Carbon Market Outlook 2010

Carbon Market Outlook 2010
Mumbai ◊ 20th May 2010
Gensol Consultants Pvt. Ltd.

ACKNOWLEDGEMENT
An honorable mention goes to all those who wish to remain unnamed from various government
and private organizations who have provided their guidance, support and valuable information.
Their cooperation and assistance has contributed tremendously towards the completion of this
report.
We wish to extend our gratitude for the inputs and insights of our team members-
Mr. Ankur Bhatnagar, Mr. Tumul Dwivedi, Mr. Ankush Bajoria and Mr. Gaurav Chauhan. We also
acknowledge Ms. Tishya Dwivedi and Mr. Jinesh Amlani for their valuable contribution in the
report.
* The findings and conclusions expressed in this report are the sole opinion of the authors. This report is not intended to
form the basis of an investment decision.
2| It 'Pays' to be Environment Friendly

Table of Contents:
1. Executive Summary.............................................................................................................................5
2. Overview of Carbon Market ...............................................................................................................8
2.1 Kyoto Protocol....................................................................................................................................................................8
2.2 European Union Emission Trading Scheme...........................................................................................................9
2.3 Carbon Market Transactions..................................................................................................................................... 10
3. Carbon Market - Global balance of demand-supply ............................................................... 11
3.1 Kyoto Protocol Mechanisms ................................................................................................................................... 11
3.1.1 Assigned Amount Units.................................................................................................................................... 12
3.1.2 Project-based Mechanisms................................................................................................................................ 13
3.1.3 Projection of CDM credits supply ............................................................................................................... 14
3.2 EU Emission Trading Scheme ................................................................................................................................ 17
3.2.1 Emission targets and projections under EU ETS phase II .............................................................. 17
3.2.2 EU ETS phase III - Carbon market driving force ................................................................................. 18
3.2.3 Net Demand-Supply under phase II .............................................................................................................. 19
4. Other Emerging Schemes ................................................................................................................. 20
4.1 US Carbon Market .......................................................................................................................................................... 20
4.1.1 RGGI ............................................................................................................................................................................ 20
4.1.2 Western Climate Initiative................................................................................................................................. 20
4.1.3 American Clean Energy and Security Act (ACES Act), 2009................................................................ 21
4.1.4 American Power Act, 2010................................................................................................................................ 21

4.2 Tokyo ETS.......................................................................................................................................................................... 22
4.3 UK CRC Energy Efficiency Scheme .......................................................................................................................... 23
4.4 REDD .................................................................................................................................................................................. 23
5. International Aviation and Shipping Emissions ................................................................. 25
6. Post-2012 Market Frameworks..................................................................................................... 27
6.1 Only EU ETS scenario ................................................................................................................................................... 27
6.2 Extension of Kyoto Protocol with EU ETS but without US scenario ......................................................... 27
6.3 Copenhagen accord scenario..................................................................................................................................... 28
7. Price Forecast ..................................................................................................................................... 30
Annexure 1: Methodology .................................................................................................................... 32
Annexure 2: Glossary ............................................................................................................................. 33
Bibliography.............................................................................................................................................. 35

1. Executive Summary
This report provides an overview of the international carbon market – its underlying structure,
dynamics and an analysis of the market forces shaping the carbon demand and supply, and the
interaction of these dynamics in influencing the carbon prices. Forecasts of demand, supply and
price are examined for Kyoto Protocol and EU ETS.
Carbon Market Structure
A consensus has emerged among scientists and policymakers that an increase in Greenhouse Gas
(GHG) emissions in the atmosphere is responsible for the extreme weather patterns and climate
change. As concerns about the potential impact of human induced climate change have increased,
policymakers around the world are looking for ways to reduce the carbon emissions associated with
human activity.
International efforts on combating climate change led to the negotiation of the Kyoto Protocol in 1997,
an international treaty committing the global community to reduce GHG emissions by an average of
5.2% below 1990 levels in the period 2008-2012.
To meet the binding emissions reductions agreed under the Kyoto Protocol, a number of nation states
have turned to a market-based policy approach of a cap and trade mechanism (CTM).
A Cap & Trade mechanism involves:
 The setting of a limit on the level of emissions allowed by covered entities (factories, power
stations) regulated under the mechanism
 An issuance by the government to the covered entities of carbon allowances in line with the
cap that can be used for compliance
 A penalty that will apply to covered entities that do not submit sufficient carbon
allowances/credits to meet their emissions over the compliance period
The Kyoto Protocol agreement has led to the development and introduction of a number of CTMs by
countries that are looking to meet their GHG reduction targets. The largest and the most liquid market
is the European Union Emission Trading Scheme (the EU ETS) that covers a number of large industrial
sectors in 27 countries across Europe.

Till date, trading in the carbon market has been dominated by two specific carbon commodities. The
most highly traded are the allowances traded under the EU ETS – these are called EU Allowances
(EUAs). The second carbon commodity is Certified Emission Reduction (CER) credits, which are offset
credits that are earned under GHG reduction projects that have been registered by the body that
administers the Kyoto Protocol – the United Nations Framework Convention on Climate Change (the
UNFCCC).
CERs are created under the Clean Development Mechanism (CDM), which allows investments in
programs or technology to reduce carbon emissions in developing countries and these credits can
then be traded to offset carbon emissions in developed countries.
Potential Demand Supply Scenario
On the supply side, expected supply of CDM and JI offsets by 2012 would range between 620 and 743
MtCO2e due to a combination of regulatory delays, the difficulty in obtaining financing for projects
in a challenging global financial environment, stricter regulations and the suspension of validators
at regular intervals.
On the demand side, the demand from EU ETS is majorly driven by the phase III where the banking
from phase II is allowed, use of international offsets (CERs and ERUs) and excess emission over cap
in phase II. The total demand for international offsets is around 1.389 billion units which could lead
to a net shortfall of 646 million units.
The expected demand for AAUs under the Kyoto Mechanism from some EU 15 countries can be
easily met through AAUs surplus of 8 billions units amid economic slowdown and estimations of
large surplus of AAUs with some central and eastern European countries.
Beyond 2012
Today, uncertainty over the regulatory framework post first Kyoto period (2008-2012), poses a threat
to the future of carbon market. The foundation of a post-2012 framework has been laid down at COP
15, Copenhagen, where many countries taken up non binding targets. This report analyses three
possible post 2012 scenarios.
First, only EU ETS scenario with no successor treaty to the Kyoto Protocol. In this scenario, limit will be
placed on imports of international offsets equal to the unused portion of the limit in phase II and target
will be met through internal abatement.

Second, Extension of Kyoto Protocol without US scenario. In this scenario, EU ETS targets would be
raised from 20% to 30% under EU ETS phase III and a higher limit permitted on importing
international offsets.
Third, with current pledges under Copenhagen accord. Under this scenario, post 2012 demand from
project based mechanism could be 6.7 billion units, with most of the demand will come from EU and
US.
Price Forecast
Carbon Market is expected to be bullish in near future and price are most likely touch new highs by
the end of first commitment period in 2012. Carbon credits as of now seems to be undervalued
commodities and thus provides and ideal investment opportunity.

2. Overview of Carbon Market
In response to threats and risks of climate change, a variety of initiatives and approaches aimed at
reducing GHG emissions have been adopted across different levels of human endeavor, from
communities, to cities, private firms, governments and from local level to a global level. Carbon market
forms a cornerstone of the regulatory response to climate change and emissions trading is one of the
key tools in supporting the transition into a global low-carbon economy.
2.1 Kyoto Protocol
The Kyoto Protocol, an international agreement signed in Dec. 1997 under UNFCCC has been
instrumental in the creation of an international carbon market. Under the Kyoto Protocol, GHG
emissions from 38 industrialized countries including economies in transition (EIT) and the EU-15
members have been capped and they have been legally bound to reduce their GHG emissions by
an average of 5.2% below 1990 levels over the first commitment period (CP1) 2008-2012.
Countries, under this mechanism, are broadly divided in two groups– Annex 1 (developed economies
and economies in transition) and non-Annex 1 (developing countries).
The first commitment period (CP1) runs for five years, from 1 January 2008 to 31 December
2012 with sovereign governments being the regulated entities:
 40 emissions-capped industrialized countries are listed in Annex 1 to the Kyoto protocol

and 38 of them (the USA and Canada have already withdrawn from the scheme) who have
accepted legally binding emission reduction commitments for CP1 have been listed in Annex
B of the Kyoto Protocol
 Targets for Annex 1 countries’ (and the Annex B countries’) Kyoto Protocol compliance
obligations are based on their GHG emissions over the five year CP1 period. Kyoto Protocol
units must be surrendered to match national emissions after the end of the CP1 period
 The value of Assigned Amount Units (AAUs or Governmental carbon emission cap) issued to
some Annex 1 countries is equal to their GHG compliance target for CP1

This market is driven by the compliance needs of the Annex 1 countries. Three instruments have
been developed under this scheme for enabling deficit Annex B countries to meet their emissions
targets.
 Assigned Amount Units (AAUs) are allowances issued by the UNFCCC to Annex B
countries at the level of their respective Kyoto protocol targets. One allowance represents right
to emit one ton of CO2e
 Clean Development Mechanism (CDM) facilitates the deployment of capital, technology,
and capability from the developed world into GHG reducing projects in the developing world
that benefits from a low marginal cost of abatement. Credits from CDM projects are called
CERs. One CER is issued on one tCO2e reduction in host country
 Joint Implementation (JI) may be carried out between two or more Annex I countries, and
involves sharing of capital, technology, and capability to deliver GHG reducing projects.
Credits from JI projects are called ERUs. An ERU is issued on one tCO2e reduction in host
country
2.2 European Union Emission Trading Scheme
To complement Kyoto Protocol targets, the European Union instituted an indigenous emission trading
scheme in 2005, known EU ETS. Although EU ETS is the principle EU policy instrument in addressing
global warming, it is not an exclusive policy tool as it does not cover 100% of the EU’s GHG emissions.
This scheme presently spreads over distinct phases. Phase I of the EU ETS ran from 1 January 2005 to
31 December 2007 (3 years), with phase II set to run in line with the Kyoto Protocol’s first
commitment period i.e. from 1 January 2008 to 31 December 2012. It is proposed that the phase III
will run from 1 January 2013 to 31 December 2020 (8 years). EU ETS, which is a cap-and-trade
scheme, enforces emissions cap for regulated entities and grants the holder of one EU Allowance
(EUA) the right to emit one tonne of CO2. The amount of EUAs allocated to each regulated entity in the
scheme is set out in National Allocation Plans prepared by the member states and approved by the
European Commission.
In order to meet the emission cap, regulated entities can undertake internal abatement; or can
source allowances (EUAs) from other regulated entities, or they can source CERs from the developing
world via CDM, or ERUs from economies in transition via JI; however, the scheme has imposed a limit
of 1.389 billion tCO2e on the use of such international offsets The EU ETS only covers around
40% of the total EU GHG emissions, focusing on the CO2 emissions from five major sectors viz.

Power and Heat Generation, Oil Refineries, Metals, Pulp & Paper, and, Energy Intensive Industry.
France and Netherlands unilaterally extended the scope of EU ETS in phase II to include installations
emitting nitrous oxide (N2O).
2.3 Carbon Market Transactions
There is a wide variety of different carbon assets

assets and a selection of different flavours of carbon units,
which means that there is never one single price for carbon. Recently, a large potential of the carbon
market has become a major area of focus for investment banks and hedge funds. Investment banks
have instituted structured carbon origination teams to buy high-yielding
high yielding carbon projects and trading
desks seeking arbitrage opportunities. This has resulted in creating a growing range of innovative
carbon-related
related financial products and derivatives, including:
 Back-to-back
back forward contracts – where an institution offers a credit enhancement and
guarantees the delivery obligation of a primary carbon asset
as set to a secondary market buyer
 Monetization of future carbon receivables – where an institution provides a loan against
expected
d future carbon revenue streams
Primary •Contracted
Contracted for forward delivery - any year up to compliance date (2008-12)
•Usually
Usually purchased directly from project owner
12)
CDM/JI •Market-makers
makers will sell in strips to break out risk into smaller packages
Secondary •Sold
Sold on a guaranteed basis by credit-rated
•No project-related
credit entity
related performance risk - only credit risk
CDM/JI •Contracted
Contracted for forward delivery - any year up to compliance date (2008-12)
12)
•Any
Any trade that is bought or sold for immediate delivery
Spot trades •Applies
Applies to issued credits only so that trades can be settled quickly
•Spot
Spot prices are the most commonly quoted prices for carbon
•Usually
Usually involves delivery of one unit per year across a number of years
Strip •Market-makers
makers split out individual future delivery years into “strips” to ameliorate delivery risk
•Futures
Futures strips may also be used to hedge against other market fluctuations
•Rare
Rare until recently due to low liquidity and high implied volatility
Derivatives •Common
Common transactions are EUA/CER and - less so - EUA/ERU swaps and carbon spread options
Figure 1
Above (Figure1) is an overview of types of Carbon Assets and types of transactions that take place
across the globe. Insurance against pricing fluctuations, delivery risks, advance payment risk and the
future acceptance of credits in regulatory schemes (such
(su as EU ETS phase III or an impending the US
federal cap-and-trade
trade program). It is expected that the development of carbon
carbon-related financial
products will continue as the value and reach of the international carbon markets intensifies.
10 | It 'Pays' to be Environment Friendly

3. Carbon Market - Global balance of demand-supply
Demand and supply of carbon market depends on three market segments – Kyoto Protocol
compliance, allowance-based (EU ETS), and voluntary carbon market – over compliance periods.
Demand and supply within each market segment are driven by:
 Policies with respect to trading schemes and GHG quota allocations of Annex 1 countries
 Expectations regarding future policies and the shape of post-2012 regulatory schemes
 Factors affecting emission generation: economic growth rates, weather conditions, fuel
prices, and availability of low-emissions electricity
 The level of emission reduction through “additional policies and measures” such as
energy efficiency programs and renewable energy use done by developed countries
 Non-compliance policies such as voluntary GHG mitigation
Global supply from the project -based Kyoto Mechanisms, and availability of
credits from large, low cost sources.
Specific drivers for the primary types of carbon asset – project-based credits from the Kyoto
Mechanisms (CERs and ERUs) and allowance-based units (AAU) – and their performance against
these factors have been discussed below.
3.1 Kyoto Protocol Mechanisms
The demand-side of Kyoto Protocol units (AAUs, CERs and ERUs), include the government demand from
nations where there is a shortfall of Kyoto Protocol compliance, and the private sector demand,
primarily from the EU ETS.
While, there are two key sources of Kyoto Protocol units on the supply-side: supply from Kyoto
Protocol party countries having a surplus - a group comprised principally of the post-Soviet
countries and supply from project-based mechanisms.

3.1.1 Assigned Amount Units
Economic restructuring and shutting down of inefficient communist-era power plants and industrial
facilities have resulted on bringing down emissions since 1990 records and creating a huge surplus of
AAUs for some central and eastern European countries.
These AAU vendor countries include Russia, Ukraine, Poland, the Czech Republic, Latvia and Hungary.
In actual terms, around 46% of surplus AAUs lies with Russia, 30% with Ukraine and the remaining
24% lies with countries of the former Soviet Union in Eastern Europe.
Figure 2
Strict international emission trading eligibility standards and UNFCCC’s rules specifying that a
percentage of AAUs held by surplus countries must be kept either in voluntary reserves or “banked”
for use in future periods act as limitations for estimating the supply of AAUs.
Developments in Russia and Ukraine will signal the likely volume of AAUs brought into the market
as these two nations together account for around 75% of the total surplus AAUs. These countries
are thought to be wary of flooding the market with AAUs and potentially driving a price crash.

Figure 3
With eight billion surplus AAUs in the system, as shown in Figure 3 and estimations about up to
1.5 billion AAUs can be traded in the market by 2012, any Annex B country’s Kyoto Protocol
compliance shortfall can be easily met by purchasing AAUs, rather than employing domestic GHG
reduction measures or competing in the international market for Kyoto Protocol compliant CERs and
ERUs. Demand for additional AAUs from EU countries (due to their excess emission) is estimated
to be around 0.770 billion units by 2012, some 10% of the total AAU surplus. This demand is
expected to be limited due to recession in 2009 which resulted into sharp decline in emissions.
3.1.2 Project-based Mechanisms
The supply-side picture is shaped by the project pipeline for CDM and JI projects. Given the nature of
CDM, the supply of CERs will always meet its demand (current and future) based on the prevailing
primary market prices. However, there are three primary constraints due to which issuances have
been affected:
 Tightening of UNFCCC rules and regulations making project eligibility and CER issuance
criteria more stringent
 Frequently suspension of validators like DNV, SGS and TUV SUD: Validators had number of
projects under validations and during their suspension time these projects were validated by
other entities took more than usual time to validate the project to ensure that all the rules are

duly met and they do not come under scrutiny

sc by UNFCCC
 Both UN and validators have shortage of manpower, as a result of which issuance rate is
declining and projects are going through bottlenecks of pipeline
 Technical issues with projects and less number of quality projects availability in the market
Joint Implementation projects still being under developmental stage and with not many projects
registered or in the pipeline,, the meager volume supply of ERUs have
hav e negligible effect on the
market.
3.1.3 Projection
rojection of CDM credits supply
An analysis had been done on CERs issuance and projects registered. The following chart represents
the issuance and projects registration under CDM in different time frames:
Figure 4
A critical analysis of the figure 4 and 5 highlight the declining issuance and probable long run
deficiency of CERs in the market. From the above charts, following analysis can be drawn:
 In 2010, issuance is much below the

the average and thus it is expected that Y
YoY issuance will fall
this year
 After analyzing the issuance per month, the maximum issuance takes place in the month of
March with an average of 10 million CERs. But in 2010, the same month issuance has been
declined to 4 million

Figure 5
 The rate of issuance has not been increasing in proportionate to the rate of projects
registration. Thus, it can be concluded that the size of registered projects (in ter
terms of
CER/project) had declined
lined
 Even if, 2009 was the good year in terms of total issuance per year but substantial cut in
issuance has been noticed starting
star from May in the same year
In the light of the existing constraints on CDM supply, we have constructed a model to quanti
quantify CDM
supply scenarios. We see different pictures
picture based variation in constraints on the CDM supply.

Figure 6
Figure 6 show the three scenarios split over time. The actual CER issuance as on April 2010 stands at
0.408 bn. The highly optimistic scenario represents that CERs equivalent to the entire EU ETS limit of
1.389 billion tCO2e are issued by the end of 2010. This would require in total CER issuance of 1.05
billion by the end of 2012. This is seen as a highly unlikely scenario
cenario because in order to meet total
issuance of 1.05 billion by the end of 2012, required issuance rate stands at 19 million CERs/month in
less than 3 years against
gainst the current average 5.5 million CERs/month
/month in last 6 years
years. Considering the
supply constraints, achieving such
uch issuance would require tremendous efforts.
Actual Issuance Highly Medium Low Optimistic

till April 2010 Optimistic Optimistic Scenario
Scenario Scenario
CERs 408.81 Million 1.05 Billion 715 Million 620 Million
Medium and low optimistic scenario represents a total issuance of 0.715 billion CERs and 0.62 billion
CERs respectively. Projecting the average historic
historic rate, gives us the Medium optimistic Scenario
representing
senting a total issuance of 0.715 billion CERs. Factoring
oring the periodic hiccup trend as seen in
Figure 4, gives us the low optimistic Scenario representing a total issuance of 0.62 billion CERs. Author
expects that the supply will pursue medium scenario in which required rate of issuance stands at 10
million CERs/month. This rate seems achievable considering current projects in pipeline, rejection,
registration and issuance rate.

3.2 EU Emission Trading Scheme
Under the mandatory EU ETS cap-and-trade scheme, understanding of the mechanism is critical to
accurately determine the demand and supply of allowances (the cap) and credits. In EU ETS, there
are three main drivers of demand and supply:
 The ability to bank allowances from one compliance period to the next: linking compliance
periods by allowing banking encourages regulated entities to bank allowances into future
periods, broadly supporting the scheme allowance price
 The size of limits on use of international units such as CERs/ERUs, for compliance
purposes: As prices of credits increase, the volume of internal abatement becomes
economically attractive
 Sensitivity to external market factors, in particular the price of fuel (oil, coal, and gas): It’s
the effect of the cost of switching between coal and gas for power generation companies.
Power producers keep on switching from coal to gas or oil as the prices of these
commodities move in international market. Subsequently it impacts carbon credit demand
(due to different emission factors of different fuels) to meet emission reduction targets
3.2.1 Emission targets and projections under EU ETS phase II
The EU ETS only covers around 40% of the total EU GHG emissions, focusing on the CO 2 emissions
from heavy industry. Non-CO2 emissions from heavy industry, as well as GHG emissions from
households, agriculture and transport, including aviation, are not included in this scheme. Given the
global significance of GHG emissions from the power- generation sector, reducing emissions from the
European power sector may therefore be deduced as one of the major aim of the EU policy.
Figure 7 below shows the emission cap imposed under EU ETS phase II and the projections for the
expected total emissions from 2008 to 2012. The projections are split between the EU 15 and the other
EU countries.
Initial analysis of EU ETS phase II reveals a net shortfall in the system of around 430 MtCO 2 which
can be easily met by using international offsets, however, the actual net demand lies in the
framework of EU ETS phase III, supply of carbon credits from project based mechanism and the
spread between the EUA and CER price. In order to gain a much clearer picture of the net demand,
it is necessary to understand the framework of EU ETS phase III.

Figure 7
3.2.2 EU ETS phase III - Carbon market driving force
On 23 January 2008 the European Commission set out its vision for the future of the EU ETS in an ETS
Review. The Review outlines a set of proposals to revise the framework of the ETS for phase III, the
most important of which are:
 Recommending the ETS cap for phase III be set at 1,974 MtCO2e in 2013, with a linear decrease
to 1,720 MtCO2e by 2020
 If no successor treaty to Kyoto is signed, the use of CERs/ERUs in phase III will be restricted
to the total unused portion of the limit set for phase II. This means that the limit set for phase
II would become absolute, and only those CERs/ERUs not actually surrendered in phase II
would be available for use in phase III
 If an international agreement is reached and it comes into force by 2013 and the EU agrees
to raise its emissions reduction target against 1990 levels from 20% to 30% then the
Review recommends provision of additional quotas of CERs/ERUs for phase III
 There will be no change to the provision allowing for unlimited banking of EUAs from one
phase of the scheme to the next. This means that any EUA not used in phase II may be used at
face value in phase III
Above features of phase III will encourages regulated entities to bank as much phase 2 allowances as
possible.

3.2.3 Net Demand-Supply under phase II
The ability to bank allowances, known as bankability, from phase II to phase III has significant
implications on the pricing of phase II EUAs. Further, the demand and supply dynamics in a trading
scheme with non-bankable phases is very different from bankable phases.
Market expectations of a tighter cap in phase III may make phase II EUAs more valuable to compliance
buyers, amid anticipation of additional scarcity of allowances in phase III. This would force regulated
entities to utilize their international offset limits which is around 1.4 billion first through CERs and
ERUs.
Figure 8
Figure 8 shows a summary of the expected compliance strategies reflecting the net supply of
CERs/ERUs till 2012, excess emission and bankable EUAs under phase II and unutilized limits of
meeting targets from international offsets.
In the above chart, considering a medium case scenario its expected that supply of CER/ERU will be
around 743 million and considering excess emissions in EU ETS it is expected that about 430 million
credits will be used to meet compliances and rest 313 million can be used to bank EUA as it is going to
be costlier than CER/ERU in phase III, together with that an unused limit of 646 million will be
available in phase III.

4. Other Emerging Schemes
4.1 US Carbon Market
A number of state-based and regional initiatives have emerged in America over the past few years for
implementing emissions trading programs and influencing federal schemes. The future of these
schemes – and interest in carbon instruments issued by them – will largely depend on their treatment
in upcoming legislation at the Federal level.
USA has many bills on table that support emissions reduction in one or the other form. Demand for
carbon credits under a US cap-and-trade scheme will likely be subject to some limits on the use of
offsets for compliance, particularly international offsets.
Simulations suggest that international offsets could provide a source of relatively inexpensive credits
that would reduce GHG allowance prices and the compliance costs in a US Federal trading program. In
particular, allowing international project credits (such as CERs and ERUs) for compliance in a US
program could create a significant demand for these instruments if they are competitively priced
relative to the US allowances, the US offsets or both.
4.1.1 RGGI
The Regional Greenhouse Gas Initiative (RGGI) is the first mandatory, market-based effort in the
United States to reduce greenhouse gas emissions. Ten north-eastern and Mid-Atlantic states have
capped and will reduce CO2 emissions from the power sector 10% by 2018. Market activity in the
RGGI gathered steam in 2008 in preparation for the official 2009 start of operations, and interest has
grown significantly during the first half of this year.
Prices of RGGI Allowances (RGGA) is now reported to be around $3.90 per short tCO2e (€3 per short
tCO2e) in a market that is likely to be bullish in its starting years. Analysts consider that likely
fungibility of RGGI Allowances into the federal system, along with the possibility of banking to later
RGGI phases, has possibly helped in keeping the price above the $1.86 auction reserve price.
4.1.2 Western Climate Initiative
The WCI covers a group of seven US states (Arizona, California, Montana, New Mexico, Oregon, Utah
and Washington) and four Canadian provinces (British Columbia, Manitoba, Ontario and Quebec),

with an aggregate emissions target of 15% below 2005 levels by 2020. Other US and Mexican states
and Canadian provinces have joined as observers. Cap and trade would here again be a major
instrument, and transition modalities to a federal cap and trade scheme are now considered under the
W-M draft bill.
4.1.3 American Clean Energy and Security Act (ACES Act), 2009
On 26 June, 2009, the American Clean Energy and Security Act (ACES Act) was passed by the US House
of Representatives by a vote of 219 to 212. The bill contains five distinct titles: I) clean energy, II)
energy efficiency, III) reducing global warming pollution, IV) transitioning to a clean energy economy
and V) agriculture and forestry related offsets. Title I contains provisions related to a federal
renewable electricity and efficiency standard, carbon capture and storage technology, performance
standards for new coal-fuelled power plants, R&D support for electric vehicles, and support for
deployment of smart grid advancement. Title II includes provisions related to building, lighting,
appliance, and vehicle energy efficiency programs. Title IV includes provisions to preserve domestic
competitiveness and support workers, provide assistance to consumers, and support for domestic and
international adaptation initiatives. The following is a brief overview of the proposed GHG cap-and-
trade program contained in Title III and Title V.
The bill establishes emission caps that would reduce aggregate GHG emissions for all covered entities
to 3% below their 2005 levels in 2012, 17% below 2005 levels in 2020, 42% below 2005 levels in
2030, and 83% below 2005 levels in 2050. Commercial production and imports of HFCs would be
addressed under Title VI of the existing Clean Air Act and are covered under a separate cap. The bill
also establishes economy-wide goals for all sources, but it is not limited to those covered under the
cap-and-trade program. These goals are the same percentage reduction and timetables as the cap-
and-trade program, except that the 2020 target is 20% rather than 17% below 2005 levels.
4.1.4 American Power Act, 2010
Senators John Kerry and Joe Lieberman on 12 May, 2010 released the discussion draft of a
comprehensive bill intended to create jobs, enhance national security, spur clean energy innovation,
and protect the environment. The Kerry-Lieberman American Power Act (APA) will allow emitters to
use up to 2 billion offsets -- 1.5 billion credits from domestically sourced projects and the rest from
international projects.

Pledging to engage Senator colleagues, Senators Kerry, Graham, and Lieberman have been working
over the past several months to build consensus within the Senate to pass the legislation, which will
include:
 A market-based solution to achieve pollution reduction targets regulated - in the short term in
the range of 17% and in the long term 80%below 2005 levels
 Investments to develop and deploy new clean energy technologies, including nuclear energy,
renewable energy, clean coal, and energy efficiency
 Increased domestic production of oil and natural gas onshore and offshore
 Transitional support for low- and middle-income families to ease costs and for businesses to
ensure compliance and avoid carbon leakage
 A mechanism to moderate the price of carbon to prevent market volatility and vigilant carbon
market oversight
 Domestic and international offsets
A strong, international agreement with real, measurable, verifiable and enforceable actions by all
nations, long-term financial assistance to developing countries, and enhanced technology cooperation
with intellectual property rights protection.
4.2 Tokyo ETS
Tokyo, in April 2010, introduced the world's first urban cap and trade program for around 1,400 large
installations, such as office buildings (1,100) and factories (400), where per annum consumption of
fuels, heat and electricity is 1,500 kiloliters or more. The scheme has two compliance periods of five
years each starting FY2010. The emission reduction target has been fixed at 6% for five years average
during first compliance period; the target shall increase to 17% reduction below base year emissions
during the second compliance period starting FY2015. Monitoring and reporting of emissions shall be
done annually. Further, all reductions exceeding the yearly obligation may be traded from the second
year. Offsetting can be done in the following ways:
 Emission reductions from small and midsize installations by energy-saving measures within
the Tokyo area
 Buyer can buy necessary amount of Renewable Energy Certificates without limit
 Solar (heat and light) energy, wind energy, geothermal energy, hydropower energy (under
1000kW), biomass energy (biomass rate 95% or above)

 Emission reductions outside the Tokyo area but within Japan

 Coverage: large installations with less than 150 thousand ton base year emission
 Large installations will be assumed to be covered under the Tokyo Cap-and-Trade Program,
and reduction exceeding the reduction obligation would be counted as offset credit
 Buyer can only buy up to 1/3 of base year emission offsets
 All violators shall be imposed with a monetary fine of around 500 thousand yen plus they shall
be required to reduce 1.3 times the shortage
4.3 UK CRC Energy Efficiency Scheme
In order to achieve their GHG emission targets of at least 80% reduction by 2050 as compared to 1990
baseline, UK has launched a mandatory legal scheme that aims to improve energy efficiency and
reduce the amount of carbon dioxide (CO2) emitted. The CRC (Carbon Reduction Commitment)
scheme has begun in April 2010 and will affect large organizations in both the public and private
sector. Around 20,000 organizations that had at least one half hourly meters settled on the half hourly
market in 2008 will be required to participate in some way or the other under the CRC scheme. The
participants will have to monitor their emissions and purchase allowances, initially sold by
Government, for each tonne of CO2 they emit. The more CO2 an organization emits, the more
allowances it has to purchase.
During the introductory phase of three years, allowances will be sold at a fixed rate of £12 per tonne of
CO2. Following the initial sale period, participant organizations can buy or sell allowances by trading
on the secondary market.
Any entity that fails to comply with its legal obligations under the CRC will be subject to different
financial as well as criminal penalties.
4.4 REDD
Efforts to mitigate the dangers of climate change revolve around the overarching goal of holding the
average increase in global temperatures to well below 2°C.
The Bali Action Plan, which emerged from COP13 in late 2007, officially put REDD back on the
UNFCCC agenda. But under the Action Plan, if REDD is to be included in the post-2012 framework,
decisions about the scope of REDD, who will pay for it, and how a mechanism will be structured, yet to
be agreed upon.

Significant progress has been made under the Bali Plan as in the intervening period, a number of
REDD focused workshops have taken place; many countries have submitted proposals and a
negotiating text including various options for REDD, is now on the table. However, substantial work
remains if a coherent REDD mechanism is to be successfully included in the post-2012 agreement.
Over the past year, competing interests have led to a convergence toward a broader scope, referred to
as REDD+. There is little agreement as to which activities REDD+ would actually incorporates and how
it would be structured. A phased approach to REDD is favored by many countries as a way of
providing support to developing nations as they build their capacity to tackle and monitor emissions
from deforestation. The source of financing for REDD is an area where there are a range of different
proposals from governments.
In addition, there are questions raised by some governments as to how much REDD should
incorporate safeguards or benefits for broader forest values, such as biodiversity and livelihoods.
REDD policies must be consistent with national sustainable development objectives that promote
conservation and biodiversity, and protect the rights of local communities and indigenous peoples.
REDD is a vital component of the global emission reductions required. A global objective of zero net
deforestation through a 75% reduction in gross deforestation by 2020 should be adopted. To achieve
this, a reasonable scope for REDD must be established. Care should be taken that any activities
included under the scope of REDD can deliver real and verifiable emissions reductions.
It is vital that the final text of the post-2012 agreement include firm commitments from developed
countries to provide financial and technical support to developing countries, including for the early
phases of REDD. A phased approach should be agreed on by the UNFCCC, which ensures that
developing countries are provided with a support to build their capacity and test approaches to work
towards national REDD programmes. Finally, the post-2012 agreement should recognize the broader
values of forests and processes must be put in place to ensure that the impact of REDD projects on
biodiversity, indigenous peoples, and local communities is positive. It is essential that a robust,
effective REDD mechanism be formally adopted in the post-2012 UNFCCC framework. With
deforestation accounting for approximately 20% of global GHG emissions, it is clear that any solution
to the climate change problem must include a solution to deforestation. Getting REDD on ground
would quantify these emissions and thereby increasing demand of carbon credits.

5. International Aviation and Shipping Emissio ns
GHG emissions from international aviation and maritime fuels, known as ‘bunkers’, account for nearly
10% of the climate problem and are growing rapidly. The EU has also proposed a specific global
agreement on reducing GHG emissions from aviation and shipping. International shipping emits 870
million tonnes of CO2 each year which is more than the total emissions of UK or Canada.
Emissions have grown by more than 85% since 1990, the base year of the Kyoto Protocol. CO2
emissions from aviation exceed 730 million tonnes annually - up well over 45% since 1990. Additional
climate impacts from other exhaust gases and cloud effects are around double than those of CO2.
Overall, aviation is responsible for 4.9% of global warming today. International aviation emits more
CO2 than the total emissions of France or Australia.
In 1997, the Kyoto Protocol gave responsibility for these emissions to developed (‘Annex I’) countries
working through the International Maritime Organization (IMO) and the International Civil Aviation
Organizations (ICAO).
These agencies failed to agree on any binding measures to control GHG emissions in the ensuing 12
years. Both these organizations have submitted proposals for only modest efficiency and operational
measures that too mostly voluntary or partial in scope at COP 15, Copenhagen
If left unmitigated, emissions from aviation and shipping are further expected to double or even triple
by 2050, forming by then a very significant proportion of a global carbon budget consistent with
keeping warming below 2° C.
UNFCCC could take the necessary action for controlling emissions from these sectors in two ways:
 By including emissions in national totals of Annex I Parties, purely as an accounting measure.

This would be straightforward for aviation, where bunker fuel emissions are a good indicator
of activity
 By setting targets for the two sectors, and mandating IMO and ICAO to develop and agree on
global sectoral policies within a limited timeframe and subject to UNFCCC review
Discussions in IMO and ICAO are currently deadlocked over whether policies should be global or
differentiated, voluntary or mandatory. Various ways to include emissions from international aviation
and shipping in the global climate framework that could raise substantial revenue for the adaptation
and the low-carbon development have been proposed, but not agreed.

NGOs believe that the international transport policies should be mandatory and global since, the
sectors are inherently global in nature. IMO and ICAO have developed many global policies in other
areas that are neutral with respect to the nationality of the operator. Besides, global approaches are
the most environmentally robust and are instrumental in avoiding leakage.
Operators of all nationalities are treated equally in these proposals, to avoid competitive distortions
and in line with IMO and ICAO principles. Differentiation is applied in the use of revenues, thus
respecting the principle of Common but Differentiated Responsibilities (CBDR) which says that
revenues raised by global policies (levied mostly on well off consumers) should be spent on climate
protection in developing countries.
Such policies could raise about $10 billion giving a real boost to efforts to finance a comprehensive
climate mitigation deal. As an effect of inclusion of shipping and aviation sectors in international
emissions demand of credits will raise considerably as national governments may ask airline and
shipping companies to compute their carbon foot printing and offset it against quality credits like
CER/ERU.

6. Post-2012 Market Frameworks
Events like failed negotiations under the United Nations Framework Convention on Climate Change
(UNFCCC) at Copenhagen in December 2009 on binding emissions commitments, signing of
Copenhagen Accord with no legal binding emission targets, uncertainty in passing and
implementation of long awaited US climate bill and stringent targets under phase III of EUETS has
divided the future of carbon market mechanism into different scenarios. This report analyses these
scenarios in the perspective of how they will affect the project based mechanisms.
6.1 Only EU ETS scenario
The European Commission has signaled, via its post-2012 proposal for the EU ETS, that additional
demand for CDM and JI credits will be contingent on a successor treaty to the Kyoto Protocol being
implemented. Under the European Commission’s proposal, if there is no new international agreement,
the present limit on importing international units for compliance purposes within phase II of the EU
ETS would be extended into the next compliance phase – effectively placing a limit on imports equal to
the unused portion of the limit in phase II.
This means that the volume of CERs and ERUs from CDM and JI projects which could be used across
phases II and III would be capped at 1390 MtCO2e, the present phase II limit.
With reference to Figure 8, its expected that supply of CER/ERU will be around 743 million.
Considering excess emissions in EU ETS, about 430 million credits will be used to meet compliances
and rest 313 million can be used to bank phase II EUA, as full banking is allowed by EU commission
and EUA will be costlier than CER/ERU in phase III, an unused limit of 646 million will be available in
phase III.
6.2 Extension of Kyoto Protocol with EU ETS but without US scenario
If a new international agreement to succeed Kyoto Protocol comes into force, assuming that targets
taken under Copenhagen accord except EU remain same, then the EU ETS phase III will have much
tougher emissions targets of 30% as compared to the current 20% imposed on regulated entities, and
a higher limit on importing international units. This will continue to drive the substantial activity in
the project-based mechanisms.

Figure 9
6.3 Copenhagen accord scenario
The Copenhagen Accord, a political agreement struck by world leaders at COP 15,Copenhagen, calls on
participating countries to pledge specific actions that they will individually and conditionally
undertake to mitigate GHG emissions. This is for the first time ever that the entire world’s major
economies (US, Japan, Australia, etc.) have offered explicit international climate pledges.
Figure 10 Source: Bloomberg

In case of Annex I countries, the nonbinding Accord calls for a quantified economy-wide emission
targets for 2020. In case of non-Annex I countries, it calls for “nationally appropriate mitigation
actions,” but does not specify what form they should take. (Least developed and small island countries
“may undertake actions voluntarily and on the basis of support”)
On 26 April, 2010, 96 parties (considering the 27 member states of the European Union as a single
party) had filed submissions with the U.N. climate change secretariat:
 16 Annex I countries submitted 2020 emissions targets

 36 non-Annex I countries submitted mitigation actions
 44 other non-Annex I countries associated with the accord
 With current pledges, post 2012 demand from project based mechanism could be 6754 Mt
(Figure 10) which is twice that in the Kyoto Protocol period with major demand coming from
the EU and the US

7. Price Forecast
The price difference between EUAs and CERs is called the EUA/CER Spread. It is generally seen that
the Project based emission reduction units (CERs) are priced lower than the European Union
Allowances (EUAs) the main reasons being, CERs are considered as a supplement to the EUAs and the
cost of carry associated with EUA. Thus CER prices are primarily, “derived’ from EUA prices.
Historically,
istorically, CERs have been averagely priced at 80% of that of EUAs.
Figure 11
Carbon emissions being directly linked to the activities of a nation, we have identified the following
factors as the price drivers of Carbon Credits.
1. Crude Oil
2. Natural Gas
3. Power Prices
4. Demand & Supply of credits
5. Temperatures & Water level
6. Economic activity (GDP, Productivity Index, Economic Sentiment Indicators, Industrial

Confidence Indicator)
7. Euro-Dollar spread

The impacts of above different factors

factors on Carbon prices are varied depending on the fundamental
theory behind the inclusion of factor. This created a necessity for quantification of the effect of these
factors on carbon prices using an appropriate quantification tool. We have used “Multip
“Multiple Linear
Regression Analysis” to predict the carbon prices and determine the probability of prediction.
After performing the detailed Multiple Regression Analysis and adjusting for data errors like
Hetroscadicity and Multicolinearity, the factors have been
be en further filtered out to three most influential
ones- Crude Oil, Power Prices and Gross Domestic Product.
An analysis of potential developments post-2012

post 2012 is important in understanding the longer run
evolution of the carbon market and likely price of carbon.
carb However, according to our research, aall the
alternate post-2012
2012 scenarios mentioned in the report would affect the CER prices and demand only
in post-2012.. The factors driving pre-2013
p 3 prices remain more or less unaffected with any decision on
post-2012
2 been taken before 2013 because the implementation of the alternate scenarios would not
be fully on ground before 2013.
Figure 12
Figure 12 shows the projection of EUA and CER prices based on the Multi Linear Regression Analysis.
Carbon Market is expected to be bullish in near future and price are most likely touch new highs by
the end of first commitment period in 2012. Carbon credits
credi ts as of now seems to be undervalued
commodities and thus provides and ideal investment opportunity.

Annexure 1: Methodology
Accurately recording project-based transactions is becoming more difficult even for agencies such as
the World Bank as each year complexity of market and factors involved is increasing dramatically. The
author has analyzed the collected information from major carbon-industry publications and the
coverage of a wide range of market players to gain a broader view on trends of the market.
Author has focused on the regulatory compliance based markets (Kyoto Protocol & EU ETS);
therefore, the coverage of the voluntary segment of the market is not exhaustive. Only projects with
issued CERs are considered in the report database. Although the analysis of key inputs from IMF,
World Bank, UNEP Risoe and UNFCCC publications was done. Various statistical tools have been used
for projecting the future data. The accuracy of data exceeds 90% (confidence level) in most cases.
Since most of the data is from secondary sources, author do not hold responsibility of its correctness,
however these sources are considered to be most trusted across the globe, and hence we have
mentioned a tolerance range of (+/-) 10%. The author considers that the analysis in this report
provides a conservative estimate of the carbon market and provides a good representative view of the
carbon market.
Prices have been expressed in US Dollar ($) or Euro (€) or Sterling Pound (£) per tCO2e. All facts
presented in the report have been deduced after comprehensive processing of the data. This data was
collected from various sources and an optimum mix of all has been used; thus, individual data source
is not mentioned with every graph and table. Due courtesy has been given where ever the author has
used opinion/projections of other market players.
CDM supply data is based on facts and figures as per UNFCCC. Projects registered till March 2010 were
taken into consideration for YoY supply estimation.
Data of project-based markets, carbon credits, daily price and volume information on allowances
markets is available online. The readers are invited to do their own comprehensive due diligence of
the market prior to taking any financial position, and in this regard nothing in this report should be
seen as constituting advice to take a position on the market as a whole, or any component there-of.

Annexure 2: Glossary
Assigned Amount Unit (AAU): Annex I Parties Implementation. This unit is equal to one
are issued AAUs up to the level of their metric ton of carbon dioxide equivalent.
assigned amount, corresponding to the
European Union Allowances (EUAs): the
quantity of greenhouse gases they can release
allowances in use under the EU ETS. An EUA
in accordance with the Kyoto Protocol (Art. 3),
unit is equal to one metric ton of carbon
during the first commitment period of that
dioxide equivalent.
protocol (2008-12). AAUs equal one tCO2e.
Greenhouse gases (GHGs): These are the

Carbon Dioxide Equivalent (CO2e): The
gases released by human activity that are
universal unit of measurement used to indicate
responsible for climate change and global
the global warming potential of each of the six
warming. The six gases listed in Annex A of the
greenhouse gases. Carbon dioxide — a
Kyoto Protocol are carbon dioxide (CO2),
naturally occurring gas that is a byproduct of
methane (CH4), and nitrous oxide (N20), as
burning fossil fuels and biomass, land-use
well as hydrofluorocarbons (HFC-23),
changes, and other industrial processes — is
perfluorocarbons (PFCs), and sulfur
the reference gas against which the other
hexafluoride (SF6).
greenhouse gases are measured.
Land Use, Land-Use Change and Forestry

Certified Emission Reductions (CERs): A unit
(LULUCF): A greenhouse gas inventory sector
of greenhouse gas emission reductions issued
that covers emissions and removal of
pursuant to the Clean Development Mechanism
greenhouse gases resulting from direct human-
of the Kyoto Protocol, and measured in metric
induced land use, land-use change and forestry
tonnes of carbon dioxide equivalent. One CER
activities. Expanding forests reduce
represents a reduction of greenhouse gas
atmospheric carbon dioxide; deforestation
emissions of one tCO2e.
releases additional carbon dioxide; various
Emission Reductions (ERs): The measurable agricultural activities may add to atmospheric
reduction of release of greenhouse gases into levels of methane and nitrous oxide.
the atmosphere from a specified activity or
National Allocation Plans (NAPs): The
over a specified area, and a specified period of
documents, established by each Member State
time.
and reviewed by the European Commission,
Emission Reduction Units (ERUs): A unit of that specify the list of installations under the
emission reductions issued pursuant to Joint EU ETS and their absolute emissions caps, the

amount of CERs and ERUs that may be used by strategies and incentives (including
these installations as well as other features performance-based) for reducing emissions
such as the size of the new entrants reserve from deforestation and degradation.
and the treatment of exiting installations or the
Regional Greenhouse Gas Initiative (RGGI):
process of allocation (free allocation or
RGGI targets CO2 emissions from power sector
auctioning).
in ten U.S. Northeast and Mid-Atlantic states,
Offsets: Offsets designate the emission with a target of 10% below current levels by
reductions from project-based activities that 2020.
can be used to meet compliance – or corporate
Registration: The formal acceptance by the
citizenship – objectives vis-à- vis greenhouse
CDM Executive Board of a validated project as
gas mitigation.
a CDM project activity.
Project-Based Emission Reductions:
United Nations Framework Convention on
Emission reductions that occur from projects
Climate Change (UNFCCC): The international
pursuant to JI or CDM (as opposed to
legal framework adopted in June 1992 at the
“emissions trading” or transfer of assigned
Rio Earth Summit to address climate change. It
amount units under Article 17 of the Kyoto
commits the Parties to the UNFCCC to stabilize
Protocol).
human induced greenhouse gas emissions at
Reducing Emissions from Deforestation and levels that would prevent dangerous manmade
Forest Degradation (REDD): A set of interference with the climate system.

Bibliography
 UNFCCC
 IMF
 EU Commission
 Carbon Market Data
 World Bank Reports
 Carbon Yatra
 European Climate Exchange, London
 Bluenext Exchange, Paris
 Bloomberg New Energy Finance
 WWF
 Merrill Lynch
 Sea at Risk
 Goldman Sachs
 Morgan Stanley Deutsche Bank
 BNP Paribas
 Tokyo Metropolitan Government
 UK environment agencies
 Reuters
 Point Carbon

Carbon Market Outlook 2010

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Carbon Market Outlook 2010

Uploaded by

Copyright:

Available Formats

Carbon Market Outlook 2010

Mumbai ◊ 20th May 2010

Gensol Consultants Pvt. Ltd.

2| It 'Pays' to be Environment Friendly

2. Overview of Carbon Market ...............................................................................................................8

2.1 Kyoto Protocol....................................................................................................................................................................8

2.2 European Union Emission Trading Scheme...........................................................................................................9

2.3 Carbon Market Transactions..................................................................................................................................... 10

3. Carbon Market - Global balance of demand-supply ............................................................... 11

3.1 Kyoto Protocol Mechanisms ................................................................................................................................... 11

3.1.1 Assigned Amount Units.................................................................................................................................... 12

3.1.2 Project-based Mechanisms................................................................................................................................ 13

3.1.3 Projection of CDM credits supply ............................................................................................................... 14

3.2 EU Emission Trading Scheme ................................................................................................................................ 17

3.2.1 Emission targets and projections under EU ETS phase II .............................................................. 17

3.2.2 EU ETS phase III - Carbon market driving force ................................................................................. 18

3.2.3 Net Demand-Supply under phase II .............................................................................................................. 19

4. Other Emerging Schemes ................................................................................................................. 20

4.1 US Carbon Market .......................................................................................................................................................... 20

4.1.1 RGGI ............................................................................................................................................................................ 20

4.1.2 Western Climate Initiative................................................................................................................................. 20

4.1.4 American Power Act, 2010................................................................................................................................ 21

3| It 'Pays' to be Environment Friendly

4.2 Tokyo ETS.......................................................................................................................................................................... 22

4.3 UK CRC Energy Efficiency Scheme .......................................................................................................................... 23

4.4 REDD .................................................................................................................................................................................. 23

5. International Aviation and Shipping Emissions ................................................................. 25

6. Post-2012 Market Frameworks..................................................................................................... 27

6.1 Only EU ETS scenario ................................................................................................................................................... 27

6.3 Copenhagen accord scenario..................................................................................................................................... 28

7. Price Forecast ..................................................................................................................................... 30

Annexure 1: Methodology .................................................................................................................... 32

Annexure 2: Glossary ............................................................................................................................. 33

4| It 'Pays' to be Environment Friendly

Carbon Market Structure

A Cap & Trade mechanism involves:

5| It 'Pays' to be Environment Friendly

Potential Demand Supply Scenario

6| It 'Pays' to be Environment Friendly

7| It 'Pays' to be Environment Friendly

2. Overview of Carbon Market

2.1 Kyoto Protocol

 40 emissions-capped industrialized countries are listed in Annex 1 to the Kyoto protocol

8| It 'Pays' to be Environment Friendly

2.2 European Union Emission Trading Scheme

9| It 'Pays' to be Environment Friendly

2.3 Carbon Market Transactions

There is a wide variety of different carbon assets

10 | It 'Pays' to be Environment Friendly

3. Carbon Market - Global balance of demand-supply

3.1 Kyoto Protocol Mechanisms

11 | It 'Pays' to be Environment Friendly

3.1.1 Assigned Amount Units

12 | It 'Pays' to be Environment Friendly

3.1.2 Project-based Mechanisms

13 | It 'Pays' to be Environment Friendly

duly met and they do not come under scrutiny

 In 2010, issuance is much below the

14 | It 'Pays' to be Environment Friendly

15 | It 'Pays' to be Environment Friendly

Actual Issuance Highly Medium Low Optimistic

16 | It 'Pays' to be Environment Friendly

3.2 EU Emission Trading Scheme