Prestiva Emissions Trading Framework


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Prestiva Emissions Trading Framework

  1. 1. Emissions Trading in an energy &<br />climate change policy framework<br /><ul><li>Where to use emissions trading
  2. 2. The key question - allocation
  3. 3. Global considerations</li></ul>Prepared by: MuraliVenkatesh<br />Version. 1.0<br />July 12 2011<br />
  4. 4. Emissions Trading in an energy &climate change policy framework<br />Introduction<br />2<br />
  5. 5. 3<br />Key Sectors in the “energy and CO2 economy”<br />Oil Biomass Gas Coal Nuclear Renewables<br />Primary Energy<br />Power Generation<br />Direct combustion<br />Industry and Manufacturing<br />Liquids<br />Energy<br />Energy<br />Energy<br />Final Energy<br />Mobility<br />Buildings<br />Agriculture and Land Use<br />
  6. 6. 4<br />A structured policy approach is needed<br />A simple, high profile and credible target for the renewables’ share of power generation, supported by a range of incentives to encourage investment.<br />"Cap and trade" emissions trading systems for power generators, most industrial facilities and large fleet transport such as aviation. <br />Measures to incentivise new fuels based on their “well-to-wheels” CO2 reduction potential, implementation of vehicle efficiency standards and vehicle/road-use programs targeted at drivers<br />A series of robust energy standards for buildings, appliances etc. with incentives for retrofit of existing infrastructure. <br />
  7. 7. 5<br />Emissions Trading or “Cap-and-trade”<br />Government issues 88 million allowances into the economy<br />Offsets<br />Year 5 at 95<br />Initial emissions<br />100 Mt p.a. <br />Year 10 at 88<br />Year 15 at 80<br />Efficiency Project<br />CCS Project<br />Allowance trading between facilities<br />$ CO2<br />
  8. 8. 6<br />Advantages of Emissions Trading<br /><ul><li>It is designed to deliver an environmental outcome, in that the cap must be met.
  9. 9. It will deliver its environmental objective at lowest cost to the economy.
  10. 10. A national trading system can be linked with other such systems, delivering over time a global carbon market.
  11. 11. It works. The trading system will deliver what it is asked to do.</li></li></ul><li>7<br />The new flow of capital in the economy<br />Goods and services pass into the economy, with the price of CO2 embedded<br />CO2<br />Emitters buy allowances from the government through auction<br />Government<br />recycles auction revenue to consumers through the tax system<br />
  12. 12. 8<br />The CO2 price and allocation<br />CO2 price impact<br />Time<br />Points of regulation<br />Heavy industry<br />Consumer<br />Factories<br />Light industry<br />Electricity<br />Resource<br />Power Generation<br /><ul><li>Over time, the CO2 price will impact the entire value chain.
  13. 13. The rate at which this happens varies considerably.
  14. 14. It can be very fast for electricity.
  15. 15. It will be very slow for some products where the price is established outside the capped market.</li></li></ul><li>9<br />The CO2 price and allocation<br />Points of regulation<br />Heavy industry<br />Consumer<br />Factories<br />Light industry<br />Electricity<br />Resource<br />Power Generation<br />CO2 price impact<br />Time<br />Free allocation early on as little / no price pass through<br />Progressive shift to auctioning as the CO2 price impacts the economy<br />Full auctioning as the CO2 price impacts the entire value chain<br />Auction funds recycled to consumers through the tax system<br />
  16. 16. 10<br />External Projects (or offsets)<br />Emission reduction projects executed outside the capped sector can offer important benefits;<br /><ul><li>An inflow of compliance units (credits) can offer further flexibility in meeting the cap.
  17. 17. Access to external projects can act as an efficient cost control mechanism within the capped sector.
  18. 18. Projects can help developing countries begin managing emissions.
  19. 19. The flow of project credits can help build a global CO2 market.</li></ul>All national emission trading systems should recognise the same global project mechanisms.<br />
  20. 20. 11<br />Global Plan<br />New technology mechanisms evolve <br />China adopts CCS standard<br />CDM evolves to includes sectors<br />CDM<br />Linkages develop between all systems and more systems appear<br />Japan technology standards<br />Norwegian ETS<br />Expanding EU-ETS<br />EU-ETS<br />Danish-ETS<br />New Zealand ETS<br />UK-ETS<br />Australian ETS<br />US National “cap-and-trade”<br />2000 2005 2010 2015 2020 2025<br />Pre-Kyoto Kyoto Post 2012<br />Linkage framework<br />