PRESENTATION ON CER MONITIZATION ADAPTATION FUND TRUST FUND Update - PDF document

AFB/B.13/Inf.5 March 9, 2011 Adaptation Fund Board Thirteenth Meeting Bonn, March 17-18, 2011 PRESENTATION ON CER MONITIZATION

ADAPTATION FUND TRUST FUND Update on Status of Resources and CER Monetization Program March 2011 Prepared by the World Bank as Interim Trustee of the Adaptation Fund Adaptation Fund Trustee The World Bank

Roadmap 1. Trustee Update • Recent developments • Status of Resources 2. CER Monetization • CER Price Levels • CER Monetization Program Adaptation Fund Trustee The World Bank

Trustee Update Recent Developments  CMP adopted extension of Interim Trustee mandate in Cancun  World Bank Executive Directors agreed to extension on February 18, 2011  AF Trust Fund Independent Audit concluded successfully, covering the period from inception to June 30, 2010.  Second project funds transfer made - Honduras Adaptation Fund Trustee The World Bank

Status of Resources January 31, 2011 (US$ millions) Cumulative Receipts (1) 224.50  Cash receipts from CER sales proceeds 138.16  Cash receipts from Donors and Other Sources 85.59  Investment Income 0.75 Cumulative Disbursements (2) 12.63  Projects and Programs 2.92  Administrative Budgets 9.71 Funds Held in Trust (3) = (1) – (2) 211.88 Adaptation Fund Trustee The World Bank

Schedule of Funds Available January 31, 2011 (US$ millions) Funds Held in Trust (3) 211.88 Operational Reserve (4) 3.00 Amounts Committed, Not Disbursed (5) 21.89 Funds Available (6) = (3) – (4) – (5) 187.08 Adaptation Fund Trustee The World Bank

Total Programs/Projects Approved to date by NIE and MIE NIE, 36% MIE, 64% Adaptation Fund Trustee The World Bank

Status of Resources CERs and Donor Proceeds 250.00 200.00 in USD millions 150.00 Monetized CERs 100.00 Donor Contributions TF Balance 50.00 - Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Dec-09 Feb-10 Mar-10 Apr-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Dec-10 May-09 Nov-09 Jan-10 May-10 Nov-10 Jan-11 Adaptation Fund Trustee The World Bank

Status of Resources CERs and Donor Proceeds 30.00 25.00 20.00 in USD millions 15.00 Monetized CERs Donor Contributions 10.00 5.00 - Adaptation Fund Trustee The World Bank

Potential Resources for the AF to end-2012 450 408 400 CER Proceeds High Case 353 350 CER Proceeds 305 300 USD, millions CER Proceeds Low Case 250 Paid-in Donor Contributions 200 Funds Held in Trust Low Case 157 150 Funds Held in Trust High Case 100 Funds Held in Trust 50 18 - FY09 FY10 FY11-Dec 2012 (Est.) Adaptation Fund Trustee The World Bank

Roadmap 2. CER Monetization • CER Price Levels Adaptation Fund Trustee The World Bank

CER Price Levels Long-Term Daily Prices 21 19 CER prices have remained in a 17 trading range of approximately € 11 15 Euro (per ton) to € 15 per ton for nearly two years. 13 11 Recently have trended near 9 bottom of range. 7 12-Aug-08 11-Oct-08 10-Dec-08 8-Feb-09 9-Apr-09 8-Jun-09 7-Aug-09 6-Oct-09 5-Dec-09 3-Feb-10 4-Apr-10 3-Jun-10 2-Aug-10 1-Oct-10 30-Nov-10 29-Jan-11 Adaptation Fund Trustee The World Bank Source: Bloomberg

CER Price Levels Short-Term Daily Prices 12.0 Flat line for 6 11.8 daysin January 11.6 Euro (per ton) 11.4 11.2 11.0 30-Dec-10 13-Jan-11 20-Jan-11 27-Jan-11 3-Feb-11 10-Feb-11 17-Feb-11 24-Feb-11 6-Jan-11 Source: Bloomberg Adaptation Fund Trustee The World Bank

CER Price Levels European Union Allowances Issues Events  In November 2010, cyber-criminals hacked into Romanian Registry and stole EUAs.  Early January, EUAs stolen from Czech Republic, Austrian and Greek Registries.  Approximately 3.2 million EUA s reported missing – market value of almost € 50 million ($68 million).  Europol stated that thefts were linked to organized crime groups and arrests have been made.  Stolen EUAs traced to other registries.  ADAPTATION FUND CERS NOT AFFECTED Adaptation Fund Trustee The World Bank

CER Price Levels European Union Allowances Issues Measures Taken On January 19 th 2011, European Commission  suspended trading on all European Union Registries.  Registries are being let back in once they demonstrate security will prevent subsequent theft. As of March 1 st 2011, only 10 of 30 registries had  reopened.  BlueNext independently suspended all trading.  Spot trading declined significantly, but derivatives markets continued to trade. Source: Point Carbon, BlueNext Adaptation Fund Trustee The World Bank

CER Price Levels European Union Allowances Issues Possible Improvements  Enhanced security, equivalent to banking standards.  Make system more centralized, with one set of standards.  Improve proof of identify for opening registry accounts - photographic and other documentation.  Limit the opening of registry accounts to compliance buyers and qualified dealers.  Clarify status of stolen EUAs purchased in good faith. Other  Concerns carousel trading (VAT fraud) and money laundering may be continuing undetected. Source: Point Carbon, BlueNext Adaptation Fund Trustee The World Bank

CER Price Levels Adaptation Fund CER Holdings BlueNext Swiss Registry 85 thousand tons $1.4 million value Clean Development Mechanism Registry 2.7 million tons $45 million value Independent Swiss Registry 35 thousand tons $575 thousand value Adaptation Fund Trustee Volumes, prices and exchange rates as of February 28, 2011 The World Bank Source: Bloomberg

CER Price Levels CER Monthly Issuance Levels 60 50 CER issuance in December 40 Tons (Millions) 2010 was 50.2 million tons - 30 double the highest 20 monthly total 10 ever 0 Source: UNEP Risoe Adaptation Fund Trustee The World Bank

CER Price Levels Analysts Forecasts – as of January 11, 2011 25 20 Euro (per ton) 15 10 5 0 2011 2012 Adaptation Fund Trustee The World Bank Source: Point Carbon

Roadmap 2. CER Monetization • CER Monetization Program Adaptation Fund Trustee The World Bank

CER Monetization Program Sale Record as of February 28, 2011 CER Tons Sold  Sales reduced by (Millions) BlueNext closure from Jan 20 th to Feb 3 rd , and Swiss Registry closure February 12 th to 3.1 present. 5.1  8.2 million CER Tons Sold  $139.1 million raised ( € 103.2 million) Exchange OTC Adaptation Fund Trustee The World Bank

CER Monetization Program Monthly Sales by Tonnage 1,600 1,400 1,200 1,000 Tons Reduced sales due 800 to Exchange and Registry closings 600 400 200 - Adaptation Fund Trustee The World Bank

CER Monetization Program Monthly Average Price 14 Average 12.56 12 10 Euro (per ton) 8 6 4 2 0 Adaptation Fund Trustee The World Bank

CER Monetization Program Adaptation Fund Inventory 6 5 4 Tons (Millions) Inventory just under 3 million tons 3 2 1 0 Adaptation Fund Trustee The World Bank

CER Monetization Program Potential Resources from Monetization 2013 to 2020 1,200 1,104 1,000 836 Based on Point Carbon estimate 800 that 2.5 billion USD Millions 602 CERs could be 600 issued in post- Kyoto period. 400 200 - Low Mid High Excludes donations, interest income and expenses. Adaptation Fund Trustee The World Bank