1) Carbon prices in emissions trading schemes around the world vary greatly due to oversupply of credits and economic downturn. The EUA price hit historic lows under €5. 2) Many countries and regions have implemented or plan to implement carbon pricing mechanisms like emissions trading or carbon taxes, covering around 10 GtCO2e annually or 21% of global emissions. 3) Carbon pricing schemes differ in key design elements such as whether they set an absolute emissions cap, how stringently it is set, which sectors are covered, and whether they include price controls. Despite differences, collectively they have potential to cover almost half of global emissions.

1. Carbon Expo
Barcelona
May 2013

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. Supply of international credits outstrips
demand
* EU-27, Iceland, Liechtenstein, Norway and Switzerland
** Only covers supply of Kyoto credits

4. Remarkably, carbon initiatives at all levels are
developing faster than ever
MEXICO

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. 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. 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. 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. 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. 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. 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. Food for thought
• Ambition levels
• Ideal prices
• Effectiveness and cost-effectiveness
• Coverage
• Relationships with other policies

13. Carbon Expo
Barcelona
May 2013
Thank you!!
www.carbonfinance.org
www.ecofys.com

14. Lack of long-term commitment and short-term
developments cause volatility to the EUA price

15. 2012 is the first time ERU issuance higher
than CER issuance
• Most ERUs come from Russia and Ukraine