Online communities by
How to Save a Planet – On a BudgetBrought to you by                    #GreenFinance
About this WebinarHow you can share:• Submit your questions in the GotoWebinar presentation window• Follow along and share...
About Our ModeratorsGernot Wagner is an economist at the Environmental Defense Fund, where he works on market-based soluti...
How to Save a Planet – On a BudgetHour 1 (9:15 – 10:15 EST):      • Paying the Cost of Carbon: A Conversation about      C...
About Our SpeakersJanet Peace is the VP of Markets and Business Strategy at the Center for Climate and EnergySolutions, ma...
Paying the Cost of Carbon        Janet Peace     November 30, 2011
Emitting GHG Is Typically Free
Climate Change Has A Cost
•is the point—to make the cost of emitting carbon explicit, so that it becomes part of the everyday decision making proces...
Policy Options• Command and Control (direct regulation)• Subsidies• Cap-and-Trade• Carbon Tax• Cap and Dividend• Clean Ene...
The Basics
Comparing C-T and Tax• Simplicity• Emission Reductions• Cost• Cost Effective• Market Risk• Technology and Innovation
For More Information                www.C2ES.org                    Janet Peace      Center for Climate and Energy Solutio...
Carbon Tax in                    CLIMATE ACTION IN                     British Columbia                    BRITISH COLUMBI...
Carbon Tax Objectives and Features• Tax objective is to reduce provincial GHG  emissions via financial incentive• All carb...
Broader Actions: BC’s Climate                Action Plan• Provincial-wide approach to adapt to  impacts, reduce emissions,...
BC’s GHG Targets and Distribution by                       Sector07 Baseline                       68MT                   ...
BC’s Revenue Neutral Carbon Tax•     Applies $30 per tonne of CO2e in 2012 to      combustion of fossil fuel•     Non-comb...
Selected Carbon Tax Rates by Fuel                     TypeFuel          Units       Tax Rate   Tax Rate   Current BC    20...
Greenhouse Gas Impacts• No historical attribution has been done because  of limited data• Effects must be modeled since ma...
Carbon Tax Discussion• Carbon tax main purpose is influencing  decisions, unlike most other taxes  – Revenues of tax can b...
The EU Emissions Trading           System  Impacts and Lessons Learned                            Chemrec, biofuel        ...
Outline:         Whirlwind tour of the EU ETS1. Disclaimer:     – Views are my own and only my own2. Acknowledgments:     ...
Emissions reductions• 2005, 2006, and 2007:      – Between 120 and 300m tonnes of CO2      – 2–5% fewer emissions than BAU...
Emissions reductionsSource: EU Emissions Data: A. Denny Ellerman, unpublished manuscript. EU GDP data: World Bank.
Costs• Minimal:  – Roughly 0.01% of Europe’s GDP (Ellerman)  – Back of the envelope: 0.02% of EU GDP  – Minimal effects ev...
Impacts of the recession • The ETS is responsible for a larger share   of emissions reductions than the economic   recessi...
Price volatility• Phase I permits were not “bankable”  – Thus Phase I was forced to end either in deficit    (high price, ...
Price volatility
Price volatility • Since 2007:        – Oil prices: 19% more volatile than EUAs        – Coal prices: 25% more volatile th...
Price volatility
Windfall profits  • Phase I:          – €11.4 billion for coal, gas, oil power          – €7.9 billion for renewables, hyd...
Windfall profits  • Concentrated in countries with:         – Fewer regulations controlling end-user prices         – High...
Theft and fraud  • Theft:         – €50 million         – Approximately 0.06% of annual value         – EU credit card the...
Theft and fraud  • Spot markets account for 10% of ETS carbon    trading  • Futures markets stayed open and maintained    ...
Low-carbon innovation  • Patent data  • Renewables in Germany employ 367,000    people         – Net gain of 70,000 to 90,...
Questions welcome!
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How to Save a Planet - On a Budget: Hour 1: Carbon Pricing and Cap and Trade

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  • 2050 target set on the basis of climate scienceTargets set for 2012, 2016, and 2020Purpose to drive early action, measure progress of decisions, and establish political accountability
  • Right now our main climate policy approach in BC is our revenue neutral carbon tax.It’s a significant climate policy instrument because it applies as of next year a $30/tonne price on carbon that drives investment decisions in the economy and brings in $1.2B each year in revenue.It’s also a significant tax policy instrument in that it returns all that money (and more) in tax cuts and benefits. Partially because of the carbon tax, British Columbians earning less that $118k/year pay the lowest personal income tax in Canada BC has one of the lowest corporate tax rates in the OECD BC families benefit from low income tax credits and Northern and Rural Homeowner Benefits that in most cases are greater than the carbon costs they pay.The carbon tax applies to the combustion of fossil fuels, and is applied equally to everyone. That equals about 72% of BC’s current emissions.The red section of the pie chart shows industrial process emissions, largely from natural gas, aluminum smelting and cement processing. The original intent was that these emissions would be covered by a regional cap and trade system. Jurisdictions like Alberta, California and Australia now have a carbon price on these emissions.Increasingly, we are seeing public attention that BC has not put a carbon price on these emissions. In particular given that the natural gas emissions are projected to be the fastest growing source of emissions in BC.
  • How to Save a Planet - On a Budget: Hour 1: Carbon Pricing and Cap and Trade

    1. 1. Online communities by
    2. 2. How to Save a Planet – On a BudgetBrought to you by #GreenFinance
    3. 3. About this WebinarHow you can share:• Submit your questions in the GotoWebinar presentation window• Follow along and share your thoughts on Twitter at #GreenFinance #GreenFinance
    4. 4. About Our ModeratorsGernot Wagner is an economist at the Environmental Defense Fund, where he works on market-based solutions to a wide range of environmental problems. He also teaches energy economics asadjunct faculty at Columbia’s School of International and Public Affairs, and is the author of But willthe planet notice? How smart economics can save the world.Marc Gunther is a writer and consultant whose focus is business and sustainability. Marc is acontributing editor at FORTUNE magazine, a senior writer at Greenbiz.com, and a leading blogger atThe Energy Collective. Marc is the author or co-author of four books, including Faith and Fortune:How Compassionate Capitalism is Transforming American Business.Jesse Jenkins is Director of Energy and Climate Policy at the Breakthrough Institute, and is a leadingenergy and climate analyst and advocate. Jesses work and analysis has been featured in manymedia outlets, and he is recently the co-author of Bridging the Clean Energy Valleys of Death:Helping American Entrepreneurs Meet the Nations Energy Innovation ImperativeRobin Fray Careyis CEO of Social Media Today, which publishes The Energy Collective, SustainableCities Collective, and eight other B2B social communities that connect leading thinkers with otherprofessionals and business influencers. Robin co-founded the company in 2007 and is a veteran ofthe print media world. #TECLive #GreenFinance
    5. 5. How to Save a Planet – On a BudgetHour 1 (9:15 – 10:15 EST): • Paying the Cost of Carbon: A Conversation about Carbon Pricing • Can Carbon Markets Drive Green Innovation? Brought to you by #GreenFinance
    6. 6. About Our SpeakersJanet Peace is the VP of Markets and Business Strategy at the Center for Climate and EnergySolutions, managing the Centers engagement with corporate community, its economics program andits analysis of market-based policy options. Previously, Dr. Peace held the same role at the Pew Centeron Global Climate, C2ESs predecessor organization. Dr. Peace holds an M.S. and Ph.D. in Economicsand an undergraduate degree in Geology.Lee Thiessenworks for the British Columbia Ministry of Environment as the Executive Director ofClimate Policy in the Climate Action Secretariat. This Secretariat is responsible for developing andcoordinating policy, and its implementation, across the BC provincial government. The policy is aimedat helping the province progress towards its greenhouse gas targets and adapting to the impacts ofclimate change.Lucas Merrill Brown is a Rhodes Scholar at Oxford who researches consumer behavior aroundcleantech adoption. He has worked as a research intern for climate change economics forEnvironmental Defense Fund, as Regional Field Director for Virginia Congressman Tom Perriello, as abudget aide for D.C. Mayor Adrian Fenty, and as a programmer for ILoveMountains.org.Gernot Wagner, moderating,is an economist at the Environmental Defense Fund, where he works onmarket-based solutions to a wide range of environmental problems. He also teaches energyeconomics as adjunct faculty at Columbia’s School of International and Public Affairs, and is theauthor of But will the planet notice? How smart economics can save the world. #TECLive #GreenFinance
    7. 7. Paying the Cost of Carbon Janet Peace November 30, 2011
    8. 8. Emitting GHG Is Typically Free
    9. 9. Climate Change Has A Cost
    10. 10. •is the point—to make the cost of emitting carbon explicit, so that it becomes part of the everyday decision making process. Accounting For Cost The point is to make the cost of emitting carbon explicit – so that decisions and investments factor in this cost
    11. 11. Policy Options• Command and Control (direct regulation)• Subsidies• Cap-and-Trade• Carbon Tax• Cap and Dividend• Clean Energy StandardAll with multiple variations…. Cap-and-trade and Tax are the two most often market based policies discussed
    12. 12. The Basics
    13. 13. Comparing C-T and Tax• Simplicity• Emission Reductions• Cost• Cost Effective• Market Risk• Technology and Innovation
    14. 14. For More Information www.C2ES.org Janet Peace Center for Climate and Energy Solutions(formerly the Pew Center on Global Climate Change) PeaceJ@C2ES.org
    15. 15. Carbon Tax in CLIMATE ACTION IN British Columbia BRITISH COLUMBIANovember 30, 2011 www.livesmartbc.ca www.livesmartbc.ca
    16. 16. Carbon Tax Objectives and Features• Tax objective is to reduce provincial GHG emissions via financial incentive• All carbon tax revenue is recycled through tax reductions• Tax rate started low and increases gradually – 2008: $10/T CO2e 2012: $30/T• Tax has the broadest possible base, given data• Tax is one of various other climate measures 16
    17. 17. Broader Actions: BC’s Climate Action Plan• Provincial-wide approach to adapt to impacts, reduce emissions, and promote low-carbon economy – Legislated targets – BC Adaptation Strategy – Revenue neutral carbon tax – Western Climate Initiative – Industry GHG reporting – Carbon Neutral Government 2010 – Local governments GHG targets – LiveSmart BC housing incentives – Green Building Code – Renewable and Low Carbon Fuel standards – Landfill gas collection standards 17
    18. 18. BC’s GHG Targets and Distribution by Sector07 Baseline 68MT Interim 2012 64MT (-6%) B.C. Greenhouse Gas Emissions - 2009 Total: Approx. 66 800 kilotonnes CO₂e Residential Other Interim 2016 56MT (-18%) and Industry Commercial 19% 11% Agriculture Legislated 3% 2020 46 MT (-33%) Waste 6% Electricity 2% Transportation Net 35% Deforestation 5% Fossil Fuel Production 19% 2050 Legislated 14MT (-80%) 18
    19. 19. BC’s Revenue Neutral Carbon Tax• Applies $30 per tonne of CO2e in 2012 to combustion of fossil fuel• Non-combustion GHG emissions not covered• BC has tailored tax benefits to balance costs Tax covers ~70% of emissions $1.5 billion Other$1.2 billion $226 Personal income tax cuts Process, $182 Low income tax credit venting etc. $85 Northern and Rural Fossil Fuel Combust. Homeowner Benefit $1,001 Business tax cuts *Projected total revenue and Carbon tax Tax reductions* reductions for fiscal revenues* 2012/13 19
    20. 20. Selected Carbon Tax Rates by Fuel TypeFuel Units Tax Rate Tax Rate Current BC 2011 Tax as 2011 2012 Market Percent of ($25/T ($30/T Price (ex Market CO2e) CO2e) carbon tax) PriceGasoline Litre $0.06 $0.07 $1.25 5%Diesel Litre $0.07 $0.08 $1.35 5%Natural gas Gigajoule $1.24 $1.49 $8.50 15%Thermal Tonne $44.30 $53.16 >$100 <44%Coal 20
    21. 21. Greenhouse Gas Impacts• No historical attribution has been done because of limited data• Effects must be modeled since many variables affect GHG emissions• Projected reduction of current tax: 3+ MT by 2020 or about 1/10 of emissions gap to target• Expectation of carbon tax rates affect energy- related investment, especially in industry 21
    22. 22. Carbon Tax Discussion• Carbon tax main purpose is influencing decisions, unlike most other taxes – Revenues of tax can be seen as co-benefit• Carbon tax and cap and trade can be complements or substitutes – Tax can help prepare economy for C&T• Design simplicity and administrative capacity in implementing carbon tax 22
    23. 23. The EU Emissions Trading System Impacts and Lessons Learned Chemrec, biofuel from pulp-and-paper
    24. 24. Outline: Whirlwind tour of the EU ETS1. Disclaimer: – Views are my own and only my own2. Acknowledgments: – Denny Ellerman, Bonnie Greenfield, Alex Hanafi3. Emissions reductions4. Costs5. Impacts of the recession6. Price volatility7. Windfall profits8. Theft and fraud9. Low-carbon innovation
    25. 25. Emissions reductions• 2005, 2006, and 2007: – Between 120 and 300m tonnes of CO2 – 2–5% fewer emissions than BAU• 2008 and 2009: – Roughly 350m tonnes – 8% fewer emissions than business as usual• 470m tonnes is more than Mexico or Australia• On track to meet and beat Kyoto targetsSource: Ellerman, Pricing Carbon, and unpublished manuscript.
    26. 26. Emissions reductionsSource: EU Emissions Data: A. Denny Ellerman, unpublished manuscript. EU GDP data: World Bank.
    27. 27. Costs• Minimal: – Roughly 0.01% of Europe’s GDP (Ellerman) – Back of the envelope: 0.02% of EU GDP – Minimal effects even on power, steel, pulp & paper (McKinsey, IEA)
    28. 28. Impacts of the recession • The ETS is responsible for a larger share of emissions reductions than the economic recession • Over-allocation: – Projected and unverified emissions data – Net long by roughly 2.5%Sources: New Carbon Finance 2009, Ellerman 2010, Frank Watson 2011, Anderson and DiMaria 2011
    29. 29. Price volatility• Phase I permits were not “bankable” – Thus Phase I was forced to end either in deficit (high price, met by CERs) or surplus (zero price) – Price went to zero• “Bankable” Phase II permits maintained stable value
    30. 30. Price volatility
    31. 31. Price volatility • Since 2007: – Oil prices: 19% more volatile than EUAs – Coal prices: 25% more volatile than EUAsSource: Black-Scholes calculations by the author, price data: World Bank, Point Carbon.
    32. 32. Price volatility
    33. 33. Windfall profits • Phase I: – €11.4 billion for coal, gas, oil power – €7.9 billion for renewables, hydro, nuclear • EU utilities market: €730 billion in total • Will be eliminated by auctioningSource: Ellerman, Pricing Carbon.
    34. 34. Windfall profits • Concentrated in countries with: – Fewer regulations controlling end-user prices – High-carbon peak electricity supply • The carbon intensity of the marginal cost plant is crucial • For instance: • German utilities have windfall profits/kWh four times larger than Spanish utilities • German utilities have ETS-induced price increases four to thirteen times larger than French utilities • Implications for California and othersSources: Ellerman, JosSijm, Point Carbon/WWF.
    35. 35. Theft and fraud • Theft: – €50 million – Approximately 0.06% of annual value – EU credit card theft: 0.12% of annual value • VAT fraud: – Europol: widely repeated projection of €5 billion • World Bank argued this cannot be true – VAT fraud on other EU commodities: €100 billion/yr – Not possible in jurisdictions with harmonized tax regimesSources: European Commission, Nilson Report, Ernst & Young, World Bank, Joshua Chaffin.
    36. 36. Theft and fraud • Spot markets account for 10% of ETS carbon trading • Futures markets stayed open and maintained stable pricesSource: Joshua Chaffin.
    37. 37. Low-carbon innovation • Patent data • Renewables in Germany employ 367,000 people – Net gain of 70,000 to 90,000 jobs • Of the 500 largest companies in the world, those focused on low carbon growth experience double the financial returnSources: Dechezleprêtre 2011, German Federal Env’t Ministry, PricewaterhouseCoopers
    38. 38. Questions welcome!
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