International ETS Comparison


Published on

  • Be the first to comment

  • Be the first to like this

No Downloads
Total Views
On Slideshare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

International ETS Comparison

  1. 1. ca ti on ub li or p o tfCARBON EMISSIONS TRADING SYSTEMS N A comparative study: CEF - AB32 - EU ETS
  2. 2. ca ti on li MACRO DATA COMPARISON rp ub AUSTRALIA CALIFORNIA EUROPEAN UNION fo CEF AB 32 EU ETS otPopulation 22.5 million (2011) 37.5 million (2011) 502.5 million (2011) (=12% of USA) NGDP US$ 1,507 billion (2011) US$ 1.900 billion (2010) €12,257 billion (2010) (pg. 3) =13% of USA US$ 14,500 bio = US$ 15,934 billionNat. GHG inventory 543 million tCo2e (2010 ex LULUCF) 457 million tCo2e (2009) 4,614 million (2009 ex LULUCF) (pg. 4) (=2nd biggest emitting state) 4,182 million (2009 incl) 600 million -2009 incl LULUCFCo2e per capita 27.3 tCO2e p.c / year (2009 incl LULUCF)) 10.4 tCO2e / p.c (2007 incl LULUCF) 8.6 tCo2e / p.c (2009-incl LULUCF)Energy production in Petajoule 17,769 PJ (2008-09) 2605 trillion BTU (2009) (=2,748 PJ = 32% 812.2 TOE (2009) = 2.4% of world production of total consumption) (=34,000 PJ = 47.7% of total consumption)Energy consumption in Petajoule 5773 PJ (2009-09) (=32% of total 8006 trillion BTU (2009) (=8447 PJ) 1,703 TOE (2009) (=71,300 PJ) production)Exported energy value / A$68.5 bio / A$244.5 bio = 28% (2010) (2605 trillion Btu produced / 8006 trillion (812 million TOE produced / 1703 millionTotal Exports (page 18) Btu consumed) TOE consumed)GHG intensity of economy 841 t Co2e incl LULUCF / US $1 million 245t Co2e incl LULUCF / US$ 1 million 382 t CO2e incl LULUCF / US$ 1 million (2005) (2007) (2005)Carbon intensity of electricity 863.1 g Co2e / kWh (2005) 237.3 g CO2e / kWh (2007) 337.5 g CO2e / kWh (2005)production
  3. 3. ca ti on li AUSTRALIA’S EMISSIONS PROFILE 2009 rp ub Waste 3% fo Deforestation & Forestry 3% ot Industrial Processes 3% N Fugitive Emissions 7% Electricity Generation 37% Transport 15% Agriculture 15% Direct fuel combustion 15% stationary energy excluding electricity
  4. 4. ca ti on li CALIFORNIA’S EMISSIONS PROFILE 2008 rp ub Not specified 3% fo Commercial 3% ot Agriculture & Forestry 6% N Residential 6% Year 2008Total Gross emissions: Transportation 477.7MMT CO2e 36% Electricity Generation (In State) 12% Electricity Generation Industrial (Imports) 21% 12%
  5. 5. ca ti on li EU27 EMISSIONS PROFILE 2008 rp ub Other 0.2% fo Waste 2.8%N ot Agriculture 9.6% Industrial Processes Energy Supply 8.3% 32.6% Transport 19.5% Stationary Energy 27%
  6. 6. ca ti on li ETS COMPARISON rp ub AUSTRALIA CALIFORNIA EUROPEAN UNION fo CEF AB 32 EU ETS otGeneral Focus Focus: Stationary energy, Focus: electricity + transport Period I-II: power generation, oil industry,landfills and fugitive emissions refinery, steel, cement, lime, paper, N (mainly coal mining + nat gas pulp, board, ( aviation 2012) extraction) Period III: +CCS + more gases (pg 7)2020 target Min 5% to Max 25% on 2000 level Reach 1990 level (=427 million tCo2e) Min 20% - Max 30% on 1990 levels (=483m incl LULUCF)2050 target 80% on 2000 level 80% on 1990 level 80% - 95% on 1990 levelCovered GHG inventory Reporting (NGER): 6 GHGs ; Scope 1 + 2 Reporting: 6 GH Gasses Period II: CO2 only (+ some N2O opted- Trading (CEF): 4 GHG direct + 2 Cap and trade: 6 Kyoto GHGs + NF3 = in) indirectly; Scope 1 = 60% of national 85% of state inventory SCOPE 1 only inventory Period II EU ETS = 40% of EU27 GHG inventory Period III: Reporting & trading CO2 +N2O +PFCReporting threshold Scope 1+2: Registration, reporting (Scope 1 Monitoring, reporting and verification Facility: emit 25 ktCO2e or consume +indirect energy purchases) and compulsory for installations with 100 TJ verification compulsory thermal input > 20MW or activity Corp: emit 50 ktCO2e or consume 200 25,000 MTCO2/yr except for electricity specific capacity thresholds TJ (co)generation (2,500 MTCO2/yr)
  7. 7. ca ti on li ETS COMPARISON II rp ub AUSTRALIA CALIFORNIA EUROPEAN UNION ot fo CEF AB 32 EU ETS NNr of entities reporting 777 (2010) 531 facilities (Oct 2011) 2011: 11,000Trading threshold In general 25,000 tCO2e scope 1 but ALL cement plants Thermal input > 20MW 10,000 tCO2e for certain landfills (page Electricity generation & cogen if ≥ 1MW or activity specific capacity thresholds 105) AND ≥ 2,500tCO2e/yr Other: if ≥ 25,000 tCO2e / yearNr of entities trading 294 facilities Approx 350 businesses, 600 facilities 2011: 11,000Start date 1st July, 2012 01/01/13 for electric utilities +large Period I: 01/01/2005 industry Period II: 01/01/2008 01/01/15 for nat.gas + fuel suppliers 01/01/12: Aviation Period III: 01/01/13Phases 1st: July12 - June15 1st: January13 - December14 1st: 2005 - 2007 2nd: July15 - June18 2nd: January15 -December17 2nd: 2008 - 2012 3d: July18 - … 3d: January18 - December20 3d: 2013 – 2020Allowances issuance Caps May14: announce 2015-19 caps 2013: 162.8 Mio t (=2012-2%) 2008-2012 = 2,086 Mio t June16: announce 2020 cap 2014: 159.7 Mio t (=2013-2%) 2013-2020 = 2,039 Mio t June17: announce 2021 cap 2015: 394.5 Mio (=-3% to 2020) - 37 Mio t per annum AT MINIMUM meet 5% target
  8. 8. ca ti on li ETS COMPARISON III rp ub AUSTRALIA CALIFORNIA EUROPEAN UNION fo CEF AB 32 EU ETS otCarbon Unit denomination EEU: Eligible Emissions Unit = permits CGGA : Cal GHG Allowances = tradable EUA = EU Allowances = tradable units N ACCU: Aus.Carbon Credit Unit: units Permits set out monitor/ reporting Kyoto ACCU = compliance ACCU ARB Offset Credits requirements for installations Non-Kyoto ACCU = voluntary ACCUPrice (Px) 2012-15: Fixed px of $23 + 5%/yr Flexible with cap and floor (Auction Flexible 2015-18: Flex but cap and floor Reserve Px and cost control px) 2018-… : Fully flexible pxCap / Floor Price 2015-2018 only: CAP: 3 tiers: $40, $45, $50 + 5%p.a. + N/A CAP: “Expected international px” + $20 + inflation 5% per annum FLOOR: $10 reserve price +5% p.a. FLOOR: A$15 + 4% per annum +inflationDomestic Offsets/ credits FIXED px period: can only use compliance Max 8% per facility, initially NAFTA ONLY (Theoretically): credits from projects ACCUs for up to 5% of liability w/ quant. and qualitative restrictions: reducing emissions not covered by the FLEX px period: Min 50%up to max 100% ARB offsets ETS (Q22) of compliance must be met with domestic Sector offsets (incl forestry) credits or permits Early action creditsImporting international CERs, ERUs and RMU’s will be acceptable The possibility for linkage to external ETS’ JI / CDM credits but (increasing)units subject to qualitative and quantitative and their approved offsets has been left qualitative and quantitative restrictions restrictions (like EU ETS). open.
  9. 9. ca ti on li ETS COMPARISON IV rp ub AUSTRALIA CALIFORNIA EUROPEAN UNION fo CEF AB 32 EU ETS N otExporting domestic units/ CFI credits: if Kyoto compliant -yes “Probably yes” : Compliance instruments The new rules allow for linking with anyallowances Permits: and ARB offsets may be used for country with a cap-and-trade though no FIX px period: no voluntary purposes by “Voluntarily linkages have been established yet (Q24) CAPPED px period: limited Associated Entities” and possibly for FLEX px period: yes compliance in approved linked ETS - (pg 209)Banking/borrowing FIX px period: no banking/borrowing of Unlimited banking but holding limits. Banking between period II and period III permits except CFI credits =bankable. (Pg 144 -152) allowances is allowed (Q23) FLEX px period: unlimited banking; Limited Borrowing e.g. only to cover Borrowing: unclear: probably allowed limited borrowing: max 5% of current excess emissions (=shortfalls). (pg 92) within each period (pg7) compliance requirementCycle Annual: July-June; Annual/Triennial; (pg 72) Period III: Report by October 31; Report April 10th / June 1st 8 year period (Jan-Dec) Partial surrender by June 15; Fulfill obligations by November 1st - for 28Feb: receive allownces Full surrender by Feb 1st years with annual compliance obligation 31Mar: verify+report (pg 93) 30Apr: surrender allow.
  10. 10. ca ti on li ETS COMPARISON V rp ub AUSTRALIA CALIFORNIA EUROPEAN UNION ot fo CEF AB 32 EU ETS NAuctions Detailed rules to be announced. First auctions August and Nov 2012; then Period II: max 10% auctioned Government will advance auction future quarterly vintages but there will be no double- Reserve price; Purchase limit; covered Period III: about half of all permits to be sided auctions. and opted-in entities only; single round; auctioned - countries can choose for (multiple) sealed bids; 1000 unit lots; national or opt into common auction “double sided” i.e free units auctioned on platform consignmentFree allowances High “EITE” = Industry avg baseline * +/_ 90% of sector avg emissions; Period II: Min 90% free 94.5% * company production based on company production, not Moderate “EITE” = Ind. Avg. baseline * 66% emissions; Period III: Auctioning = rule, not * company production tradable; exception. No free allowances for Assistance declines by 1.3% p.a electricity producers, (some exceptions). LNG: 50% of production Sectors at risk of carbon leakage will EITE = Emiss. intensive trade exposed receive free allowances, but for non- based on trade share % and CO2e/$ exposed industry such allocations will be revenue or CO2e/$ value add phased out.
  11. 11. ca ti on li ETS COMPARISON VI rp ub AUSTRALIA CALIFORNIA EUROPEAN UNION fo CEF AB 32 EU ETS N otPenalties Shortfall will be charged at: Shortfall charge = uncovered emissions * 4 €100/tonne + make up for shortfall (Article FIX px period: fixed px * 1.3 16) Flex px period: annual avg px * 2Tax “Eligible Emission Units” spot trades = GST No official guidelines avail yet (1 May 2012). No common rules re taxation of allowances: free (subject to agreement from States) Free allowances mostly not taxed/no “EEU’s” = Australian permits, domestic No property rights (pg 54) deductions (except a.o. UK which taxes credits, CERs, ERU’s, RMU’s Important principle of freedom of contract. when received) Proceeds = assessable income in year of sale Purchased allowances some immediate Valued at market value (or 0 if free permit) Acid Rain program = precedent but is deduction, some allow deduct. over life Costs = tax deductible on rolling basis different (e.g auctions, “tax basis”, CGT and time, some only when used. (pg 8) tax deductions)Treatment of Fuel Either excluded or included through Fuel suppliers and importers’ obligation Transport sector and household fuel use not reduced fuel tax credits but there is an opt- includes downstream emissions. included. in facility: Refineries have similar obligation. Fuel used in any covered activity with total Households and Light Business excluded rated thermal input >20 MW included. Heavy transport to be included 2014 (tbc) (Annex1) Domestic aviation, shipping, rail and non- Aviation included as of 01/01/12 transport use included.
  12. 12. ca ti on li ETS COVERED SECTORS/ACTIVITIES pu b CEF AB 32 EU ETS orCombustion installations Yes Stationary combustion emissions - 2013 Yes fMineral oil refineries Yes Stat, Process, Catalyst, Flares - 2013 Yes otCoke ovens Yes Yes NMetal ore roasting/sintering Yes YesPig iron/steel Yes Stationary combustion emissions - 2013 YesCement clinker or lime Yes Stationary and process emissions - 2013 YesGlass including glass fibre Yes Stationary combustion emissions - 2013 YesCeramic products by firing Yes YesPulp, paper and board Yes Stationary combustion emissions - 2013 YesAgriculture No No NoLand use sector No No NoTransport sector No Yes NoCarbon Dioxide suppliers Yes Supplied CO2 as of 2013 NoCogeneration Yes Stationary combustion emissions - 2013 YesElectricity - first deliverers Yes Stat. emis. From CAL facilities - 2013 YesElectricity - Importers N/A Imports from sources >25,000 - 2013 ; ALL emissions (no threshold) -2015 NoElectricity self-generation Yes Stationary combustion emissions - 2013 YesHydrogen production Yes Stationary and process emissions - 2013 YesNitric Acid production Yes Stationary combustion emissions - 2013 2013Petroleum and Natural gas systems Stat, process, flares -2013 2013Suppliers of liquefied petroleum gas -LPG “Yes” Combust emis. from total Vol supplied -2015 UK onlySuppliers of Natural gas “Yes” Combust emis. from total Vol delivered to non-covered entities - 2015 YesSuppliers of RBOB and distillate fuel oil N/A Combust emis. from total Vol supplied -2015 N/A
  13. 13. ca ti on li RATIONALE rp ubWe started this exercise to understand the upcoming Californian quite certain to proceed. As net energy importers they may have similar foscheme and naturally compared it to the Australian scheme since that is energy security concerns as the EU. In Australia, a large energy exporter, otour “home” scheme. However the decision to add the EU ETS was quickly there is bipartisan agreement to a small reduction - which due to Nmade because of its importance. growing population will still equate to a 27% reduction on 2000 levels by 2020. If the Australian ETS makes it through to 2020, which at thisThe EU is by far largest market of the three in terms of population, GDP point seems likely but not certain, that figure will be higher. The mainand emissions but California carries implicitly the hope to be expanded point of concern being Australia’s current, cheap, embedded but carbonone day into the other US states, which together are roughly the size of intensive energy supplies, so fuel switching is arguably more costly thanthe EU27. The EU ETS started modestly, then expanded. Australia tried elsewhere and may erode an important competitive be all (too?) inclusive from day one, covering more sectors and moregasses more completely (e.g. fugitive emissions and own transport are Covered Emissions in the EU equate to 40% of their total emissions, whichincluded in Australia, not in Europe), which contributed to a difficult is less than Australia’s 60% and California’s 85% coverage. Whereas thepolitical process and general public fatigue, if not negativity. EU has been trading since January 2005, Australia starts (fixed) pricing on July 1st, 2012 and California starts trading on January 1st, 2013.The three schemes were developed in very different political contexts: in Australia will be following suit with flexible pricing and hence tradingthe EU there was broad consensus across the political spectrum to reduce proper as of July 2015greenhouse gases –possibly due to energy security and Keynesiangovernment led supply creation motivations. Emissions reductions of Various regions use various price control mechanisms: California has20% have long been accepted and a 25-30% target is being discussed. free allowances, auctions, a reserve price (=price floor) and a cost controlIn California the ETS was pushed through by the EPA, unsuccessfully reserve (=price cap). California allows Project offsets, though primarilychallenged by private sector coalitions in the High Court and is now domestic and the compliance cycle is triannual. All three schemes have
  14. 14. ca ti on li RATIONALE rp ub fofree allowances for heavy emitters, ramping down over time. All three to the other ETS’s. Facilities in the Australian context are activities. They otsovereignties allow banking and restrict borrowing. Only Europe does are not restricted to a physical boundary but they are defined in terms Nnot have a price cap and floor. Penalties vary from 1.3*fixed price in of a conceptual activity. Unlike in the EU however, the CEF includesAustralia to €100/t, effectively 15*market price in Europe. emissions from various sources and processes. These fundamental differences can result in large discrepancies for comparable companies,With Europe opting for a low key, low coverage start, it did not offer not just internationally but even within Australia depending on theirspecific household assistance. It did not include transport fuel either definition of probably did not need such sweetener to convince its population.Europe did however start with significant (over)compensation for Interesting –philosophical- differences are also revealed by the use ofindustry in the form of free EUA overallocations. The initial Australian offsets in each regime: In the “new” world, more attention is being paid to the local opportunities rather than merely the compliance aspect i.e.scheme from 2008 did cover fuel usage but due to the growing political domestic land sector based offsets are allowed and international creditsdiscontent it was left out of the 2012 version, even if household and are either restricted (California) and/or delayed (Australia).industry assistance is ample and generous. In “old” Europe CERs are allowed though restricted, and domestic off- sets are all but inexistent –in part because Europe is more open to link-Under the EU ETS coverage is defined in terms of “Activities”, thus ing carbon reductions with sending “charity” money overseas.limiting eligible emissions from covered installations to the emissionsdirectly related to a particular process and excluding their secondary The Anglosaxon market economies –perhaps because they have learnedor unrelated emissions from their inventory. In California liable entities from the EU’s mistakes- are more concerned with the fairness principle, sharing the load across their entire economies, limiting the low carbonare “Facilities”, defined in geographic terms: contiguous land, visible or transition costs and keeping money in the country.interconnected pipelines as per US EPA practice. In Australia liability isdetermined by “Industry Sectors and Facilities”, neither of which equate
  15. 15. ca ti on li DISCLAIMER rp ubThis document is intended to provide general information only and has been prepared by PricesCarbon, a trading name of Rubran Pty Ltd, ABN808.1864.6940 and by CarbonIntel Pty Ltd, ABN 271.3411.5183. Rubran Pty Ltd is registered with ASIC under Regulation 7.6.02AGA of the Cor- foporations Regulations 2001. otGeneral Advice Warning NThis document has been prepared without taking into account any particular person’s objectives, financial situation or needs. Investors should, beforeacting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. Werecommend investors obtain financial advice specific to their situation before making any financial investment or insurance decision. Accuracy & Reliability of InformationAlthough every effort has been made to verify the accuracy of the information contained in this web site, PricesCarbon and CarbonIntel, their officers,employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from theinformation contained in this document or any loss or damage suffered by any person directly or indirectly through relying on this information.CopyrightPricesCarbon and CarbonIntel own copyright in the information contained on this website. Information may be printed or downloaded for personal useonly. The information may not otherwise be reproduced and must not be distributed or transmitted to any other person or used in any way without theexpress approval of PricesCarbon or CarbonIntelLinks to Other SitesPricesCarbon and CarbonIntel are not responsible for the content of any site owned by a third party that may be linked to this document. These links areprovided as a courtesy service and no judgement or warranty is made by us concerning the suitability, accuracy or timeliness of the content of any site thatmay be linked to this document. By providing access to other websites, we are not recommending or endorsing any brand, products or services offeredby the organisation sponsoring or owning the linked website.Governing LawThe use of this document and the provision of such facilities, products and services will be governed by the laws of Victoria, Australia.