Overview of Carbon Markets SIO Fall 2007 Environmental Science and Policy Forum Mitigation and Adaption in a High CO2 World 1 Melanie McCutchan MPIA Candidate 2009 UCSD IR/PS October 23, 2007
Jan 03, 2016
Overview of Carbon Markets
SIO Fall 2007 Environmental Science and Policy Forum
Mitigation and Adaption in a High CO2 World
1
Melanie McCutchan MPIA Candidate 2009 UCSD IR/PS
October 23, 2007
OutlineCarbon Markets• Regulatory• Voluntary
EU ETS and Lessons LearnedMarket Prices for Carbon
2
Carbon MarketsRegulation Based
Existing• Clean Development Mechanism (Kyoto)• European Union Emission Trading Scheme (EU
ETS)• Australian Carbon Trading Scheme• United Kingdom ETS
Under Development• California - Global Warming Solutions Act• NE States - Regional Greenhouse Gas Initiative
Under Debate• “Cap & Trade” Bill in Senate
3
Carbon Markets
Voluntary Emission Reduction Markets
4
Keidanren Voluntary Action Plan
Over the Counter (OTC) Market
Chicago Climate Exchange
Market Growth
5
Source: World Bank. State and Trends of the Carbon Market 2007. p. 3
EU ETS Linked to Kyoto Protocol
Developed Nation (Annex 1) Targets• GHG Emissions to 1990 levels by 2000• 5% reduction by 2008-2012
Kyoto Expires 2012New negotiations now under way in Bali
6
European Union Emission Trading Scheme (EU ETS)
Trading began 2005 Covers:• Electric Power and Major Industrial Sectors
• 45% of EU C02e emissions
Allowances with some AuctioningPhase I 5% Phase II 10%
National Allocation Plans
7
8
Source: Parliament of the United Kingdom at http://www.publications.parliament.uk/pa/cm200607/cmselect/cmenvaud/70/7004.htm10/18/2007
9
Source: World Bank. State and Trends of the Carbon Market 2007. p. 12
Effects of the EU ETS Market
• Some reduction 1-4% of EU’s 2005 Emissions(Ellerman and Buchner 2006)
• Price signal resulted in internal abatement(Point Carbon 2007)
10
Lessons from the EU ETS Market
11
Challenges
Allocating allowances• Technical• Political
Creating an appropriately constrained market
Price of CarbonPhase II EU ETS Market $20-$25/tCO2e
12
Sources: For EU ETS Phase II Price: World Bank. State and Trends of the Carbon Market 2007. p. 3For CCX Auction: CCX Press Release at http://www.chicagoclimatex.com/market/pdf/CER_Auction_Results_2007.pdf
Chicago Climate Exchange Auction
Carbon Credits from Wind Farm in
India $22/tCO2
Insert 13
Insert 14
$8.70/metric ton .8 metric tons
The Future Price of Carbon
Depends on a number of unknowns:– New International Agreements–Market Rules
15
Links Carbon Markets:
European Union Emission Trading Scheme
ec.europa.eu/environment/climat/emission.htm
Chicago Climate Exchange
www.chicagoclimateexchange.com
Keidanren Voluntary Action Plan
www.keidanren.or.jp/index.html
Further Reading:
World Bank: “State and Trends of the World Carbon Markets 2007”
carbonfinance.org/docs/Carbon_Trends_2007-_FINAL_-_May_2.pdf
"Business is getting down to cutting carbon, but needs more
incentives to make much difference to climate change"
www.economist.com/specialreports/displayStory.cfm?story_id=9217992
“Recommendations for a Greenhouse Gas Cap and Trade System for
California” (page 4-6 executive summary)
www.climatechange.ca.gov/documents/2007-06•
16