Mapping Carbon Pricing Initiatives

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This presentation would introduce the main findings of the report “Mapping Carbon Pricing Initiatives” which was prepared by the World Bank together with Ecofys. It outlines key developments and prospects of existing and emerging carbon pricing initiatives around the world. It covers initiatives that give a direct price to greenhouse gas emissions, such as emissions trading schemes, offsets and new market mechanisms as well also non-market initiatives such as results-based financing and carbon taxes. The report analyses common considerations across the initiatives, such as setting the appropriate ambition level, implementing price stabilisation mechanisms, using offsets, and taking concrete moves towards linking schemes together.

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Mapping Carbon Pricing Initiatives

  1. 1. Carbon Expo Barcelona May 2013
  2. 2. Economic downturn and slow recovery process led to historic low EUA and CER prices €0 €5 €10 €15 €20 €25 €30 Daily prices (€) EUA Secondary CER Primary CER Primary CER post-2012
  3. 3. Supply of international credits outstrips demand * EU-27, Iceland, Liechtenstein, Norway and Switzerland ** Only covers supply of Kyoto credits
  4. 4. Remarkably, carbon initiatives at all levels are developing faster than ever MEXICO
  5. 5. Different ways of cap setting • Absolute cap fixed for multiple years: – EU ETS set a cap for 2020 as -10% relative to 1990 emissions – California set a cap for 2020 equal 1990 emissions – Korea set a cap as -30% compared to business as usual • Absolute rolling cap – Australia sets the cap each year for 5 years in the future • Intensity cap – Chinese pilot systems define a reduction in emissions per unit GDP • No cap: – In New Zealand the quantity of domestic units is fixed, but, the quantity of international units that could be imported is unlimited
  6. 6. New systems are coming and GHG coverage keeps growing 0% 20% 40% 60% 80% 100% Date of implementation Estimatedcoverage Circumference sizes indicates magnitude of GHG emissions EU ETS NZ Switzerland RGGI Implemented Future coverage expansion Implementation scheduled Tokyo Québec Calif. AU Kaz. Korea Tianjin Beijing Guangdong Shanghai Shenzhen NZ Calif. & Quebec Norway EU ETS: Romania & Bulgaria EU ETS: Croatia EU ETS: Norway Liechtensten, Iceland
  7. 7. Systems differ in terms of coverage • Traditionally: stationary installations (power generation and manufacturing industry) • Transport: e.g. aviation in EU ETS – Aviation in EU ETS, regulated per aircraft • Distribution of fuels to amongst others transport and build environment – California and Quebec as of 2015 • Economy wide coverage: – The New Zealand scheme as of 2015 • Systems can cover CO2 emissions only (e.g. RGGI, Shenzhen, Tokyo), but most systems cover other GHG as well (e.g. EU ETS and California)
  8. 8. Free allowances are distributed as transitional support and to prevent carbon leakage • Distribution based on combination of product benchmarks (allowance / unit of product) and energy benchmarks (allowance / unit of energy consumed) (EU ETS and California) • Distribution based on revenue (New Zealand) • Distribution based on emissions (e.g. Kazakhstan, Tokyo) • Number of free allowances can be fixed (e.g. EU ETS) or updated in time based on actual activity (e.g. California) • Many systems have no or limited allowances to electricity generators to avoid wind-fall profits (e.g. EU ETS, California, Quebec, RGGI) • Systems can differentiate between level of support depending on – Exposure to risk of carbon leakage (e.g. EU and California) – Need for assistance in making a transition (e.g. EU and Australia for carbon intensive power generation)
  9. 9. Carbon prices around the world vary and have different price stabilization mechanisms Price stabilisation? No Upper price Upper and lower price No Upper price Upper price Upper and lower price Fixed price No explicit
  10. 10. Different ways exist to control and stabilise prices To avoid prices becoming too low: • Minimum auction price (California, Quebec, RGGI) • Supporting tax (e.g. UK has a tax dependent on level of carbon price) To avoid prices becoming too high: • Regularly offer allowances at a fixed price (California and Quebec) • Auction additional allowances if the price becomes too high (EU ETS and RGGI) • Price cap (fixed price option in New Zealand, Australia during unilateral linking with EU ETS)
  11. 11. Today, countries with carbon pricing mechanisms implemented and scheduled emit ~10 GtCO2e/y, 21% of global emissions Carbon tax implemented or scheduled for implementation ETS implemented or scheduled for implementation ETS and carbon tax ETS under consideration If emerging economies eyeing these mechanisms are included, carbon pricing mechanisms could reach countries emitting 24 GtCO2e/y, almost half of the total global emissions (50 GtCO2e)
  12. 12. Food for thought • Ambition levels • Ideal prices • Effectiveness and cost-effectiveness • Coverage • Relationships with other policies
  13. 13. Carbon Expo Barcelona May 2013 Thank you!! www.carbonfinance.org www.ecofys.com
  14. 14. Lack of long-term commitment and short-term developments cause volatility to the EUA price
  15. 15. 2012 is the first time ERU issuance higher than CER issuance • Most ERUs come from Russia and Ukraine

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