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Carbon Market Services for banks in Turkey Disclaimer:Neitherthisreportnoranypartthereof,including,withoutlimita9on,anyinforma9on,opinion,adviceorrecommenda9oncontainedtherein, isintendedtocons9tutespecifictechnical,financial,commercialorlegaladviceandnothingthereinpurportsinanymannertoreplaceprofessionaladvice. Noexpressorimpliedwarran9esaremadewithregardtothisreport,andtherearenothirdpartybeneficiariesthereof.NeithertheEuropeanBankfor Reconstruc9onandDevelopment,ClimateFocus,GaiaCarbonFinance,noranyoftheirdirectors,officersemployees,shareholdersoragentscanbeheld liableforanyerrors,omissionsorinaccuraciesthisreportmaycontain.Thisreportreflectstheviewsoftheconsultantsandnotnecessarilythoseofthe EuropeanBankforReconstruc9onandDevelopment. Istanbul | 24 January 2017 Agenda Time Topic 2 Presenter 14:00 Introduction Jan-Willem van de Ven (EBRD) 14:10 Direct and indirect carbon regulations Turkish industry and banks (current and anticipated) Szymon Mikolajczyk (Climate Focus) Gediz S. Kaya (Gaia) 14:45 Summary of 1st Consultation Egbert Liese (Climate Focus) 15:00 Coffee break 15:15 Clarification Request Ajda Gencsoy (G&T,O) Egbert Liese (Climate Focus) 16:00 Discussion Clarification Request Ajda Gencsoy (G&T,O) Egbert Liese (Climate Focus) 16:45 Formulation of next steps and wrap up Jan-Willem van de Ven (EBRD) January 24, 2017 Global carbon pricing efforts Figure: Global ETS and carbon tax schemes ± 13% global GHGs ± 40 countries & 20 subnational jurisdictions Source: The World Bank Group, An advance brief from the State and Trends of Carbon Pricing 2016 January 24, 2017 3 State of the Voluntary Market • Total transactions increased by 10% between ‘14 and ‘15, from 77 million tCO2e to 84 million tCO2e • Current market value of USD 278 million. Average price has been declining, currently to 3.3 USD per tonne • Turkey represents the largest seller of voluntary carbon credits in Europe. Over the period 2007 – 2015, Turkey transacted around 35 million tonnes of CO2e valued at over USD 200 million (±70% of total market volume in Europe to date) Source: Ecosystem Marketplace. Raising Ambition: State of the Voluntary Carbon Markets 2016. May 2016 January 24, 2017 4 Impact of CORSIA 5 • October 2016 - Signature of the Carbon Offset and Reduction Scheme for International Aviation (CORSIA) • Implementation in 3 phases over 2021-2035 / Participation on a voluntary basis for the first two, mandatory for the last • 15 years of ‘CORSIA’ (2021-2035) will require approximately 2.5 billions tCO2e of offsets to achieve carbon neutral growth beyond 2020* CORSIA CDM * Average of estimations from the Environmental Defense Fund & the Stockholm Environment Institute January 24, 2017 Overview of carbon tax schemes 6 Table: Carbon tax per jurisdiction Government British Columbia Chile Denmark Finland France Iceland India Ireland Japan Mexico Norway Portugal South Africa Sweden Switzerland United Kingdom January 24, 2017 Coverage% GHGs 70 37 45 15 35 50 46 40 90 40 50 26 75 25 30 25 Price per tCO2e $ 22 $ 5 $ 31 $ 48-83 $ 24 $ 10 $ 6 $ 28 $ 3 $ 1-4 $ 4-69 $ 5 $ 8.50 $ 168 $ 87 $ 16 Covered sectors: • • • • • Power generation; Industry; Waste; Purchase and sale of fuels; Coal extraction The Paris Agreement Double threshold:7 55 Parties 55% global GHGs • Adopted in December 2015 by 196 Parties to the UNFCCC in Paris • Entered into force on 4 November 2016 • Establishes a global warming goal of “well below 2°C” / 1.5°C • Requires mitigation measures of individual countries to be expressed in nationally determined contributions (NDCs) • Countries can meet their NDC targets by transferring ‘mitigation outcomes’ internationally – either in the context of emission trading, or to allow results-based payments • A commitment to a collective goal of providing USD 100 billion per year to 2025, and beyond 2025 with USD 100 billion as a floor; GCF key financing mechanism • Parties agreed to adopt a package of decisions that will enable full implementation of the Paris Agreement by December 2018 January 24, 2017 Nationally Determined Contributions 56% Of submitted NDCs mention plans for ETS or Carbon Tax instruments $3.5trl Estimated cost of realizing necessary investments up to 2030 Figure: Global emissions and carbon development paths Garanti Bank| Istanbul | 23 January 2017 Source: PBL Netherlands Environmental Assessment Agency 8 USD 100 bln – Where do we stand? • Reporting from governments, their bilateral development agencies and key multilateral development banks and climate funds indicates that climate finance reached USD 62 billion in 2014, up from USD 52 billion a year before Figure: Amounts in billion USD, per source: $30 $24 $25 $20 $17 $17 EBRD EIB WB/IFC AfDB ADB IADB $15 $10 $5 $2 $2 Climate funds Export credits $Bilateral finance MDBs Private cofinance Source: UNFCCC, 2016 Biennial Assessment and Overview of Climate Finance Flows January 24, 2017 9 Regulation and changing investor behavior • Financial Stability Board (an international body that monitors and makes recommendations about the global financial system) released recommendations of the Task Force on Climate-related Financial Disclosures in Dec 2016 to include: “…price risk to support informed, efficient capital-allocation decisions…” • The EU has passed a new law which says pension funds (overseeing €3.3tn) must consider environmental, social and governance factors, including climate risk, when making investment decisions (expected to enter into force in early 2017) • UK requires mandatory disclosure of GHG emissions for companies listed on the London Stock Exchange • The SEC is also working to streamline requirements relating to climate change disclosure January 24, 2017 10 Example: Aviva • Pension and insurance company (£246 bln of assets) • Action on carbon investment risk five pillars build on existing commitments and outline new commitments: 1. Integrating climate risk into investment considerations - Explore ways to integrate carbon risk (research and insights) 2. Investment in lower carbon infrastructure - £ 500 mln annual investment in low carbon infra, include carbon returns alongside financial returns, target for investments 3. Supporting strong policy action on climate change – support to policymakers and negotiations 4. Active stewardship on climate risk – engage with companies to achieve climate resilient business strategies 5. Divesting where necessary January 24, 2017 11 Turkey and climate negotiations January 24, 2017 12 Turkish ambition Nationally Determined Contribution of Turkey to the UNFCCC: • Contribution: - 21% GHG emissions BAU level by 2030 • Use domestic sources and receive international support (financial, technological, technical and capacity building, including finance from the Green Climate Fund) • Policy tools applied to following sectors: Ø Energy, Industry, Transport, Buildings and Urban Transformation, Agriculture, Waste and Forestry January 24, 2017 13 PMR Support 14 Roadmap for Emission Trading System Implementation Support with MRV implementation PMR Support Identification of market based options for other sectors January 24, 2017 Modelling fiscal, economic and sectoral impacts Relationships structure 15 Foreign Policy and Regulation Domestic Policy and Regulation Investor Behaviour Turkish Corporates and Financial Institutions January 24, 2017 Questions: please contact us European Bank for Reconstruction and Development: • Jan-Willem van de Ven, associate director, Energy Efficiency & Climate Change – London ([email protected]) • Adonai Herrera-Martínez, Senior Manager, Energy Efficiency & Climate Change – Istanbul ([email protected]) Project team: • Egbert Liese – project manager ([email protected]) • Baran Gen – local counsel ([email protected]) • Ajda Gencsoy – local counsel ([email protected]) • Gediz Kaya – climate policy expert ([email protected]) • Szymon Mikolajczyk – climate finance expert ([email protected]) 16