Opportunities in carbon markets

01 Jul 2009

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Decrease in the quantity and quality of water in many arid and semi-arid areas, lesser amounts of clean water available to more than one billion people who already experience severe water shortages, increase in the incidence of diseases, reduction in agricultural productivity in the tropics and sub-tropics, depletion of species, displacement of tens of millions of people in low-lying areas and the disaster list goes on…

New Horizons - While the world is discussing the dreadful consequences of climate change, a billion dollar sector is emerging in the forefront: Carbon Trade. 

More than 157 countries have agreed to work together to fight global climate change under the Kyoto Protocol on February 16, 2005. Ratifying the Protocol, 32 industrialized countries have put in place policies and measures to reduce 5.2% of their carbon emission levels in 2008-2012 compared to 1990 levels. Industrialized countries should either reduce their emissions or purchase emission reductions from developing countries via specific mechanisms.

In the context of the UN Framework Convention on Climate Change (UNFCC), 186 Kyoto Protocol signatories concert to industrialized countries – who are responsible for the vast majority of emissions that cause climate change –taking the first steps towards sustainable energy consumption, use of clean technologies and developing sustainable land management practices. The Convention divides countries into three main groups according to differing commitments: Annex I Parties to which Turkey is a member, include the industrialized countries that were members of the OECD in 1992, along with countries with economies in transition (the EIT Parties), including the Russian Federation, the Baltic States, and several Central and Eastern European States. Annex II Parties consist of the OECD members of Annex I, but not the EIT Parties. They are required to provide financial resources to enable developing countries to undertake emissions reduction activities under the Convention and to help them adapt to adverse effects of climate change. Non-Annex I Parties are mostly developing countries.

The term carbon finance refers to the resources provided for a project to purchase carbon emission reductions. One only has to go back less than 10 years to see that commitments to carbon finance for the purchase of carbon have increased dramatically. In 2005, greenhouse gas emission reductions in the global market grew to more than $10 billion. The World Bank’s newly released report: “State and Trends of the Carbon Market 2008” showed that carbon trade doubled every year, from US$0.7 billion in 2004 to US$126 billion in 2008. 

In this scope, United Nations Development Programme, World Bank, Turkish Ministry of Environment and Forestry and Republic of Turkey Prime Ministry Undersecretariat of Treasury conducted a workshop on “Opportunities in Carbon Trade’ on the 17th and 19th of June in Ankara and Istanbul, respectively. The workshop hosted presentations from speakers from the World Bank, United Nations Development Programme and the government. Among the participants were government officials and local project developers.

Over the course of the workshop, the Kyoto Protocol in relation to carbon trading, the importance of carbon finance, project development for carbon trading and project cycle issues as well as previous projects developed in this field were discussed. In his opening speech, the World Bank Carbon Finance Team Leader Venkata Putti underlined Turkey’s high potential in the field of carbon finance and stated that the workshop’s primary goal is to share know-how in developing carbon finance projects.

His presentation was followed by Deputy Director General of the Undersecretariat of Treasury Foreign Economic Relations Özgür Pehlivan who pointed out that although Turkey does not have any binding commitments concerning greenhouse gas reduction between 2008 and 2012 climate change strategies for 2012 will be determined after United Nations Climate Change Conference in Copenhagen this December. Pehlivan continued his speech by highlighting Turkey’s carbon emission level which has accumulated to 95% in the last 15 years adding that the responsibility for the increase falls on the shoulders of the energy sector. To avoid such abrupt rises in energy consumption, he referred to the importance of utilizing energy efficiency and clean energy.

Environment and Sustainable Development Programme Manager Katalin Zaim from the UNDP Turkey Office cautioned the audience by starting her presentation with reference to climate change as a ‘disaster’ for both global ecology and global economy that affects the poor in developing countries. Zaim further remarked that clean energy investments are substantial in overcoming challenges presented by climate change and the economic crisis.

Following the opening statements, the World Bank Carbon Finance Team Leader and environmental expert Venkata Putti cautioned that more than 90% of climate change is a result of human activities and drew attention to the serious outcomes of 2 °C increase in temperature. Putti further explained the Kyoto Protocol in detail and evaluated the carbon market trends in the context of to the current economic crisis. In his second presentation, he provided comprehensive information about integrating carbon finance into various projects.

UNDP’s Anna Kaplina assessed post-Kyoto policies and Turkey’s status quo pertaining to carbon finance and Kyoto Protocol while Dimitry Goloubovsky explained DNA (Designated National Authorities) structures and functions. Antonio Lim from the World Bank followed with a presentation on the roles of DNA’s, project owners and the World Bank in the carbon finance project cycle.

Finally, Forestry Deputy Director General İsmail Belen gave examples of biomass activities for clean energy in Turkey and Monali Ranade from the World Bank Carbon Finance Unit concluded with extensive coverage of biocarbon funds, developing carbon assets from wastes and biomass and the establishment of a carbon partnership facility.

Voluntary Carbon Markets

Another workshop on carbon markets was organized in Ankara on 24th June. Great interest was shown for the workshop cooperatively organized with Ministry of Environment and Forestry, State Planning Organization and Turkish Industrialists’ and Businessmen’s Association in the scope of UNDP’s Capacity Building for Climate Change Management in Turkey project.

At the opening of the workshop, Fulya Somunkıranoğlu from Ministry of Environment and Forestry evaluated the current situation of Turkey in the Kyoto Protocol and the post-2012 period. She further said that if Turkey does not determine its place in the new climate regime and greenhouse gas limitation rates, it will have to accept the rate that some other countries may impose. Following her presentation, Gediz Kaya, a representative of Turkish Carbon Platform which is an initiative founded by various companies active in the field of carbon asset development and trade, stated the objectives of the platform and its mission.

After introducing the platform, she provided detailed information on the dramatic rise of the voluntary markets, the standards used in carbon trade and the potential scenarios for Turkey’s position after 2012. Kaya expressed Turkish carbon market’s ongoing and future concerns and mentioned their need for immediate support in terms of data generation. Furthermore, UNDP “Capacity Building for Climate Change Management in Turkey” project manager Bahar Ubay highlighted the structure and functions of DNA’s (Designated National Authorities) and provided examples of global DNA applications.

The workshop’s aim was to contribute to process of developing financial models to make the voluntary carbon markets more effective, preparing regulations for appropriate functioning of the market and improving DNA capacities. In the workshop, outcomes such as the necessity of research centers and graduate programmes were proposed along with the need for establishing technical units in the related ministries.

The foundation of a Voluntary Carbon Stock Market, the encouragement of firms in the field, economic incentives and support from energy firms were among the ideas for financing the carbon market in Turkey. Moreover, the importance of setting up a banking system with a focus on carbon finance was discussed. Another important outcome from the workshop was to increase the collaboration with international organizations. Finally the need for comprehensive terminology was laid out while the necessity of defining DNA’s, their mission and responsibility was also expressed.