This presentation discusses cap and trade for emissions.

1. Cap and Trade System –
Carbon Pricing - 101
By: Paul Young, CPA, CGA

2. • This presentation is on perspective when it comes Cap and Trade
System

3. Paul Young - Presenter
Bio
• CPA/CGA
• 25 years of experience in Academia, Industry and Financial solutions
• Youtube Channel -
https://www.youtube.com/channel/UCAArky1bAXPSuV2NLtUnyLg

4. Agenda
• What is Cap and Trade?
• How does it work?
• California Cap & Trade Model/Issues
• Europe Cap & Trade Model/Issues

5. What is Cap and Trade
a system that puts a limit on the amount of pollution companies can
produce. Companies can buy and sell rights to put harmful gases into the
air, meaning a company that reduces its pollution is financially rewarded:

6. How does Cap and Trade work?
• Emissions trading or cap and trade is a government-mandated, market-based approach to
controlling pollution by providing economic incentives for achieving reductions in the emissions
of pollutants.[1] Various countries, states and groups of companies have adopted such trading systems,
notably for mitigating climate change.[2]
• A central authority (usually a governmental body) allocates or sells a limited number of permits to discharge
specific quantities of a specific pollutant per time period.[3]Polluters are required to hold permits in amount
equal to their emissions. Polluters that want to increase their emissions must buy permits from others
willing to sell them.[1][4][5][6][7] Financial derivatives of permits can also be traded on secondary markets.[8]
• In theory, polluters who can reduce emissions most cheaply will do so, achieving the emission reduction at
the lowest cost to society.[9] Cap and trade is meant to provide the private sector with the flexibility required
to reduce emissions while stimulating technological innovation and economic growth.[10]
• There are active trading programs in several air pollutants. For greenhouse gases, which may cause
dangerous climate change, permit units are often called carbon credits. The largest greenhouse gases trading
program is the European Union Emission Trading Scheme,[11] which trades primarily in European Union
Allowances(EUAs); the Californian scheme trades in California Carbon Allowances, the New Zealand scheme
in New Zealand Units and the Australian scheme in Australian Units.[8]The United States has a national
market to reduce acid rain and several regional markets in nitrogen oxides.[12]

7. What are the issues – Cap & Trade –
California?
California (Source – Reuters)
• California in 2012 became the first U.S. state with a comprehensive cap and trade program for carbon
emissions, which are implicated in global warming, and now finds the program sputtering.
• The woes include a glut of pollution permits, a lawsuit that could invalidate the premise of the
program and political differences over whether it should continue after 2020 when it is due to expire
unless extended by the state legislature.
• The latest round of bad news came on Tuesday when the state announced that it had raised just $10
million from the May carbon permit auction, more than $500 million less than it brought in during the
February sale.
• It also marked the first time that California failed to sell any of the permits it offered to cover 2016
emissions at an auction. (For a graphic of the California carbon market see:tmsnrt.rs/1sThH6S)
• Oil companies, manufacturers and market speculators had little incentive to purchase permits from
the state since they could be found on the secondary market at a discount.
• Earlier this month, Governor Jerry Brown, the program's chief advocate, acknowledged uncertainty
about the program's future and said he has yet to work out a deal with the legislature to extend it
beyond 2020.

8. What is issues – Cap & Trade – Europe?
• Europe’s ETS — riddled by fraud and organized crime — never
recovered following the 2008 global recession, when dramatically
reduced economic output created a massive surplus of carbon
credits, rendering them virtually worthless.
(http://news.anotao.com/link/ca/201606012839)

9. Other Source
• Carbon Pricing - http://www.slideshare.net/paulyoungcga/carbon-tax-
or-carbon-pricing-impact-on-consumer-good-prices-for-canada
• Ontario Cap & Trade -
http://www.slideshare.net/paulyoungcga/government-policy-carbon-
pricing-climate-change-ontario
• Carbon Tax - http://www.slideshare.net/paulyoungcga/carbon-tax-
canada-and-its-provinces