EDF TRADING by cuiliqing


									Demand for Carbon Credits
Post Kyoto:
A Buyer’s Perspective
Africa Carbon Forum 2011

                           EDF TRADING   1
A leader in the international wholesale energy markets

                                                     EDF TRADING   2

•    Whole sale commodity trading arm of EDF
•    Active in Power, Gas, Coal, Oil , Environmental
•    790 000 trades executed in 2009 across 600                                                                             NORWAY
     counterparts                                                                                                           Established a dedicated Nordic team and opened an Oslo
                                                                                                                            office in 2008.

•    A3 credit rating                                                                                                                 NETHERLANDS
                                                                                                                                      Acquired three coal terminals in the Port of Amsterdam.

      GLOBAL                                                                                                                                                      Secured a trading licence. Supporting the
                                                                                                                                                                  local EDF Group company with cross-border
      Sourced biomass products in Asia,                                                                                                                           trading, emissions trading and hedging of
      Brazil, Denmark, Estonia, Greece,                                                                                                                           electricity positions.
      Latvia, Lithuania, Portugal, Spain,
      Sweden, Tunisia, the UK and the USA.
                                                                                                                                                 Signed an LNG supply agreement with Qatar’s RasGas for
                                                                                                                                                 delivery through the Zeebrugge terminal in Belgium.

                                                                                Expanding gas
                                                                                storage capacity
      GLOBAL                                                                    at Hole House in                                                                                  JAPAN
      Contracts signed to purchase carbon                                       Crewe. Acquired                                                                                   Established a joint coal business
      emission credits in Brazil, China,                                        one of the UK’s         Announced gas                                                             with Japan’s Chubu Electric
      Korea, Malaysia, Mexico, the                                              largest independent     storage joint                                                             Power Company. Contracted
      Philippines, Thailand and Vietnam.                                        suppliers of biomass.   venture with EDF                                                          with Mitsubishi Corporation for
                                                                                                        and Germany’s                                                             ownership of a new capesize
                                                                                                        EnBW.                                                                     dry-bulk vessel.
                                                                                                                           EASTERN EUROPE                         CHINA
                                             One of the largest providers of
                                             market services to the wholesale                                              Supporting the local EDF Group
                                                                                                                                                                  Agreed with China Guodian Long
                                             gas and power sectors in North                                                companies with cross-border
                                                                                                                                                                  Yuan to buy 8 million carbon
                                             America and Canada. Other                                                     trading, emissions trading and
                                                                                       BRAZIL                                                                     credits from 18 windfarms.
                                             commodities include coal and                                                  hedging of electricity positions.
                                             renewable fuels.                          Acquired CERs from several
                                                                                       bagasse cogeneration plants,                                                                     AUSTRALIA
                                                                                       which once implemented are
                                                                                       projected to have over 70                                                                        Narrabri coal project.
                                                                                       MW in installed capacity.

                                                                                                                                                                                                                      EDF TRADING   3
EDFT has a unique positioning in the environmental
product space

 •   Active in all the segment of carbon markets
      – One of the largest CDM buyers with over 150 projects
      – Managing group compliance position
          (~100M carbon Allowances/yr)
      – Establishment and portfolio management of EDF
          Carbon Fund (€290m) to purchase CERs (EDF SA,
          EDF Energy, Edison, EnBW)
      – Supply of credit to EDF industrial client base
      – 260 Mt CO2e traded in 2009

 •   Product and geographical coverage:
      – European ETS EUAs and Secondary CERs
      – Global primary CER Origination
      – ERU Origination
      – UK LECs and ROCs Trading
      – GoO Trading in continental Europe
      – Biomass procurement and trading
      – US RECs trading
      – Weather Derivatives
                                                               EDF TRADING   4
The CDM successes – EDFT’s involvement

 200+ projects (incl. the
  acquisition of ESI in June 2010)
 80% registered
 15+ methodologies
 16+ countries
                                                        Fujian Zhangpu
                                                        Liuao Wind
                                                        Power Project.
                                                        Fujian province,

                                                       SK Power
                                                       Surat Thani
                                     Displacement of   Province, Thailand
                                     lamps by CFLs.
  Landfill-based                     India
  biogas collection
  and flaring.
  Pasto, Colombia

                                                               EDF TRADING   5

   Natural Gas US       9 top 3 places in
  House of the Year   commodity rankings

       June 2010          February 2010

                                            EDF TRADING   6
Demand for Carbon Credits post Kyoto: A Buyer’s
 The CDM successes and challenges in the African

• Significant financial flows towards low carbon activities in developing countries
   – 3212 registered CDM projects with PDD volumes of ~2 billion tCO2 potential reductions
      until 2012… and more coming! (as of 1 July 2011)
        •   Only 61 (2%) of these registered projects are in Africa (~57 MtCO2 potential reductions until
              –   16 in North Africa ; 45 in Sub-Saharan Africa (of which 20 in South Africa)
    – 9 Registered POAs, including 3 in Africa (Uganda, Egypt, South Africa)  Main Barriers
      to uptake of PoA’s:
        •   DOE Liability
        •   Coordinating Entity/ Ownership of CERs
        •   Rigidity of POA for Meth updates
        •   Intra CPA Exposure
        •   CPA Inclusion Protocol
    – Financial vector which helped mobilize over €3 billion per yr (@ 8 €/t)  Africa region to
      have least benefited, mainly due to:
        •   Lower level of local capacity and expertise to support projects
        •   Project potential generally smaller scale
        •   Investment and financing environment more challenging  flow of credits less predictable for
            buyers under off-take agreements
                                                                                                     EDF TRADING   8
  How does the post-2012 context look from 2010?

• EU ETS to remain strongest & most reliable            Implications
  engine for CER demand:
                                                         Focus of investors and
  – EU is the only established source of demand           buyers to gradually shift
     • Japan, Australia, US still (very) uncertain        away from projects in large
  – CERs are cheapest option for ETS operators            emerging economies
     • EU MSs have more flexibility                      Opportunities for Africa if:
  – Visibility until 2020 for minimum volume of CERs      • Good quality projects,
     usable in EU ETS                                       especially RES and EE
• … but investing in / buying post-2012 credits           • Adequate local capacity
  bears risks from potential eligibility restrictions
  on any credit type                                     In the transition to 2013, a
                                                          good risk-reward balance
  – No credit type immune to regulatory risk today
                                                          between buyers and sellers
  – Indications that Africa and LDCs could be             will be critical

                                                                                 EDF TRADING   9
Demand and Supply dynamics for Carbon Credits to

                             • Pre-2012
                               –     Market long EUAs because of recession
                               –     Spread CER-EUA low  Little incentive to swap and use
                                     CERs for compliance
                               –     Anticipation of qualitative restrictions (QRs)
                               –     EU sovereign and Japan = active buyers

                             • Post-2012
                               –     Japan and Sovereign Demand may absorb part of CER
                                     supply, but ETS operators main buyers
                               –     With eligibility restrictions, risk of CER oversupply to EU
                                     ETS is reduced

                                   Main factors shaping CER market post-2012 :
                                   • Effect of a possible move beyond 20% reduction in
                                     the EU (increase of limit on CER import?)
                                   • Firm ER pledges by other developed countries and
                                     eligibility of CERs to meet (part of) those pledges
                                   • Bilateral agreements, new credit mechanisms
                                     (sectoral, NAMAs, etc.)
                                   • CER market differentiation on the basis of eligibility
                                     in EU ETS phase 3
                                                                                       EDF TRADING   10

  Hervé Gueguen                         Visit our website: www.edftrading.com
  Head of Carbon Operations
  EDF Trading
  3rd Floor, Cardinal Place
  80 Victoria Street
  SW1E 5JL
  United Kingdom
  Tel: +44 (0) 20 7061 4214
  Email: herve.gueguen@edftrading.com

                                                                         EDF TRADING   11

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