Industry Experience of the UK Emissions Trading Scheme

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Allen Tate
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1 Industry Experience of the UK Emissions Trading Scheme

2 BP s participation in the UK emissions trading scheme Others Market Brokers BP Energy NGOs Governments tco 2 e Allowances Gateway Projects BP Energy & Approved projects Downstream Tradable credits Approval Direct Participants 34 companies Cap & trade Auction to allocate targets BP Upstream and incentive Emissions must match allowances held Verification Climate Change Agreements 44 sectors Baseline & credit (at start) BP Chemicals Relative and absolute targets Trade to meet targets Reporting Emissions Trading Authority

to allocate targets BP Upstream and incentive Emissions must match allowances held Verification Climate Change Agreements 44

3 Emissions trading It influences the entire business jigsaw Emissions reporting and verification Emissions forecasting Portfolio change implications In-house emissions reduction options Cross business linkages Participation in the UK ETS Enhancing the client offer Engaging with partners Ensuring compliance with targets Price signal & options available in the emissions trading market

business linkages Participation in the UK ETS Enhancing the client offer Engaging with partners

4 Learnings & opportunities: Upstream Direct Participation Learnings Joint participation in a voluntary scheme creates its own complexities >40 BP operated assets coowned by 30 companies Mandatory participation would help reduce complexities of joint participation. Opportunity A catalyst for catalyst for conversation and action: Emissions management becomes an increasingly important part of the business for 30 companies Alignment with partners, with sharing of best practice that helps reduce emissions effectively & drive efficiency

5 Learnings & Opportunities: Chemicals Relative sector flexibility Opportunity Flexibility in meeting Climate Change Agreement targets to help gain certification for the 80% CCL rebate Opportunity to generate additional value via delivery of low cost opportunities that improve energy efficiency Learnings Underlying Scheme legal rules have a significant impact on the market. The time-line for generation of allowances for overcompliance for sale to relative sector within the 2002 reconciliation period is very challenging

opportunities that improve energy efficiency Learnings Underlying Scheme legal rules have a significant impact on the market.

6 Learnings & Opportunities: BP Energy Enhanced customer offer Certainty Kyoto ratification EU ETS 2005 International ETS 2008 UK ETS $ Pre-market 2000 $1-$ Business opportunity: Provide value-added services Learning-by-doing through engaging customers Demonstrated through the market s first physical trade 15% of the trades that went through the Registry in the first 4 months were executed through BP s service

value-added services Learning-by-doing through engaging customers Demonstrated through the market s first

7 Key messages An excellent opportunity to continue learning-by-doing well ahead of future mandatory schemes The commercialisation of emissions management has allowed it to become a much more integral component of everyday business management Participation positively influences behaviours & business processes A stable regulatory environment fosters a clear and understandable business environment one which will give industry the confidence to make decisions, helping reduce emissions effectively

management Participation positively influences behaviours & business processes A stable regulatory environment fosters a

8 Carbon in the City Simon Linnett October 2002

9 The Four W s Rothschild CF Why? 2. What? 3. Where? 4. When? SCHILD

10 Why? Rothschild CF1064 Trading offers: economic efficiency transparency inclusiveness internationalisation Accordingly least change to industry least risk of political interference (once established) less uncertainty great opportunity for the City Economic trading will, ultimately, become a world economic currency SCHILD

risk of political interference (once established) less uncertainty great

11 What? Rothschild CF1064 Understanding Advice Foresight Financial support/ involvement Analysis Risk amelioration SCHILD

12 Where? Rothschild CF1064 Understanding economic trends success and failures effects of auctioning allowances Sector/company evaluation social responsibility made a science more than just energy companies Financial appraisal new project loans corporate lending to certain sectors M&A Financial instruments to help planning to spread risk SCHILD

auctioning allowances Sector/company evaluation social responsibility made a science

13 When? Rothschild CF1064 Know it will happen mood change UK & Denmark Chicago Climate Exchange EU Scheme Regional US markets Chicago Climate US Exchange Danish scheme UK scheme EU Russia Japan Energy Policy Now Australia EU Kyoto SCHILD

Chicago Climate US Exchange Danish scheme UK scheme EU Russia

Residential Property Climate Bonds

Residential Property Climate Bonds Certification methodology Low Carbon Buildings Technical Working Group ABSTRACT This paper sets out guidance by the Low Carbon Buildings Technical Working Group on the