The Million Dollar Question: Where is the world going with carbon trading?

Amongst many research and analysis tasks during the past few weeks, I’ve been asked to develop a high-level overview on the future of carbon trading for the CEO in the  company I’m interning at. The assignment seemed somewhat easy and straightforward; However I soon discovered that I’ve been tasked to find the answer for the on million dollar question. After reaching out to some experts in the area and researching available literature. I have developed a 3 pages report that later had to be condensed into just four bullet points summary for the CEO 🙁 Of course that’s what a high-level overview for a CEO means 😉

Anyhow, I have refined my findings and developed below narrative to share with you the highlights of my research.. Hope you find it useful.

Title CT Research

IN A NUTSHELL

  1. The overarching message is that carbon markets are sizable; they are bouncing back and expanding
  2. At the early stages, from now to 2025, markets will develop nationally and at the sector level. At the international level, an accounting system will be developed to ensure the integrity of carbon reductions. It will also avoid double counting
  3. After 2025 and up to 2050, the markets will be developed and connected at the international level
  4. As we move gradually to 2050, a more centralized market will be developed on the basis of knowledge gained and practical experience gained as national and regional markets mature

THE GLOBAL OUTLOOK

EUROPEAN UNION: Stumbling with stability in the offing, but structural reform is needed  

  • Price for Phase III of the EU Emissions Trading System (ETS)will probably continue downward, but will eventually stabilize (expected average price is  above €10)
  • The EU (ETS) cap-and-trade system fixed ‘supply’ of allowances resulted in a significant surplus that could remain available for years to come; thus, hampering low- carbon investment across EuropeEU
  • The 2014 backloading’ amendment delayed the auction of 900 million EUAs, including a 400 million reduction in auctioned permits in 2014 with the aim of temporarily rebalancing supply and demand. However, the longer term prospects are still not clear.
  • The EU Commission has proposed a Market Stability Reserve that would allow the quantity of EUAs auctioned to be reduced when there is a large surplus of EUAs in circulation.
  • Market participants think the EU ETS’s proposed Market stability reserve is a step in the right direction, but without other reforms like setting a tighter 2030 targets, it want help  in stimulating significant  low-carbon investment

 CHINA: Rapid evolution and powerful force

  • The “next generation” of carbon trading is shifting the power towards ChinaFlag_of_the_People's_Republic_of_China.svg
  • Chinese officials view market based instruments as the most cost effective way for addressing climate change
  • As part of its 2030 national climate and energy framework, China launched six new emissions trading ‘pilots’
  • Despite of China’s support for carbon base solutions, market expert’s cautioned that much remains uncertain about what the government intends to do and at what pace

 NORTH AMERICA: California celebrates its one year anniversary and gets linked with QuebecUSCANDA

  • California is successfully implementing the  most rigorous cap-and-trade program in  the  world
  • In January 2014, California and Quebec linked their carbon markets under the Western Climate Initiative
  • However, experts are divided as to wither the US will implement a national carbon emissions policy under a federal action by 2020

New forms of globally interconnected markets are emerging  

  • New and emerging markets are forming  where the UNFCCC top-down approach for carbon Capturemarket is being replaced/enhanced by bottom-up trends for market
  • International talks through the UN will still have value for keeping the climate ch
    ange present on national agendas and harmonizing accounting and reporting methods

New carbon pricing landscape is informed by lessons learned from the past

  • Both private and public sectors involved in carbon markets are learning form the 1st generations of carbon pricing schemes; the lessons learned from the EU ETS, the Australian Carbon Pricing Mechanism (CPM) and the Western Climate Initiative are being used to develop new market based instruments for carbon trading in the developing carbon markets.

COP 21 in Paris: paving the way for carbon market futurelogo-cop-21-carr--

  • The upcoming COP talks in Paris  and its anticipated climate deal (Nov 30-Dec 11,15) will build the foundation for the next 20 years of carbon trading and climate investment

THE ROLE OF BUSINESS

  • Between now and Paris, businesses need play an active role in in shaping the way of structuring an international agreement that enables the private sector participation.
  • At the same time, businesses at domestic levels need to engage with governments to enact policies that not only create an incentivizing market, but also regulate carbon pricing in the supply chain

Sources and References

Eng. Khalid M. Abuleif, Sr. Advisor to the Minster and the Chief Negotiator for the Climate Agreements at the Ministry of Petroleum and Mineral Resources in Saudi Arabia

http://www.ieta.org/ghgmarket2014

http://www.ieta.org/index.php?option=com_content&view=article&id=856:ieta-s-2014-ghg-market-sentiment-survey&catid=26:reports&Itemid=93

http://www.businessspectator.com.au/article/2013/6/7/carbon-markets/wheres-world-going-carbon-trading

*All pictures are form google image.

Week 3 Report: Under the weather, but catching up…

Last week was a bit rough! Had to deal with cold and sore throat that later led to a sever ear infection :((

All is good now! And I was able to catch up quickly with my internship tasks.

So, here we go again with some of interesting stuff that I have learned about.pic 1blog week 3

On June 11th, the Company I’m interning with had its annual gathering meeting (AGM)  in which all investors are invited and updated on the performance of the funds that are under management. I was in the meeting representing my Company in Saudi Arabia (a major investor in the Company I’m interning at). Thus, I had to critical and question some of investment decisions. In addition as a global sustainability student, I’ve learned that you always have to question the sustainability of a product no matter how green it looks.

As the private equity I’m interning at heavily invests in cleantech believing that technology along with sustainability are the two pillars of green economies of the future. Big data, cloud computing, collaboration and Internet of things are major focus areas for the technology growth capital. I had to ask does cloud computing actually contribute to sustainability? I was immediately answered “the cloud is bringing and can bring great efficiencies, but the challenge is to ensure that it is utilizedpic 2blog week 3 in a way that actually replaces activities of higher carbon intensity”. Then, the shift to the online music distribution was cited as an example; it can only contribute to significant carbon savings if consumers are not also burning the downloaded music into CDs;  that respond did answer my business question during the meeting, but my “Sustainabilist” curiosity was still unsatisfied… I sat with my mentor and asked more questions… he then said” those are great questions Ruby, why don’t do some research and come back to me with a high level report about what’s available on the sustainability of cloud computing”. I then realized that I’m back to my role as an intern:-I

It was quite interesting to learn about cloud computing and I thought of sharing my findings with you guys…

The Cloud Explained  

Cloud Computing Explaibned
Figure 1: The Cloud Explained (source: https://www.cdp.net/en-US/WhatWeDo/Pages/Cloud-Computing.aspx)

Facts: Cloud Computing is Green

  • There is enough convincing data confirming the massive energy efficiency gains from moving into cloud computing
  • In addition to energy, time and money savings, along with increased capacity and performance, cloud’s computing has another key green attribute of “dematerializing” the economy by reducing the number of physical materials and associated wastes

pic 3blog week 3
Critique:
A greenwash for dirty laundry

  • It is of concern that “cloud computing and storage” is being used as greenwash tool; The lack of transparency and overestimated environmental benefits are amongst key critiques to the cloud industry
  • As tech giants are pushing for the transition to online distribution models, such as video streaming, on the premise that cloud computing has a less carbon footprint over traditional models of delivery, this shift may lead to much higher levels of consumption, ultimately increasing the total amount of electricity consumed and the associated pollution from electricity generation
  • While many industry leaders have adopted 100% renewable energy goals, this commitment is still lacking basic transparency in terms of reporting and still needs to be guided by investment decisions toward renewable energy and away from conventional fuel

The carbon emissions-reducing potential of cloud computing is a thrilling breakthrough, allowing companies to maximize performance, drive down costs, reduce inefficiency and minimize energy use – and therefore carbon emissions – all at the same time. Paul Dickinson, Executive Chairman Carbon Disclosure Project

Solution: Accelerating the cloud’s green transformation, the supplier responsibility…

  • The keys to a sustainable cloud are sourcing renewable energy and improving energy efficiency. In order to make cloud computing a truly sustainable option, suppliers are to locate their data centers in areas where the grid portfolio is clean
  • Major providers of cloud services are to leverage their buying power to positively influence the collocation companies’ energy source related decisions. In addition, giant data center operators need to join forces to push the agenda for policy frameworks that allow them to procure renewable energy and overcome the resistance of monopoly utilities

References and related articles:

www.bsr.org/en/our-insights/blog-view/taking-ethics-to-the-cloud

http://globalwarmingisreal.com/2013/09/12/sustainable-cloud-computing/

http://www.mckinsey.com/insights/business_technology/disruptive_technologies

http://www.techweekeurope.co.uk/e-innovation/greenpeace-data-centre-global-electricity-168134?utm_source=2015-05-14&utm_medium=email&utm_campaign=uk_techweekeurope&referrer=uk_techweekeurope&id_prob=61871_1216529&t=0ac6eb20d2a17c8a99240714d829bb411745042

Rocky is still in London …. the 101 of Cleantech

As I have promised in my last week post, here is the 101 of Cleatech…

EXPANDING THE GLOBAL LANDSCAPE OF CLEANTECH INNOVATION IS KEY FOR SUSTAINABILITY TRANSITION

Definitioncaption_callout box _week2

Originally thought of as a venture capital investment niche theme,   cleanttech basically means the attempt to have more production and profitability with less consumption and cost (fewer materials, less energy, and less water. For many years, the term was mostly associated with the energy field (renewables and energy efficiency).

However, the clentech field is expanding to a wider meaning that includes solving the most pressing global sustainability issues such as clean water, land and air pollution, and sustainable food and transportation systems (Parad, Henningsson, Currás, & Youngman, 2015).

Cleathch is also known as ‘resource innovation’, ‘industrial efficiency’, ‘sustainable technology’.

Cleantch Finance

Energy related technologies are attracting more than half of the venture capital that goes to cleantech (51%) and much of that money goes to investing in energy efficiencies versus renewables generation.

Global Venture and Growth Equity Investment in Cleantech companies, 2008 - 2013(Source: Parad, Henningsson, Currás, & Youngman, 2015)
Global Venture and Growth Equity Investment in Cleantech companies, 2008 – 2013(Source: Parad, Henningsson, Currás, & Youngman, 2015)

This Week Highlights:

Interesting tasks:

  • Evaluating an investment opportunity in solar tracking systems
  • Attending an overview of recent development in R&D for e-mobility and clean transport at utility and services sectors
    With my mentor
    With my mentor

    Gelato time!
     Some .. Gelato time  with friends from home 🙂 

Week 1: Rocky DeBull in London! Resource Innovation .. the Path for Green Economy

Rocky DeBull in London (Source: https://twitter.com/usf_euroexpo)
Rocky DeBull in London (Source: https://twitter.com/usf_euroexpo)

Here I am in London! Arrived on the 23rd just when all Londoner where ready for their long weekend bank holiday!

On the 26th, I started my intern with a private equity and fund manager company that is active in making investments generating both strong return and positive environmental impact.  On my 1st day, everything was set to the highest professional standards. My badge, security pass, workstation, and mentor details were ready. I was briefed on the Company’s operations, strategy, and leadership team.

On my 1st week, I’m getting acquainted with the concept of “resource innovation” and the role of cleantech in enabling the growth of greener and cleaner economy..

Will be posting more on the subject in the days to come!

Cheers for now !

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