Les droits d émission de CO 2 La sophistication financière peut-elle se mettre au service de la protection de la planète? Philippe Rosier, Président d orbeo et Rhodia Energy Services Mardi 17 novembre 2009 powered by
orbeo, a company purely dedicated to carbon markets
Rhodia & GHG or how the choice of sustainable development became a success story 1993 Rhodia: start of greenhouse gas (GHG) reporting in sustainable development annual report 1997 Kyoto: discussions & opening for signature 1998 Rhodia: emission reduction project in Chalampé, France (20Mt CO 2 e / year) 2002 Rhodia: voluntary commitment to reduce GHG emissions by 30% in France 2005 2006 2007 Kyoto: comes into force Rhodia: registration of 2 CDM projects (11-13Mt CERs/year) Rhodia: creation of orbeo with Société Générale Rhodia: start-up of South Korean unit Rhodia: start-up of Brazilian unit 2008 Rhodia: development of an emission reduction project in France 3
Rhodia, among the largest GHG reduction contributors N 2 O is a by-product of Adipic Acid, and is a major contributor to greenhouse gas emissions 1t of N 2 O = 310t of CO 2 France: Chalampé & Salindres 2 abatement facilities Achieved in 1998 and 2008 Reduction not monetized Share of emission reductions by project Chalampé France 17% 57% 17,1% Paulínia Brazil Chalampé France Onsan 26% South Korea 57 % Brazil: Paulínia 2 abatement facilities Achevied in 2006 and 2007 South Korea: Onsan Abatement facility Achieved in 2006 c. 14 million CER/ERUs production capacity/year 4
orbeo: market solutions and project expertise to fight climate change Created in 2006 A 50%-50% joint-venture between Société Générale and Rhodia Purely dedicated to CO 2 markets A unique combination of industrial and financial expertise capitalising on: Two large CDM projects developed by Rhodia (~100 M tons CERs / Credit Emission Reduction Units, over 2007-2012) Société Générale s CO 2 trading and risk management know-how Société Générale 100% Rhodia 100% Société Générale Energie 50% Rhodia Energy Services 50% June 18 th, 2009: orbeo signs agreements to purchase, an international company that generates high quality carbon credits by originating, developing or financing projects that reduce the emissions of greenhouse gases. 5
orbeo, from project to market: a unique combination of industrial & financial expertise Origination CO 2 Operations Trading Marketing Identification & Implementation of greenhouse gas emission reduction projects CO 2 Instruments Liquidity Provider Risk Management solutions to constrain buyers linked to CO 2 emissions Know-how to develop, register and monitor climate change projects generating carbon credits for either compliance or voluntary offset purposes Provision of liquidity and risk management services contributing to market efficiency Design of innovative and customised solutions to meet all types of customers needs (industrials, governments, investors and voluntary offset buyers) Intelligence on environmental regulatory frameworks and emission trading schemes addressing climate change worldwide 6
Growth and development of orbeo is parallel to the growth of the carbon market 2006 Jul. 3 rd Creation of orbeo Oct. 25 th orbeo present on CCX 2007 ~ 10% market share in EU ETS ~200 Mt of CO 2 traded worldwide Best trading company for Kyoto projects credits 2008 Best trading company for European ETS allowances Apr. 8 th First screen trade in the ICE ECX EUA Dec13 futures between orbeo and undisclosed counterparty May 8 th Signature of a market making agreement on BlueNext for futures EUA contracts May 19 th Participation in the 1st trade of CER options on ECX May 30 th orbeo selected as market maker for first carbon futures contracts on MCeX House of the Year Emissions Europe 2008 1st place EU ETS options dealer ~ 10% market share worldwide ~ 500 Mt of CO 2 traded worldwide 2009 Best trading company for EUA EUA options Primary CERs Secondary CERs June 18 th orbeo signs agreement for the purchase of OneCarbon BV Sept. 4 th First orbeo s trade on RGGI market (USA) 7
Making emission reductions happen orbeo partners for afforestation project in Democratic Republic of Congo 4,226 hectares plantation of acacias, eucalyptus and pine trees Boost the region s economic activity and employment, while reducing deforestation in natural forests. orbeo & the World Bank s BioCarbon fund will acquire on a 50/50 basis the 1 000 000 GHG removals issued from the project Orbeo partner of the first landfill gas project in Central Africa (Cameroon) ERPA signed with Hysacam (Hygiène et Salubrité du Cameroun) Landfill gas project in Cameroon The project should avoid about 400 000 tons of CO 2 emissions up to 2012 and generate 200 jobs.. 8
Our vision of the future 9
CO 2 market: potentially, one of the largest commodity markets Global annual CO 2 emissions (Gt) 60 50 All policies have to be thought in a way that helps and urges international community to put a price on carbon dioxide emissions. 40 30 20 Kyoto impact Annual CO2 market vs oil trading market Today: 3-d equivalent 2020: ~ 1 month 10 2050: ~equivalent 0 1954 2004 2050 World CO 2 transactions (Bn ) 2004 ~ 0 2008 ~ 80 2020 ~ 2000 Sources: EIA; Robert Socolow (Princeton University) 10
Carbon markets: regional organisation linked with international offset credits Kyoto Protocol Japan EU ETS Market Offset projects CDM / JI Australia New Zealand Canada USA CCX Japan JVETS Other voluntary markets United-States: RGGI, WCI Voluntary Markets Source: orbeo Other local markets 11
Offsets will remain, but registration processes need to be improved Project Pipeline Evolution Project pipeline evolution Actual Forecast (2008-2012) Projects at PDD stage Number of projects 5441 10000 Corresponding volumes (Mt) 3200 5000 Projects registered Number of projects 1867 3000 Corresponding volumes (Mt) 1737 2000 CER issuance Number of projects 580 Corresponding volumes (Mt) 336 1200 Overall performance 24% Performance of registered projects 60% Performance of Rhodia's projects 95% Not only registration success but also delay Performance forecast of offset projects is the largest market risk so far 12
Towards an integration on the carbon value chain 13
What to expect from Copenhagen Framework agreement featuring some emission reduction targets and minimal pledges for emerging countries financing No full-fledged Protocol with detailed mechanisms or burden sharing possible US domestic legislation needed for completion of the international discussions Copenhagen a booster, not the end of the story Regional markets will emerge in any case Europe US/Canada Australia/New Zealand Japan Korea They will be the driving force behind an international framework A Copenhagen bis will be organized in Q3 2010 to reconvene on more solid grounds 14
Appendix 15
Carbon markets: regional organisation linked with international offset credits EU ETS Market Kyoto Protocol Offset projects CDM / JI Japan Australia New Zealand Canada USA CCX Japan JVETS Other voluntary markets United-States: RGGI, WCI Voluntary Markets Source: orbeo Other local markets 16
EU ETS Phase III: what has been decided? Key decisions «20-20-20» objectives confirmed 10 % perimeter increase: aluminum, chemical industry, and possibly shipping CER Phase II will be exchangeable for EUA up to 2015 First implications EU ETS exists up to 2020, one continuous trading period, full EUA banking from Phase II to Phase III ensured Large increase in auctioned volumes, despite of concessions made to accommodate economic crisis Some key points to be finalized only by 2010 (e.g. CER phase III eligibility criteria), leaving still some uncertainty European CO 2 market to continue up to 2020 Project-based mechanisms will continue as flexibility tools Source: orbeo 17
USA Federal Scheme how and when Obama Administration plans Spend $15 billion a year to develop clean energy technology and introduce a Renewable Portfolio Standard Set up a federal cap-and-trade scheme in 2012 through a law in 2010 Reduce emissions by 17% to 20% below 2005 levels by 2020, and 83% by 2050 Potential market of more than 6.5 billion carbon allowances in 2012 87% of the Federal emissions covered by the program The US could create a huge, yet cheap market Allocation of allowances upstream to suppliers, refiners and importers of transportation fuel 2 billion tons low-cost offsets allowed annually; Domestic offsets (1 to 1.5 bn) will primarily be agricultural, international ones (0.5 to 1 bn) from forestry Potentially, a US market representing by 2012 3x current European market volume $100 billion cap-and-trade 18 Source: orbeo
orbeo offices around the world Europe - Middle East - Africa Calgary Paris Cologne North America New York Barcelone Istanbul Beijing Seoul Tokyo Saltillo Asia-Pacific Singapore Latin America Santiago de Chile Sao Paulo Johannesburg 19
List of awards Best Trading Company Kyoto Project Credits Runner up Best Trading Company EU ETS Best Trading Company for European ETS allowances (EUA) Emissions Europe House of the Year Awarded to: First place EU ETS Options dealer Second place Primary CERs dealer Secondary CERs dealer Awarded to: Best Trading Company for EUA EUA options Primary CERs Secondary CERs Awarded to: Awarded to: DECEMBER 2007 UK FEBRUARY 2008 UK JUNE 2008 UK AUGUST 2008 UK FEBRUARY 2009 UK 2007 EDIE Environmental Excellence Award Scheme NEFCO, an international finance institution established by the five Nordic countries, administers the NEFCO Carbon Fund, a global carbon fund 242,000 primary CERs over the period 2009-2012 Sold by: NEDO is Japan s largest public R&D management organization for promoting the development of advanced industrial, environmental, new energy and energy conversation technologies. 9,769,000 CERs over the period 2007-2013,5 Sold by: Best Carbon Reduction Project Awarded to: SEPTEMBER 2008 FI MARCH 2007 & APRIL 2008 JP OCTOBER 2007 20
Disclaimer This documentation is for information purposes only. Figures are only given as a matter of example and are not intended to reflect the market prices. Certain transactions may give rise to substantial risk and are not suitable for all investors and no representation is made that any returns indicated will be achieved. In no circumstances should it be considered as an offer by Orbeo or its affiliates, to provide any service or product or an offer or solicitation of an offer to enter into a transaction, nor any advice or counsel. Orbeo does not give any warranty as to the accuracy or completeness of the information contained herein, which is given on a confidential basis only. However, as part of your risk management policy, it may be in your interest to enter into such derivative transactions, after having analysed (if necessary with the help of external financial, legal or otherwise advisors) the specific risks which such transactions may imply and the advantages they may provide. 21
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