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Update of Emission Trading after Copenhagen



A training session for PRC functionnaires visiting Italy (Turin) in 3Q 2010

A training session for PRC functionnaires visiting Italy (Turin) in 3Q 2010



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Update of Emission Trading after Copenhagen Presentation Transcript

  • 1. Update of Emission Trading after Copenhagen Daniele RUSSOLILLO Fondazione per l’Ambiente
  • 2. Summary | the topics covered…
    • The outcome of COP15 and the “ Copenhagen Accord ”
    • Market based instruments (MBI): a very quick primer
    • EU GHG Emission Trading Scheme (ETS)
    • Final remarks
    • What’s the rationale ?
    • How does it work ? (actors, mechanism)
    • What market results ? (quantitative data)
  • 3. World CO2 Emissions? | Mt (Total since 1900)
  • 4. World CO2 Emissions? | Mt (2009, per capita)
  • 5. World CO2 Emissions? | Mt (2009, per country)
  • 6. World CO2 Emissions? | Mt (2020, per country)
  • 7. Copenhagen Accord | Main facts
    • T he Conference of the Parties (COP), at its fifteenth session, took note of the Copenhagen Accord of 18 December 2009 by way of decision 2/CP.15
    • Countries that have agreed : Albania, Algeria, Armenia, Australia, Austria, Bahamas, Bangladesh, Belarus, Belgium, Benin, Bhutan, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Burkina Faso, Cambodia, Canada, Central African Republic, Chile, China , Colombia, Congo, Costa Rica, Côte d'Ivoire, Croatia, Cyprus, Czech Republic, Democratic Republic of Congo, Denmark, Djibouti, Eritrea, Estonia, Ethiopia, European Union, Fiji, Finland, France, Gabon, Georgia, Germany, Ghana, Greece, Guatemala, Guinea, Guyana, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy , Japan, Jordan, Kazakhstan, Kiribati, Lao People's Democratic Republic, Latvia, Lesotho, Liechtenstein, Lithuania, Luxemburg, Madagascar, Malawi, Maldives, Mali, Malta, Marshall Islands, Mauritania, Mexico, Monaco, Mongolia, Montenegro, Morocco, Namibia, Nepal, Netherlands, New Zealand, Norway, Palau, Panama, Papua New Guinea, Peru, Poland, Portugal, Republic of Korea, Republic of Moldova, Romania, Russian Federation, Rwanda, Samoa, San Marino, Senegal, Serbia, Sierra Leone, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Swaziland, Switzerland, The Former Yugoslav Republic of Macedonia, Tonga, Trinidad and Tobago, Tunisia, United Arab Emirates, United Kingdom of Great Britain and Northern Ireland, United Republic of Tanzania, United States of America, Uruguay, Zambia
    • Countries that have agreed after the COP15 final report : Afghanistan, Barbados, Chad, Gambia, Jamaica, Mozambique, Togo, Uganda, Ukraine, Viet Nam
  • 8. Copenhagen Accord | Main facts
    • The Accord proposes agreements and declarations , the most relevant ones are:
    • the scientific view that the increase in global temperature should be below 2 degrees Celsius has been recognized, moreover on the basis of equity and in the context of sustainable development, it has been declared the need to enhance the long-term cooperative action to combat climate change
    • enhanced action and international cooperation on adaptation is urgently required to ensure the implementation of the Convention and developed countries shall provide adequate, predictable and sustainable financial resources, technology and capacity-building to support the implementation of adaptation action in developing countries
    • the collective commitment by developed countries is to provide new and additional resources, including forestry and investments through international institutions, approaching USD 30 billion for the period 2010 - 2012 with balanced allocation between adaptation and mitigation. Funding for adaptation will be prioritized for the most vulnerable developing countries. In the context of meaningful mitigation actions and transparency on implementation, developed countries commit to a goal of mobilizing jointly USD 100 billion dollars a year by 2020 to address the needs of developing countries (Copenhagen Green Climate Fund is estabilished)
    • assessment of the implementation of the Accord is to be completed by 2015
    • The Accord requires :
    • Annex-I parties to q uantify economy-wide emissions targets for 2020 , declaring what base year has been considered, within the 31 st of January 2010
    • Non Annex-I parties to declare nationally appropriate mitigation actions , on a biannual base, within the 31 st of January 2010
  • 9. Copenhagen Accord | …the “legal character” of it… (*) extracted from the original communication; for an accurate reference please go to: http://unfccc.int/files/parties_and_observers/notifications/application/pdf/100125_noti_clarification.pdf Yvo de Boer Executive Secretary of the UNFCCC since the 10 th of August 2006 (He will leave the United Nations on 1 July 2010 to join international consulting group KPMG as global adviser on climate and sustainability) (*)
  • 10. Copenhagen Accord | Annex-I Countries commun.
  • 11. Copenhagen Accord | Non Annex-I Countries comm. Afghanistan  Armenia Benin  Bhutan  Botswana Brazil  Central African Republic  China   Congo Costa Rica Côte d'Ivoire    Mexico  Mongolia  Morocco Papua New Guinea  Republic of Korea Republic of Moldova San Marino  Sierra Leone Singapore  South Africa  The former Yugoslav Republic of Macedonia Togo  Ethiopia Eritrea  Gabon  Georgia Ghana India  Indonesia Israel  Jordan Madagascar  Maldives Marshall Islands  Mauritania These non Annex-I countries have communicated the n ationally appropriate mitigation actions(*) (*) simplified table; for an accurate reference please go to: http://unfccc.int/home/items/5265.php
  • 12. Copenhagen Accord | Non Annex-I Countries comm. China (*) <<… China will endeavor to lower its carbon dioxide emissions per unit of GDP by 40-45% by 2020 compared to the 2005 level, increase the share of non-fossil fuels in primary energy consumption to around 15% by 2020 and increase forest coverage by 40 million hectares and forest stock volume by 1.3 billion cubic meters by 2020 from the 2005 levels…>> EU (*) <<…As part of a global and comprehensive agreement for the period beyond 2012, the EU reiterates its conditional offer to move to a 30% reduction by 2020 compared to 1990 levels , provided that other developed countries commit themselves to comparable emission reductions and that developing countries contribute adequately according to their responsibilities and respective capabilities…>> (*) extracted from original communications; for an accurate reference please go to http://unfccc.int/home/items/5264.php (EU) and http://unfccc.int/home/items/5265.php (China)
  • 13. Market Based Instruments | A short introduction
    • MBI Types
    • tradable permits
    • environmental taxes (effect on prices)
    • environmental charges (cost-recovery of environmental services and abatement measures)
    • liability and compensation schemes for environmental damage
    • environmental subsidies and incentives (stimulating the development of new technologies and markets)
    European Environmental Agency Report no. 1/2006 “… MBI help realising simultaneously environmental, economic and social policy objectives by taking account of the hidden costs of production and consumption to people’s health and environment in a cost-effective way…”
  • 14. ETS – Rationale | Policy framework analysis
    • The role of public policy…
    • … is to contribute to overcome traditional barriers to the achievement of sound environmental results, i.e.:
    • lack of information
    • high transaction costs
    • externalities
    • Specific ETS policy purposes
    • green house gas (GHG) emission reductions in the energy intensive industrial sector (large emitters)
    • support the achievement of the EU target following the approval (16 th of Feb. 2005) of the Kyoto Protocol: reducing GHG emissions by 8% below its 1990 level during the period 2008–2012
    • Specific ETS implementation
    • EU Directive 2003/87/EC amended by 2004/101/EC and 2009/29/EC (23 april ‘09, published on the OJ on the 5th of June ‘09)
    • Latest Guidance document issued on the 18 th of March 2010
    • EU carbon market size: ~ 78 billion €
    • 5 years of trading (started in Jan. 2005)
  • 15. After the implementation of 2009/29/EC Start in 2005, Cap via National Allocation Plan Regulatory period and Cap: GHG reduction of 20% (30%) by 2020 vs. 1990 Objective Included: Combustion (>20MW of rated thermal input), Metals industry, and cement clinker, lime, ceramics, glass and paper industry, aviation (from 1/1/2012) Excluded : incineration of waste, biomass-only fired power plants (any size) , “units” < 3MW (any fuel) of rated thermal input Main categories considered Carbon dioxide (CO2), Methane (CH4), Nitrous Oxide (N2O) Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs) Sulphur Hexafluoride (SF6) GHG considered 1 EUA = EU Allowance, i.e. the right to emit 1 ton CO 2 equivalent Emission permit EU-ETS – How does it work? | The scheme
  • 16. Source: CarbonMarketData.com EU-ETS & Aviation | A preliminary picture…!
  • 17. Source: Elaboration of data from CarbonMarketData.com EU-ETS Compliance | Results from 2005 to date
  • 18. Source: CarbonMarketData.com EU-ETS Compliance | Emissions to Cap (2008) [Mt]
  • 19. Source: CarbonMarketData.com EU-ETS Compliance | Emissions to Cap (2008) [%]
  • 20. Source: CarbonMarketData.com EU-ETS Compliance | Emissions to Cap (2009) [Mt]
  • 21. Source: CarbonMarketData.com EU-ETS Compliance | Emissions to Cap (2009) [%]
  • 22. Source: data from EEX – European Energy Exchange EUAs – Market results ? | Spot market trading: last 12 months
  • 23. Source: data from EEX – European Energy Exchange EUAs – Market results ? | Spot market trading: since it started
  • 24. Source: data from EEX – European Energy Exchange Market results ? | Carbon futures trading (MidDec 2010) Second Period European Carbon Futures | MidDec (2010) Prices and trading volumes|2010/05/07|European Energy Exchange
  • 25. Source: data from EEX – European Energy Exchange Market results ? | Carbon futures trading (MidDec 2012) Second Period European Carbon Futures | MidDec (2012) Prices and trading volumes|2010/05/07|European Energy Exchange
  • 26.
    • The Copenhagen accord outcome has not influenced in any relevant way the process of the European Trading Scheme
    • Carbon price is influenced by many risk factors and the equilibrium (i.e. strength of the policy enforcement) on the allowances allocated (via National Allocation Plans ) and verified is one of them. Moreover, do banking and borrowing need to be redesigned?
    • Scientific literature research shows that ETS has had a fairly limited influence on European intensive energy sector (carbon price too low to trigger deep changes) and thus on the economy (including final users)
    • Interactions between carbon markets and conventional financial markets in the post-kyoto era need to be assessed
    • How to let Kyoto non-Annex I large countries benefit EU ETS is still an open issue (as well as the effect on them of including aviation in EU ETS)
    FINAL REMARKS | Policy issues at stake…
  • 27. FA | www.fondazioneambiente.org
    • Non profit private foundation (23 funding partners: public administration, utilities, local university, chamber of commerce of Turin, industrial associations)
    • Research centre on energy and environmental policy at local level
    • Two main research streams : a) multi-disciplinary analysis of policy implementation impacts and innovative technology systems b) economic regulation of local public services
  • 28. For more information, feel free to contact me: Daniele RUSSOLILLO [email_address] Fondazione per l’Ambiente Via Pomba 23, I-10123, Torino, Italy Tel +39 011 571 47 50 Fax +39 011 571 47 51 www.fondazioneambiente.org Thank you for your kind attention | Contacts