MAIN FEATURES OF EXISTING OR PROPOSED SELECT CAP-AND-TRADE SCHEMES (AS OF MID-MARCH 2009)
ETS in existence US Australia
Mid-term and long-term targets
• 6% below 1990 levels over 2008-12
• 20% below 1990 levels by 2020
• 30% if a new agreement post-2012 is achieved
• 60-80 % below 1990 levels in 20506
• EU-wide cap setting, starting 2013
− 1,720 MtCO2e for 20% target by 2020 anthropogenic gas designated by the EPA1
• All GHG included under the KP
• Electric power, oil refineries, coke ovens, metal ore & steel, cement kilns, glass, ceramics, paper &
pulp9;
• Aviation, starting 2012
• extension (2013-2020): CO2 emissions from petrochemicals, ammonia and aluminum, N2O emissions from the production of nitric, adipic and glyocalic acid production and perfluorocarbons from the aluminum sector.
• Emissions from industrial processes, stationary energy, transport, waste, and fugitive emissions will be covered under the Scheme
• Agriculture to be possibly included by 2015 Scope
• Covers (currently) over 10,000 installations in the energy and industrial sectors which are
collectively responsible for close to half of the EU's emissions of CO2 and 40% of its total greenhouse gas emissions10
• Establishes an emission cap that covers about 85% of total U.S. GHG emissions, and virtually all emissions from the combustion of fossil fuels3
• The Scheme will cover around 75 per cent of Australia’s emissions and involve mandatory obligations for around 1,000 entities6
Allocation of
allowances • 2005-07: 5% auctioned max and most permits given away free9
• 2008-12: 10% auctioning max is allowed9
• 2013-20:
− 100% auctioning for power sector with possible waiver (given interconnectivity, share of oil sector, and GDP per capita) to start at 30% in
• 4.77 billion of allowances to be set by the administrator in 2012 equals 2
• Most details of action and allocation were not specified (first quarterly auction to be held before April 2011)1
• Some permits will also be administratively allocated, in order to address the transitional challenges for energy-intensive and trade-exposed industries as well as coal-fired power generation6
2013 and reaching 100% by 2020
− 20% auctioning in 2013, increasing to 70%
auctioning in 2020 with a view to reaching 100% in 2027 for other sectors with free allocation (with benchmarking) for competitiveness-exposed companies10 Banking and
borrowing • Unrestricted inter-period banking, but no borrowing12
• Full banking
• An emitter can meet up to 15% of its compliance by holding allowances of a vintage 1 to 5 years later, with interest
• Full banking
• Limited to 5% of liability using units from the following year
Price cap
• No price cap 14 • Not determined • Cap of AU$40 per allowance for 5 years at scheme
commencement, and rising in real terms at 5% per year6
Other price control mechanism
• If market fundamentals are not being observed, Member States may be allowed to bring forward the auctioning of a part of the quantity to be auctioned, or auction up to 25% of the remaining allowances in the new entrant reserve.
• EPA to make reserve allowances available through an auction when allowance prices rise to unexpectedly high levels
• Strategic Reserve to Moderate Prices: the EPA would create a “strategic reserve” by setting aside about 2.5 billion allowances each year
• Oversight of position limits and margining requirements
• Exports of carbon pollution permits will not be allowed, and would only be introduced with five years’ notice6
• CDM and JI allowed
• Domestic offsets (JI)
• No AAUs and no non-Kyoto units
• Projects in EU Member States which reduce greenhouse gas emissions not covered by the ETS could issue credits. Such provisions would be adopted only for projects that cannot be realized through inclusion in the ETS10
• International offsets may be accepted if
− U.S. is party to an agreement with the host country
− the project or activity is within a developing country
• Domestic offsets 1
• CDM and JI allowed
− Reductions occurring after January 1, 20092
• Offset credits could be created by those sectors not covered by the Scheme
• Domestic offsets for agriculture to be considered after 2013.
Use of offsets (and Other carbon units)
• quantitative limitations – credit import is limited to 13.5 % of the cap (differentiated by Member State) over 2008-1213
• Total market not to exceed two billion offset credits per year (50% domestic, 50%
international)1
• Covered entities may satisfy compliance by holding 1.25 offsets in lieu of an allowance2
•
• qualitative limitations – no nuclear and sinks credits, limited uptake of hydro credits
• •
Compliance
enforcement • Phase I: €40/tCO2e for non-compliance
• Phase II and forward: €100/tCO2e for non-compliance
• Not determined • Comprises both an administrative (financial) penalty and a continuing obligation to surrender compliance permits for any permit shortfall.6 REDD
provisions • Not included • The draft includes provisions for inclusion of offsets generated from international REDD projects2
• Not included6
Other
provisions • 5% of total quantity of allowances will be put into a reserve for “new entrants” (new installations or airlines)
• A part of the new entrant reserves sets aside 300 million allowances for CCS10
• Establishment of a A$2.15 billion Climate Change Action Fund over 5 years to smooth the transition for businesses, community sector organizations, workers, regions and communities6
Sources:
1) Environmental Markets US Policy Update, p. 1April 8, 2009, JP Morgan 2) TFS Energy bulletin – March 31, 2009
3) EPA Analysis of the Waxman-Markey Discussion Draft: The American Clean Energy and Security Act of 2009. Executive Summary April 20, 2009 4) Carbon Emissions The ETS Review: Unfinished Business. 23 February 2009. Deutsche Bank
5) Climate Change Policy in the USA: What can we expect from the US on the road to Copenhagen? Presentation at the World Bank of Ned Helme, President Center for Clean Air Policy. April 16, 2009. Washington, DC.
6) CARBON POLLUTION REDUCTION SCHEME: Australia's low pollution future. White Paper. 15 December 2008.
7) Carbon Pollution Reduction Scheme – EXPOSURE DRAFT Legislation. Australian Government. March 2009.
8) Citizens' summary EU climate and energy package
9) THE EUROPEAN UNION EMISSIONS TRADING SCHEME (EU-ETS) INSIGHTS AND OPPORTUNITIES. Pew Center on Climate Change 10) Questions and Answers on the revised EU Emissions Trading System. MEMO/08/796. Brussels, 17 December 2008
11) Emissions Trading Scheme - Roundtable March 3 2008. Australian Government. Department of Climate Change
12) The European Union's Emissions Trading System in Perspective. A. Denny Ellerman,Paul L. Joskow. Prepared for the Pew Center on Global Climate Change. May 2008
13) The EU Emission Trading Scheme (EU ETS). Presentation by Peter Zapfel – European Commission (www.climatechange.utah.gov/docs/Webinar_5.ppt) 14) Questions & Answers on Emissions Trading and National Allocation. MEMO/05/84. Brussels, 08 March 2005