
• After 5 years relatively few projects
• The most advanced have reached the PDD-stadium
• Implementation, after EB approval of PDD 1-2
  years
• Issuance of CERs 1 year after implementation
• 1-3 years from PDD to CER
• Projects that have not yet been developed as PDDs
  are not likely to start delivering CERs before
  after 2005
• Current PDDs give an indication of CER-supply by
  2005

10
CER volumes

• About 2 MtCO2e to market in 2005
• About 0,1 of total emissions
• Dwarfed by annual variations

• CERs to market in 2005 3.35 MtCO2e

11
Natural variation, EU15

• Total volume allowances 1800 MtCO2e
• Natural variation 30 MtCO2e
• CERs to market in 2005 3.35 MtCO2e

12
The size of the EU market
13
Conclusions

• Market implications for CERs
• CER price Price of EAU
• Two prices approved and not approved by EU
• Offset opportunities Reduced risk in connection
  with CDM investments
• Makes CDM more attractive
• But potential depends on procedures...

14
Thank you for your attention!

• For more information
• kt_at_pointcarbon.com
• www.pointcarbon.com