The historic Paris Agreement adopted in December 2015 represents 196 countries’ best plan for avoiding the worst impacts of climate change and the strongest signal yet that the international community may rise to this existential global challenge. A month after the agreement was reached, climate scientists confirmed that 2015 was the hottest year since modern climate record keeping began in 1880, shattering previous records.
The Paris Agreement is different from previous attempts to strike an international deal on climate in that it requires all countries, not just those deemed to be “developed,” to submit national climate plans. Its Article 6 creates the space for a market-based mechanism that would allow countries to trade internationally transferred mitigation outcomes (known as “ITMOs”). Unlike the Clean Development Mechanism (CDM), which was created for developed countries to purchase emissions reductions units from developing ones, a market-based mechanism under the Paris Agreement could potentially include any country, and transfers could flow in any direction. Any transfer of emissions reductions among parties must therefore ensure that ITMOs are clearly defined and that each emissions reduction is counted only once. Such a market-based mechanism would not fully go into effect until 2020 when countries become accountable for their national contributions to the global effort, but its rules will be debated over the coming years. The Paris Agreement also leaves the door open for the many bottom-up market-based mechanisms. Emissions reductions units created through domestic markets would not fall under UNFCCC rules unless they were traded internationally, and some jurisdictions may even choose to incorporate offsets originally developed for the voluntary markets. Still, a key question with all of these developments – perhaps the key question – is what the role of voluntary carbon offsetting will be in a world in which nearly every country is effectively under a compliance agreement to reduce emissions. No matter what the compliance targets, there will always be companies that want to demonstrate “above-and-beyond” action as part of a corporate social responsibility strategy, or simply because their leadership has seen the (climate change) writing on the wall and wants to do everything it can to preserve a livable planet. Source: Raising Ambition: State of the Voluntary Carbon Markets 2016, by Forest Trends’ Ecosystem Marketplace (EM).
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In Light of Dropping Offset Prices, Innovators Seek to Prop Up the Market and Capture True Cost : Source: Raising Ambition: State of the Voluntary Carbon Markets 2016, by Forest Trends’ Ecosystem Marketplace (EM). With 12 MtCO2 e selling for less than $1/tonne in 2015 and over half of those offsets selling for less than $0.6/tonne, some offset suppliers report that current pricing cannot support continued emissions reductions activities – and for some project types, it sends a weak signal for new project development. Here are some of the reasons why 2015 offset suppliers that have recurring costs may have been willing to offload tonnes for record-low prices: The disillusioned: An offset supplier relied entirely on carbon finance but couldn’t find enough buyers. Over the years, the supplier loses money to the point where the supplier is willing to sell their remaining volumes at a possible loss to exit the market. The distressed optimists: An offset supplier sells tonnes below cost so that the temporary influx of finance – though not enough to cover the full costs of mitigation – helps the supplier stay afloat in the immediate future. This “distress selling” allows the supplier to remain in the market, with the hope that demand will grow in the coming years and that prices will rise. The diversifiers: An offset supplier initially relied solely on carbon finance, but soon found alternative sources that provided a more reliable source of revenue, such as grants or microfinance (for project developers), or added advisory or consulting services (for resellers). For some diversifiers, the varied income streams allow them to ride out bumpy demand in the carbon markets, while others exit the market entirely. The heavy hitters: An offset supplier finds a buyer willing to purchase a large volume of offsets and is willing to reduce prices in exchange for higher overall value gained. Voluntary buyers around the world paid to offset the equivalent of 84.1 million (M) tonnes of carbon dioxide in 2015, a 10% increase from 2014, led by private-sector companies taking proactive steps to reduce emissions ahead of regulation, according to a new report from Forest Trends’ Ecosystem Marketplace (EM). Other key findings include: Despite the 10% increase in volume transacted, the average price of carbon offsets fell 14% to an all-time low of US$3.3 per tonne, driving the overall value of the voluntary market down to US$278 M. Offsets from wind energy surpassed those tied to avoided deforestation (REDD+) as the most sought-after project type in 2015. Transactions of wind offsets reached 12.7 million tonnes of carbon dioxide equivalent (MtCO2e) at an average price of $1.9/tonne. But due to their higher average prices, REDD+ offsets accounted for a higher total value than wind, at US$37.5 M. Alongside California’s growing compliance carbon market voluntary buyers in the United States purchased the most offsets of any country in 2015 – 16 MtCO2e, nearly equal to the combined voluntary demand of all European countries. Most of this demand (15.5 MtCO2e) stayed within the United States. Among offset buyers, the events/entertainment and service sectors rose to the top of the list in 2015. Energy, transportation, and finance/insurance companies remained significant players. Overall, 98% of offsets went to private-sector buyers in 2015. Third-party verification is king: 98% of transacted tonnes were verified by an independent thirdparty standard. Despite a record 39.5 M tonnes being retired by voluntary end-users in 2015 – permanently removing these offsets (and the emissions they represent) from circulation – new issuances continue to outpace retirements, and it is a buyers’ market. Looking ahead, there are a number of promising opportunities to shore up demand for voluntary carbon offsets or, alternatively, to transition them to budding compliance markets. For example, the International Civil Aviation Organization (ICAO) – the UN body that governs the sector – has set a goal of achieving “carbon-neutral growth from 2020,” positioning airlines to become major offset buyers as they look to bridge the gap between achievable emissions reductions and their ambitious targets CMT's annual two-track summit incorporating – ‘Biomass Supply Chain’ and ‘Biofuels World Asia’ – traces Asia’s biomass feedstock market trends and the progress in use of biofuels in road transport and aviation. Centre for Management Technology (CMT) brings in feedstock suppliers to start off the BIOMASS SUPPLY CHAIN track with Akarin Vongapirat, Managing Director of BNS Wood Industry, outlining Thailand’s Rubberwood pellet & biomass market while Andrea Alessandrini, Managing Director of PT Trenergy Biomasse, shares insights on Indonesia’s palm biomass market with growth of the country’s biomass fuel demand. Southeast Asian Country Analysis include : Myanmar’s biomass power developments and plans to use biomass for electricity generation by Htun Naing Aung, Chairman & CEO of Kaung Kyaw Say Engineering,Vietnam’s biomass growth & opportunities for export by Dam Dinh Vinh, Deputy General Director of Vinomig Green Energy and Biomass, biofuels & biogas prospects in Philippines & Indonesia by Tony Segadelli, Managing Director of Owl Energy. Opportunity for an integrated biomass power and biofuels value chain is presented by palm oil producer Kencana Agri’s Head of Energy Karel Sampe Pajung while other panelists in the Biomass Supply Chain Track are from: Indufor, Prodesa, EnerOne and Turboden Srl (Mitsubishi Heavy Industries Group Company). Main highlights for the BIOFUELS track include contributions by – PSC Starch Products on cassava market in Thailand & the current economics for ethanol production; Japan’s IHI Corporation on biofuel from algae (Botryococcus) and COFCO on China’s ethanol demand. Log on to Biomass & BioEnergy Asia for more details. Alternatively contact Ms. Hafizah at +65 6346 9218 http://www.cmtevents.com |