lo largo de estas jornadas, expertos nacionales e internacionales en el tema analizan la situación actual, tendencias futuras y principales retos que plantean los esquemas de reducción de emisiones y los mercados de carbono como herramientas en la lucha contra el calentamiento global, especialmente después de la cumbre de Copenhague. Anthony Hobley, Jefe de Cambio Climático y Finanzas de Carbono. Norton Rose LLP, participa con la ponencia "Regulación en los mercados de Carbono".

1. CORPORATE FINANCE FINANCIAL INSTITUTIONS ENERGY AND INFRASTRUCTURE TRANSPORT TECHNOLOGY
Fact, Fiction, or Fancy?
An International Carbon Market
Anthony Hobley
Partner, Norton Rose LLP
Global Head of Climate
Change and Carbon
Finance

2. The Climate Change Reality
In its 4th Assessment Report (2007) the Inter-Governmental Panel on Climate
Change (IPCC) found that
•It is very likely – that is, there is a greater than 90 per cent probability – that climate
change is due to the observed increase in anthropogenic greenhouse gas emissions
•A reduction of at least 25–40 per cent by 2020 on 1990 levels will need to be made by
developed countries to limit the global average temperature rise to below two degrees
Celsius
•Global greenhouse gas (GHG) emissions must peak in the next 10-15 years and must
then be followed by substantial reductions to achieve this end
•Nations are deciding not on the whether they should act, but what they should do
and how it best be done
Emissions reduction and mitigation frameworks have become a
reality for both individuals and corporations
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3. What Will It Cost?
“In the Peak Scenario,CO2 emissions from the world’s energy infrastructure peak at 30.8 GtCO2-e in
2019. In order to achieve this target, annual investments need to rise from $55 billion today to $500
billion by 2020.”
UNEP / New Energy Finance, June 2009
“This adds up to a total of at least €65–100 billion per
year on average from 2010-2020, ramping up over that time.”
Climate Works Foundation, June 2009
•UNFFCC: up to 86 per cent of the global finance needed to respond to climate change
will come from private investment sources
•World Bank: the private sector will have to bankroll close to 85 per cent of all clean
energy and climate projects in the future
The global carbon market grew by 100 per cent between 2007-20081
It is projected to grow to a value of $550 billion by 20122
Sources: (1) World Bank, (2) New Carbon Finance 3

4. The Global Carbon Market
• Current policy framework has two pillars : the Kyoto Protocol government-level compliance
obligations and the EU ETS
• The global carbon market was valued at $126 billion in 2008
• EU ETS accounted for $93 billion, and Kyoto mechanisms for $33 billion
Chicago Climate
EU ETS
Exchange
$93 billion
$307 million
Regional Greenhouse
* Asia 88%
Gas Initiative (RGGI)
$246 million * Africa
2%
New South Wales
Greenhouse Gas
Abatement
* Latin Scheme
America $183 million
5%
* Regional share of Kyoto project-based credits suppplied
Sources: (1) World Bank, (2) New Carbon Finance 4

5. CDM Project Cycle
CDM project Project meets CDM participation Project Design Document (PDD)
identified and eligibility criteria completed
Issuance of CERs
Designated National Authority of the
Host Country issues a letter of approval
DOE delivers Certification Report to the
CDM Executive Board which constitutes a
Validation of the project by an
request for issuance of CERs equal to the
independent designated operational
emission reductions achieved by the
entity (DOE)
CDM project achieved.
Registration of the Project
Verification by DOE of the GHG
Monitoring of the Project and (i.e. the project is formally
emission reductions and
provision of a monitoring report to accepted by the CDM
Certification by the DOE of the
the DOE Executive Board as a CDM
emission reductions achieved
project)
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6. Traditional CDM Project Structure
Possible Issues
• No (or delayed) registration
PROJECT ERPA PROJECT • Late commissioning
SELLER BUYER • Under-performance
• Poor monitoring leading to
delayed issuance of CERs
Assumptions
• Seller responsible for managing successful development of Project
• Buyer pays for CERs if they are delivered
... Some Risks
• Licensing / Regulatory: registration, appraisal (PDD), certification, verification, monitoring, crediting
• Political: host country approval, regulatory change, tax change, etc.
• Financial: currency, price, etc.
• Technology: performance, etc.
• Cost / Delay: compliance, completion, etc.
• ERPA Counterparty: credit etc.
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7. Bali Action Plan
• “Shared vision” to be developed by all Parties on
tackling climate change going forward
ADAPTATION • Four building blocks
― Mitigation
― Adaptation
― Technology transfer
MITIGATION
― Financing
• Negotiations amongst developed and developing
states for a new climate deal
FINANCING • AWG-KP: Ad-hoc Working Group tasked with detailing the
second commitment period of the Kyoto Protocol
• AWG-LCA: Ad-hoc Working Group tasked with detailing
TECHNOLOGY TRANSFER the details of the Long-Term Cooperative Action, as
mandated by the Bali Action Plan
• Two-track negotiations: discrete, but intrinsically linked
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8. Copenhagen Accord
Moderate success?
• Resort to “bottom-up” approach (versus European “top-down”) championed by the US
• First truly global declaration on climate change
FINANCING MRV TARGETS
USD 30bn by 2012 Developing country Due by January 31
USD 100bn by 2020 supported NAMAs (deadline flexible)
Abysmal failure?
― Only politically binding
― No timeline for global legally-binding agreement
― No commitments to specific aggregate mid-term targets
― No agreement on tenets of Bali Action Plan via the AWG-LCA
Next steps
• COP16, Mexico City, December 2010 aim for legally binding framework
• Until then regional developments key
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9. “Too much conversation, a little more action please ....”
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10. European Union – Under Pressure
• World leader in carbon markets and legislative action to reform economy
• Backseat in Copenhagen process
• A War Lost leadership backfires at COP15 accusation: unrealistic expectations?
• Scrambling to regroup post-COP15
Recent developments
• Copenhagen Accord: maintains 20 per cent reduction by 2020 pledge; 30 per cent conditional
• Markets already suffering: analyst expectations low, investors withdrawing
Next steps
• New mechanisms plans severely compromised, but EU still
carries “demand stick”
• Possibility of tariffs for imports: 9 per cent
(in line with WTO regulations, IEA)
• Inter-EU Member dissent: who cuts most?
• Worries in Brussels: Transatlantic carbon market
compromised – all eyes on Washington
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11. United States – Recent Legislative Progress
September 22, 2009
June 26, 2009 EPA issues mandatory monitoring rule
IN PROGRESS: Bipartisan
House of Representatives passes under the authority of the Clean Air
comprehensive energy bill,
American Clean Energy and Security Act. Entities emitting 25Mt+ CO2-e per
being drafted by Senators John
Act (ACES) – the Waxman-Markey year, required to report GHG emissions
Kerry, (D) Joe Lieberman, (I)
Bill data annually starting January 2010.
and Lindsey Graham (R)
STATUS: PASSED First annual reports due to EPA in
2011.
December 14, 2009
September 15, 2009
September 30, 2009 EPA adopts
EPA and National
Clean Energy Jobs and Endangerment and
Highway Traffic and
American Power Act (CEJAPA) – Cause and Contribute
Safety Administration
the Kerry-Boxer Bill Findings (GHGs
propose standards for
STATUS: BEING DEBATED ON “threaten public health”
light-duty vehicles (for
SENATE COMMITTEE LEVEL so under CAA EPA will
adoption March 2010)
regulate)
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12. United States – Piecemeal Markets
Western Climate Initiative (WCI) Regional GHG Initiative (RGGI)
• 7 US States, 4 Canadian provinces (3 provinces, 6 • Established December 2005 by Governors of
Mexican states observers) North-eastern and Mid-Atlantic States
• Regional goal of 15 per cent below 2015 by 2020 • Sets a cap on fossil-fuel fired electricity generators
• To begin on January 1, 2012 greater than 25 MW in size
• Two phases: Phase I implicates emissions from • First cap emissions at current levels in 2009, then
electricity, industrial combustion and processes reduce by 10 per cent by 2018
• Phase II (2015) includes transportation fuels etc. • Auctions quarterly, use of offsets from other sectors
California Cap-and-Trade Chicago Climate Exchange (CCX)
• AB32: product of the Californian Global Warming • Launched in 2003, now more than 450 members
Solutions Act of 2006 • Voluntary listing, mandatory reporting of emissions
• STATUS: California Air Resources Board will issue • World’s first and US’s only cap-and-trade system
regulations by January 1, 2011. for all 6 GHGs
• Effective 2012 • Members make voluntary, legally-binding
• Subject to a consultative process commitment to reduce emissions by 6 per cent
• International offsets eligible (CERs, REDD?) from 2000 levels by 2010
• Emissions reductions 27.3Mt by 2020 • Cumulative cuts of more than 400Mt achieved
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13. United States – Prospects
• Obama’s State of the Union address January, 2010:
― Called for comprehensive energy and climate bill to “make
― clean energy the profitable kind of energy in America”
― No reference to ETS, but not excluded: hybrid approach?
• Legislative priorities 2010:
Nuclear, off-shore drilling: hooks for
― Economy – jobs, jobs, jobs Republicans?
― Healthcare
― Financial sector reform
• Senator Scott Brown’s (MA) victory (January 19, 2009) = no more Democrat Senate majority
• If no legislation Q1/Q2 unlikely until 2011 mid-term elections November 2010
• Hurdles: Congressional partisanship, economic concerns, busy legislative agenda, timing:
legislative structure: post-Senate new Bill in joint sitting, then President signs into law
• Copenhagen Accord: 17 per cent by 2020; difficult , not impossible without cap-and-trade
• Cap-and-trade not good for jobs creation message – good for cutting compliance costs
More likely: Energy and jobs Bill, renewable energy target, GHG regulation in
the short-term, instead of cap-and-trade: business has not been vocal
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14. China – Ahead of the Game
• Copenhagen Accord: reduce "carbon intensity" by 40-45 per cent on 2005 levels by 2020
• WRI: “comparable to US targets” but will do no more – worries about economic growth.
• Will measure only energy consumption and industrial activity emissions
• Will likely significantly exceed targets = bargaining chip in future negotiations
Prospects for a carbon market?
• Have relied more on administrative measures vs markets – bottom-up approach
• But government encouraging domestic carbon market creates incentives for emissions reductions
• Plans to include pilot emissions trading system in Five Year Plan 2010-15
• Already operating, largely in VERs and with small volumes: Beijing Climate Exchange, Shanghai
Climate Exchange, Tianjin Climate Exchange
Next steps
• Will bank on technology transfer
• Already majority market share of renewable energy generation parts
• Government committed to capitalizing on global shift in priorities
• Also – energy security big issue. China needs to cut own
dependence on fossil fuels.
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15. Japan – Temperature Rising
• Copenhagen Accord: 25 per cent from 1990 levels by 2020 conditional upon global agreement
• New climate bill due March 2010: likely to include cap-and-trade, some form of tax, no start dates
• Renewable energy target: 10 per cent of primary energy by 2020 (currently 1.3 per cent)
Obstacles?
• Already energy efficient: what percentage to come from domestic action?
• Strong opposition from business and industry: compliance costs likely to be very high
Purchased To Purchase
25 million CERs Energy efficiency decrease of 1.6 per
$2.15bn on
+ cent by 2013 + target carbon credits
71.6 million AAUs through of carbon credits by end of 2012
Prospects for carbon market
• Voluntary ETS since October 2008: created demand for CERs and AAUs by business
• April 2010: mandatory ETS for businesses in Tokyo to begin
• March 2010 bill to include mandatory national ETS 15

16. Australia – Leading from Behind
• Rudd Government severely burned by Senate failure and Copenhagen outcome
• Worst-case scenario: no measures – double dissolution unlikely considering election timeline
• Opposition leader Tony Abbott – climate sceptic, appealing to Conservative minority
• Carbon Pollution Reduction Scheme (CPRS) due for Senate reintroduction February 2, 2010
― Need 7 non-Party votes to pass – last attempt failed by 5 votes
― 2 Coalition Senators crossed the floor in last vote (have stated that reserve right to repeat)
― 5 Greens Senators – all opposed (looking for no less than 25 per cent reduction)
Recent developments
• Copenhagen Accord: Australia first to associate. 5 per cent on 2005 level “unconditional offer”;
15 and 25 per cent reduction trajectories dependent on global agreement
• Government ex-climate change advisor Ross Garnaut calls for tax of AUD20 as interim measure
• Coalition looks to soil carbon and no-cost alternatives to reaching 5 per cent target
• Australia may be short on Kyoto compliance (new LULUCF data released) compliance will
come from public chequebook without CPRS
• Federal election end of 2010: legislation late 2010 / early 2011?
• Mandatory Renewable Energy Target (MRET) 20 per cent by 2020 – scheme under review
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17. Canada – The Rogue Nation
• By 2007, 34 per cent above Kyoto target – Government: compliance = economic ruin
• Criticized by developing countries, now calls for Commonwealth suspension
• Copenhagen Accord: 17 per cent on 2005 levels or 3 per cent on 1990 levels by 2020
• What Canada wants: no limits on mining tar sands in Alberta for oil
• Conservative Government at 30 per cent approval in polls
Recent developments
• December 30, 2009: PM Harper announces “period of prorogation”
– 36 bills failing to receive Royal Assent prior to recess, cease to
exist; all legislative committee activity stops Tar sands: significantly more carbon
intensive than regular extraction
• PM likely to appoint handful of Conservative nominees to Senate
(Liberals lose control of upper house)
• March 3, 2010: PM to deliver new Throne Speech to launch 40th Parliament; federal budget
released, new committees formed, bills reinstated or reintroduced
Next steps
• Focus on provinces, members of WCI: Ontario, Quebec, Manitoba and British Columbia
• Continuing dialogue with the US: we move when (and if) you move
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18. South Africa – BASIC Concerns
• Acute shortage of electricity generation capacity and supply: threatens economic progress
• Continues energy rationing amongst industrial users (implemented after blackouts in 2008)
• Copenhagen Accord: 34 per cent below projected BAU by 2020 (conditional on international deal
and financial support) after meeting with other BASIC leaders in Delhi
• Renewable energy target: 4 per cent of all energy by 2013
Existing policies and measures
• 2009: instituted Africa’s first wind feed-in tariff of ZAR1.25
($0.16) per kilowatt hour – more than EU member states
• Currently: less than 10 megawatts (MW) of operational wind capacity
• Early 2008: Eskom solar water heating rebate program
• Mid-2007: Eskom Energy Efficient Motors Programme promotes
replacing old, inefficient motors by subsidizing purchase cost
Natural resources and mining: Africa’s
biggest export industry
Next steps
• Development of NAMA
• Continuation of project finance via CDM (E+/E- issues)
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19. Russia – Hot Air and Indifference
• Historically poor engagement with international
climate change process / discussions
• No significant domestic policy to speak of
• Some measures involving fines for high-polluting
vehicles – status undetermined
• Less JI projects than Eastern bloc neighbours
• Resource companies nationalised
• No energy security issue energy dependence
of others critical for international status
• No sale of AAUs 1997-2009
• Sberbank authorized to sell 300 million AAUs
• EC concerned about market flooding, but no
significant buyers for the amount (Canada?)
• Substantial project finance and REDD potential, but no government moves to develop
• Copenhagen Accord: December 2009 increase reduction pledge from 10-15 per cent to 25 per
cent on 1990 levels but still significant surplus, not yet affiliated with Accord
• AAU banking issue to remain contentious in any post-2012 policy framework
• Engagement unlikely
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20. Others
South Korea – On the Move
• Copenhagen Accord: 30 per cent reduction on BAU by 2020 (4 per cent on 2005 levels)
• December 31, 2009: Low Carbon Green Growth Act passes Korean National Assembly
• January 13, 2010: President signs LCGGA into law
• Effective from April 13, 2010, will provide comprehensive legal ground to all subsequent
regulations, policies and measures to “transform South Korea into low-carbon society”
• Enforcement ordinances, regulations to be created by government ministries in next few months
Singapore – Ambition Decreases
• Post-Copenhagen: emissions cut by 7-11 per cent on BAU levels by 2020 (pre-COP, 16 per cent)
• Ambitions of being Asian carbon trading hub
New Zealand – A Soft Start
• Conditional targets 10 to 20 per cent on 1990 levels
• Emissions trading scheme enacted late 2009
• July 1, 2010 – January 1, 2013 transition period. Emitters pay fixed price of NZ$25 ($18.25) per
tCO2-e (1 unit for every 2 emissions units). Assistance phased out 1.3 per cent / year from 2013.
• NZUs not for export, but forestry NZUs can be converted to AAUs and sold abroad
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21. A Truly Global Market?
Potential total size of the global carbon market by 2020 is
estimated at €2,000 billion
CDM Host
US Federal EU ETS
Countries /
Scheme Sectoral Regional
Mechanisms Schemes
CDM Host
CDM Hosting Countries
Countries /
CDM Host
Countries /
Sectoral
Sectoral
Mechanism CPRS &
Mechanisms NZ ETS
Potential future
linking opportunity
Linking via Kyoto
project mechanisms 21

22. Opportunities or Risks?
Where do the Opportunities Lie?
• Clear long term signals for long term investments – confidence in policy makers
• Certainty of change – e.g. to carbon constrained economy
• Nuances and differences in implementation which create arbitrages
• Broad spectrum of asset classes
• New products required e.g.
― Financial products to
manage risks
― Activities in renewable energy
― Activities in nuclear
― Avoided deforestation
McKinsey Low-Cost Abatement Curve
22

23. Gazing Into the Crystal Ball ...
• Two steps backwards, one step forward for global action: high-level engagement positive, UN
process in question, speed of action may not meet scientific imperative
• Currently, “policies and measures” – not markets – politically palatable
• Short-term outlook very bearish: EU is ahead of the game, global market some years away
• Activities in renewable energy / nuclear / avoided deforestation more likely
Harbinger of success: How will Copenhagen affect the development of regional
markets and schemes?
SHORT-TERM MEDIUM-TERM LONG-TERM
Discrete regional schemes, first number of Linking of regional schemes, Global carbon market / economies
years linked only by offset mechanisms pairing of scale
• Developments occur very quickly e.g. House of Representatives in US
• Tariff threats may provide impetus
• Cost-efficiency of market mechanisms will come to the fore – industry must advocate
Global action is inevitable
How coordinated the action will be remains in question
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24. Global Practice: Deal Map
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25. CORPORATE FINANCE FINANCIAL INSTITUTIONS ENERGY AND INFRASTRUCTURE TRANSPORT TECHNOLOGY

26. Presentation
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of Norton Rose Group (whether or not such individual is described as a “partner”) accepts or assumes
responsibility, or has any liability, to any person in respect of this presentation.
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LLP or one of its affiliates with equivalent standing and qualifications.
3 This presentation contains information confidential to Norton Rose Group. Copyright in the materials is owned
by Norton Rose Group and the materials should not be copied or disclosed to any other person without the
express authorisation of Norton Rose.
4 This presentation is not intended to give legal advice and, accordingly, it should not be relied upon. It should
not be regarded as a comprehensive statement of the law and practice in this area. Readers must take
specific legal advice on any particular matter which concerns them. If you require any advice or information,
please speak to your usual contact at Norton Rose Group.
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