How to insure permanence by thebest11

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									                             How to insure permanence ?




Beyond Carbon conference
29 - 30 October 2003                    Wolfgang Ortloff
Swiss Re Rüschlikon
Centre for Global Dialogue              Greenhouse Gas Risk Solutions
                                        Swiss Re
                             Sink credits vs.
                             technological emissions reduction credits

                               Main difference: permanence

                               A technological credit, as soon as certified and verified,
                               is real and cannot be un-done.

                               What happens if the underlying for a sink credit which
                               has been sold or traded “disappears” because of a
                               forest fire or another natural event?

Beyond Carbon conference
29 - 30 October 2003
Swiss Re Rüschlikon
Centre for Global Dialogue
                             The task:
                             to insure ...

                               … a forestry / land-use project (trees!)

                               … with a fuzzy underlying (what is carbon?)

                               … in a foreign country (Banana Republic)

                               … by an unknown counterparty (Treehugger Ltd.)

                               … without a track record (first time ever)
Beyond Carbon conference
29 - 30 October 2003
                               … for 100 years !!!
Swiss Re Rüschlikon
Centre for Global Dialogue
                   Insurance - the value of Swiss Re’s
                   balance sheet to a delivery guarantee




                         100 t            80 t
                         CO2e            CO2e


                                 tCO2e

Sink Project 100                  $$$                 Buyer 30-50 t
        t
                             (Sorry for the last slide)

                             In summary

                              From insuring an individual project (buyer/seller)
                               – to ensuring to the seller that we will be there to buy
                                 (a C purchase agreement helps him finding finance)
                               – and to ensuring to the buyer that we will get him the
                                 expected credits, no matter what project they come
                                 from

                              Liabilities:

Beyond Carbon conference
                               – on our sell side: Swiss Re is liable to deliver
29 - 30 October 2003           – on our buy side: Swiss Re takes risk of non-delivery,
Swiss Re Rüschlikon
                                 depending on risk profile of projects a lower price will
Centre for Global Dialogue
                                 compensate for uncertainties (permanence!)
                               – It helps if traditional agro insurance is in place
                                                      Carbon flow with different accounting
                                                      systems
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Number of C credits [Mio]




                            6
                            5
                            4
                            3
                            2
                            1
                            0
                            -1   1      3    5    7    9   11 13    15   17 19      21   23   25 27   29   31 33    35      37 39

                            -2                                                                                         -4.9
                                     Average Stock, 50 yrs, yearly issuance                     Average Stock, 70 yrs, yearly issuance
                                                                              Time [years]
                                     Temporary Crediting, 5yr issuance                          Total Stock, 5yr issuance

                                     Total Stock, yearly issuance

								
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