A Global Carbon Market Perspective

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  • 1. A Global Carbon Market Perspective Carbon Sequestration Workshop Mark Proegler, BP November 3, 2005 Houston
  • 2. Who we are BP is an oil, gas, petrochemicals and renewables company We employ around 102,900 people We have operations on 6 continents and in over 100 countries market capitalisation $225 billion (on 24 Oct 2005) annual revenues of $285 billion (in 2004) the 2nd largest oil & gas company and one of the 10 largest companies in the world with approx 30,000 service stations worldwide serving 13 million customers every day 2
  • 3. Where our people are located Middle East, Caspian & Russia 2,950 (100,000+ TNK-BP) North Europe America 42,600 39,200 (7400 in Texas) Asia & Australasia 11,600 Africa 3,500 Latin America & Caribbean 4,500 3
  • 4. Our global presence Oil Gas Chemicals Refining Market positions An opportunity and a responsibility 4
  • 5. Environment Climate change context Worlds estimated annual emissions from hydrocarbon consumption is nearly 25 billion tonnes of CO2 Emissions from BPs products account for approx 5% of global CO2 emissions BPs operations contribute less than 0.4% of annual global emissions We are looking at ways to reduce emissions from our products as well as our operations 5
  • 6. Environment Our position on climate change Our position is that there is no single solution! We will continue to focus on three main areas: 1. Provide leadership Engage Governments and Industry (e.g. Lord Brownes Stanford I & II speeches, Beyond Kyoto) Increase customer awareness Fund scientific research (e.g. Princeton, Tsinghua, CO2 capture, etc) Collaborate with auto-industry to increase fuel efficiency 2. Continue to reduce the carbon content or impact of our products Natural gas growth Cleaner fuels (e.g. Ultimate) Renewables & Alternatives (e.g. Solar & Hydrogen) Lubricants that enhance fuel efficiency 3. Continue to minimise our operational emissions Energy efficiency improvements within existing operations Efficient technology deployment in new major projects 6
  • 7. Climate Change The need for integrated policies Market Development Engagement of business and consumers Technology Development R&D and demonstration projects Business Development Creation of incentives and support to establish new and competitive businesses 7
  • 8. Market Development Policies Cap and trade systems are a more effective engagement tool than taxes-- and are proven Mandatory caps create effective carbon property rights, as do well defined reduction projects Need for a carbon price that is global in reach, but probably not a single global system EU ETS has the potential to become the strong global carbon currency Cap and trade systems are ONE policy tool, they engage and facilitate trade 8
  • 9. Market Development Emissions Trading: BP History 97 Advocate precautionary action to mitigate risk of climate change Set 10% reduction target on internal GHG emissions 98 Internal global GHG emissions trading system, 99 develop externally verified GHG baseline Achieve 10% GHG reduction target 01 Entry into UK ETS 02 Engage in developing 03 regulations for EU ETS 05 Start of EU ETS 9
  • 10. Market Development Learning by doing BPs ET Experience Flexible mechanisms are a primary tool to address environmental issues BPs experience: A range of targeted initiatives is required to underpin the Internal GHG trading trading system trading by itself does not reduce system 1998-2001 emissions US NOx, SO2 (1995+) The development of a robust futures market will be UK ETS 2002 essential if the value of carbon is to drive significant EU ETS 2005 capital investment in emission reduction projects Compliance enforcement is critical Process takes time to implement and requires: Strong reporting and monitoring Consistent and harmonious application between installations Stable and predictable allocation mechanism Investment in training e.g. accounting, trading, verification 10
  • 11. Market Development The ETS: here today EU EU ETS started January, 2005 cap & trade system; permits inclusion of project-based credits represents 45% of EU emissions 12,000 installations two phases: 2005-2007; 2008-2012 GHG reductions of ~ 8% below 1990 levels by 2012 A few start-up issues delays in country allocation plans; registries Many signs of success active trading new exchanges (6 to date) and increased participation 11
  • 12. M arket Development Current EU ETS activity Weekly volume EU allowances 2005-2007 Price 2005: Euro/tonne Volum e: tonnes/w eek 30.00 12,000,000 29.00 28.00 27.00 26.00 25.00 10,000,000 24.00 23.00 22.00 21.00 20.00 8,000,000 19.00 18.00 17.00 16.00 15.00 6,000,000 14.00 13.00 12.00 11.00 10.00 4,000,000 9.00 8.00 7.00 6.00 5.00