‘Green Investment Scheme and AAUs management prospects’ Moscow Carbon Market Forum 28-29 April 2008 Moscow -Potential and Condition of GIS How to full fill the gap in global carbon market – Takashi Hongo Special Advisor and Director General Japan Bank for International Cooperation 1 Global Kyoto Credits Market - Demand and Supply 1 Demand EU15 and Japan : 2 -3 billon ton - Excluding Canada, US, Australia 2 Supply : CDM registered : 1.3 billion ( Issued 135 million ) JI Tr.2 submission : 0,2 billion 3 Gap of credits Limited time for projects preparation ・ DSM type CDM/JI ( quick supply ) ・ Green Investment Scheme - Mobilization of Surplus of Russia and eastern European countries through Green Investment Scheme 2 Possible types of GIS and activities 1 Fund type AAU purchase comes first, then Investment to ‘green activities’ < Pros and Cons> Quick transfer of big volume of AAU, but higher reputation risk 2 Project by projects approach ( Domestic rule JI ) Project base approach with flexible procedure < Pros and Cons> Lower reputation risk but procedure is complicated ( but much simpler than JI 3 Space for Private sector Investors for eligible projects Implementation of the scheme Buyers of greened AAUs 3 Buyers perspective 1 Possible Merits ・ Volume merit ・ Simple procedure ( Low transaction cost and predictability ) ・ Wide range of coverage 2 Risk ・ AAU Transfer risk ( Article 16 and ITL connection) ・ Reputation risk 3 Requirements ・ Environment Benefits GHG emission reduction Pollution control Capacity building ・Visible outcome Possible projects ・ Energy Efficiency, Renewable etc( JI ) ・ Demand Side Management ・ Programmatic ・ Forestation and forest management 4 How to mitigate/control Reputation risk 1 Planned structure Environment benefit + Economic development Business opportunity 2 Implementation of activities under GIS Efficiency and compliance with ‘GIS guidance’ 3 Monitoring and ‘Auditing’ Environment benefit and cash flow Third parties review and audit 4 Transparency 5 Price of Greened AAU Euro/ton 25 S econdary C ER (80% of EU A ) 20 Highest Issued CER Issued CER in Japan 15 P rim ary C ER in 2006 10 C ER no M eth. P rim ary C ER in 2005 5 AAU Price A verage:8.4 Euro A verage:5.5 Euro C FI at C C X 0 Jan-05 2005 Jan-06 2006 Jan-07 2007 Lowest CER/ERU Jan-08 2008 Source: CCX, ECX, World Bank, IDEA Carbon, Nikkei/JBIC 6