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CARBONrisk is enhanced to take into account past issuance

14 November 2011

14 November 2011 CARBONrisk now introduces the ability to take into account project-specific past issuance, which are volumes generated earlier during the crediting period in question. CARBONrisk incorporates considerations of past issuance into future delivery risk estimates.

14 November SR press release picture

Applicable project stages, relevant dates, and contractual terms add specificity. CARBONrisk now introduces the ability to take into account project-specific past issuance, which are volumes generated earlier during the crediting period in question. CARBONrisk incorporates considerations of past issuance into future delivery risk estimates.

• What is it?
Past issuance is the volume of credits already issued by a project prior to CARBONrisk analysis. When past issuance information is available, CARBONrisk incorporates this data into its estimation for future delivery risk. Depending on the volumes generated and the contractual terms of the ERPA in question, past issuance affects the risk proposition of credits expected in the future.

• How is it captured?
For every year of the project crediting period, the user may enter in a past issuance volume. CARBONrisk takes this volume, the volume expected per PDD, and priority of the delivery distribution under the ERPA to estimate future delivery. As past performance cannot guide future expectation, CARBONrisk wanes the importance of past issuance in each subsequent year of analysis.

• What’s the impact?
Past issuance is treated as a ‘given’ for years in which it is entered, and CARBONrisk performs no delivery risk estimates for those crediting periods. CARBONrisk biases delivery expectations and uncertainty in future periods by past issuance. The first of the figures on the right illustrate how past issuance in 2010 and 2011 sets an initial trend for delivery in 2012 and beyond. The lower figures illustrates that the trend attenuates over the passage of time: expected delivery increases, accompanied by increasing uncertainty. (The expectation and variance are determined by the Carbon Rating Agency’s historical parameterizations for the project type under study.)

• How can this help you?
Past issuance allows the user to ask:
- What can the past tell me about my portfolio’s future delivery??- Given delivery targets, what are my past issuance ‘break-evens?’?- How does past performance de-risk future delivery??- What contractual arrangements are most advantageous, given past issuance history?

For more information on CARBONrisk, click here: http://www.ideacarbon.com/cra/carbonrisk/index.htm .

About IDEAcarbon
IDEAcarbon, is an independent and professional provider of
ratings, research and strategic advice on carbon finance. Founded by Shandi
Modi, CEO and Ian Johnson, Chair and formerly Vice President of the World
Bank, it is part of the IDEAGlobal Group whose advisors include Lord Nick
Stern and Nitin Desai. IDEAcarbon's services are designed to provide leading
financial institutions, corporations, governments, traders and developers
with intelligence and analysis of the factors that affect the pricing of
carbon market assets. The IDEAcarbon team are leading experts in the carbon
and energy markets.

IDEAcarbon combines its strength or risk assessment, risk evaluation and
ratings with its ability to introduce novel and relevant tradeable products
to enhance liquidity and transparency in exchanges besides setting world
class standards in educating, guiding and providing research to the members
of exchanges. IDEAcarbon being fundamentally a neutral partner is not
constraint by any relationships or by market positioning exposure and can
thus greatly assist the launch of credible instruments and build markets.
For more information please visit: www.ideacarbon.com.

Press contacts: Sriram Rajan (srajan@ideacarbon.com).

Disclaimer:
All information contained herein has been obtained by the IDEAcarbon from
sources believed by it to be accurate and reasonable. Although reasonable
care has been taken to ensure that the information herein is true, such
information is provided 'as is' without any warranty of any kind, and the
IDEAcarbon in particular, makes no representation or warranty, express or
implied, as to the accuracy, timeliness or completeness of any such
information. All information contained herein must be construed solely as
statements of opinion.

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