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Dirk Forrister, President and CEO, International Emissions Trading Association

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The Paris Agreement: Ambition, Cooperation and Opportunity

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Dirk Forrister, President and CEO, International Emissions Trading Association

  1. 1. Ambition, Cooperation and Opportunity. Dirk Forrister President & CEO, IETA Sustainable Prosperity Ottawa 22 June 2016
  2. 2. The Paris Climate Agreement. It’s about three things… Climate Challenges, Market Solutions
  3. 3. Realizing Ambition Climate Challenges, Market Solutions
  4. 4. Enhancing Cooperation Climate Challenges, Market Solutions
  5. 5. Seizing Opportunity Climate Challenges, Market Solutions
  6. 6. Climate Challenges, Market Solutions
  7. 7. 2 C = 450 ppm  80 – 90% Reductions Climate Challenges, Market Solutions
  8. 8. 1.5 C = 350 ppm  95% Reductions? Climate Challenges, Market Solutions
  9. 9. • 2°C (or 1.5 °C) means massive transformation by 2050 – • Hold atmospheric concentrations to 450 ppm (or 350 ppm?) • Advanced nations reduce 80 – 90 % and emerging economies reduce growth significantly • Net zero goal (sources = sinks) by 2nd half of century • Action largely reflected in Nationally Determined Contributions • Current targets closer to 3°C than 2°C • So expect targets to strengthen over time • Level of change means action must reach beyond borders • Helps keep costs in check and avoid economic shocks • Enables business to be a partner – not an obstacle
  10. 10. The Paris Outcomes  on Carbon Markets Climate Challenges, Market Solutions
  11. 11. Marshall Islands New Zealand INDC Submitted Singapore INDC includes the use of International markets San Marino Trinidad and Tobago Comoros Grenada Country will consider using markets Seychelles Kiribati Mauritius Maldives Barbados Tuvalu Cape Verde Dominica Sao Tome and Principe Solomon Island Monaco Samoa INDC Not Submitted Antigua and Barbuda Fiji Nauru Cook Islands St Lucia St. Vincent and the Grenadines Micronesia Vanuatu Palau SOURCE: IETA/EDF “Carbon Pricing: The Paris Agreement’s Key Ingredient,” April 2016
  12. 12. 1. Cooperative approaches through “internationally transferred mitigation outcomes” (para 2) 2. Rules for carbon market accounting, particularly avoidance of double- counting (para 2 & 5) 3. Sustainable development & mitigation crediting mechanism (para 4)  The Big Caveat: Rules, modalities and procedures due by 1st COP/MOP of Parties to Paris Agreement, but negotiators’ track record is mixed.
  13. 13. • Enhanced cooperation through market linkages with accounting principles to drive integrity • New mitigation mechanism available to all who want to use it • For both developed & developing countries • Could be broader than mere crediting • Operates in context of all Parties implementing NDCs • Includes direct & indirect references to REDD+ (Art. 5) • NDCs reviewed every 5 years (Decisions 23 and 24) – may help signal supply / demand trends
  14. 14. • Success in getting Article 6 reflected hard work on carbon pricing over past few years • Market cooperation now extends beyond INDCs and Article 6 • World Bank’s Partnership for Market Readiness and Carbon Pricing Leadership Coalition • Germany/Japan leading the G7 carbon market platform • New Zealand declaration on carbon markets • Japan’s Joint Crediting Mechanism with 19 partners • High-level Panel set ambitious goals in NYC to double coverage of pricing by 2020 and double again within a decade
  15. 15. Taking Carbon Markets  Forward From Paris Climate Challenges, Market Solutions
  16. 16. Centralized Hub • Decisions taken in COP  22 and 23 • Trading hub follows  GCF, CTCN models • Governed under COP  oversight • Results in broad buy‐in Spin Off Clubs • UN gridlock • Coalition forms • Trading club follows  CCAC model • Governed by users • Results in narrow, but  strong buy‐in Climate Challenges, Market Solutions
  17. 17. Climate Challenges, Market Solutions Common building blocks for trading Common issuance  process Registry & tracking  service Market oversight  system Standard sector  baselines  Reduction targets MRV standards Defined units of  measure  Agreed offset  standards  Compliance  assurance
  18. 18. Climate Challenges, Market Solutions The Case of the JCM Japan Mexico Maldives Cambodia Vietnam Kenya Palau Costa Rica Ethiopia BangladeshIndonesia Laos Mongolia
  19. 19. Climate Challenges, Market Solutions The Case of California‐Quebec (+Ontario?) MOU WCI Inc. Compliance Instrument Tracking System Service Joint Auctions CA ETS QU ETS Offsets California  Entities Quebec  Entities Futures Exchange,  Brokers Offsets ??? CAR, VCS,  ACR  Standards
  20. 20. Climate Challenges, Market Solutions  Essential UN function may be reporting (net imports, exports)  Basic rules are similar inside or outside UNFCCC UN Hub Independent Club Advantages Broad fungibility Owned by supporters Experienced team Reduced barriers to adopt policy Build on existing tools Pulls quality systems forward Enhance ambition for all Domestic political/reputation  Disadvantages Political interference Limited fungibility Bureaucracy No existing institution Reputation Potential start up pains
  21. 21. SOURCE: Climate Policy, “Compliance of Parties to the Kyoto Protocol in the First Compliance Period,” June 2016 Key Points • Trade enabled EU, Japan &  New Zealand to comply • EU’s internal AAU trade  significant (Poland,  Romania & Czech) • Japan imports:150m CERs,  22m ERUs, 226m AAUs • EU imports: over 1b. units  • NZ imports: 90m units
  22. 22. • Carbon markets got a boost from Paris • Business community’s interest is rising • Now action shifts to implementation & business readiness • National (and sub-national) pricing systems • Cooperation across borders / business relationships • UN FCCC negotiations on rules & guidelines • Nations are free to cooperate in either “hubs” or “clubs” • For Canada, no obligation to engage markets – just opportunity
  23. 23. www.ieta.org Climate Challenges, Market Solutions

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