Issue: 6 Wednesday, 24 June 2015
We are pleased to present the International Carbon Action Partnership (ICAP) newsletter, a quarterly summary of the latest developments in emissions trading around the world and activities here at ICAP.
For more information on planned and operating cap-and-trade programs around the world, please visit the ICAP Interactive ETS Map on the ICAP website. It is updated regularly as new information becomes available.
The ICAP Secretariat
On 13 April, Ontario Premier Kathleen Wynne announced a cap-and-trade program for her province, and her intention to join the existing cap-and-trade program of California and Québec. Ontario being one of Canada’s biggest economic and manufacturing centers, this means that carbon pricing instruments will soon cover more than 80% of Canada’s national emissions. Revenue raised by the program is to be reinvested in emissions reduction projects in households, transport and businesses. Premier Wynne and Québec Premier Philippe Couillard have signed a letter of intent to work toward linking their cap-and-trade systems. The province will now embark on a six-month consultation phase on the design of its system.
On 3 June, the Californian Assembly approved AB1288, extending the Californian cap-and-trade program until 2050. The bill now awaits senate approval. If passed, the extension will increase long-term market certainty for businesses and investors.
With the inclusion of transport fuels, California and Québec doubled the size of their linked carbon market at the beginning of the year. The number of allowances up for auction increased accordingly to meet the expected growth in demand. Since then, California and Québec have held two joint auctions with all 2015 allowances sold slightly above the auction floor price (USD 12.10). For California alone, the auctions held so far have generated almost USD 1.6 billion in revenue earmarked for clean energy, emissions reduction projects, consumer electricity bill relief and administrative costs for the system.
On 5 May, the members of the European Parliament, Commission and the Council of the European Union reached an informal agreement on the Market Stability Reserve (MSR). According to the compromise, the MSR, which is to help address structural imbalances in the European carbon market including the current surplus of roughly two billion allowances, will start operating on 1 January 2019. The European institutions also agreed to transfer the 900 million “backloaded” allowances into the MSR, as well as the unallocated allowances set aside for new entrants or stemming from plant closures. The agreement must now be formally endorsed by both the Parliament and the Council of the European Union.
The New Zealand government has committed four years of funding to the development of a supply management strategy for its emissions trading system (NZ ETS). The strategy will include the consideration and design of an auctioning mechanism, on which a political decision is yet to be taken. Currently, compliance entities in New Zealand either receive part of their allowances for free, or can purchase allowances at a fixed price or on the carbon market, for which international credits were the main source of supply until May this year. The Ministry of Environment (MoE) announced that the eventual establishment of an auctioning mechanism would be preceded by consultations about its design.
As the compliance deadlines in the Chinese ETS systems approach, all seven pilots have over the last months enacted further restrictions on the use of CCERs (Chinese Certified Emissions Reductions), limiting vintage years, geographic origin and project types. All pilots accept the use of CCERs for compliance ranging from five to ten percent of an entity’s obligation. The number of CCERs issued by the National Development and Reform Council (NDRC) thus far is not sufficient to cover potential demand of compliance companies, and the various specifications introduced by the pilots further reduce the number of eligible offset credits. Restrictions target in particular pre-CDM and hydro power projects that make up a major share of currently available CCERs.
On 15 June 2015, the Taiwanese parliament (Legislative Yuan) passed the “Greenhouse Gas Emission Reduction and Management Act” (Chinese), which sets a 50% emissions reduction target for 2050 compared to 2005 levels. The law charges the Taiwanese Environmental Protection Agency (EPA) with the development of appropriate climate change policies to reach this target, with an emissions trading system (ETS) mentioned as a key option. There is however no concrete timeline for implementation, and it remains unclear how developments in the international climate negotiations might affect these plans, including the role of market-based instruments like an ETS.
ICAP convened its 13th training course on Emissions Trading in Seoul, Republic of Korea from 19 to 28 May 2015. The course conveyed an in-depth understanding of emissions trading as an instrument to mitigate greenhouse gases to the 27 participants from China, Indonesia, Kazakhstan, the Republic of Korea, Taiwan, Turkey, and Ukraine. Speakers included representatives from ICAP members (the EU Emissions Trading System (EU ETS), California, New Zealand, the Tokyo Metropolitan Government, and the Regional Greenhouse Gas Initiative (RGGI)), international ETS experts, carbon market practitioners and local stakeholders. The Course in Seoul was hosted by the Sookmyung Women’s University in cooperation with the Korean Ministry of Environment and was funded by the European Commission.
In July, ICAP will convene a Masterclass on Emissions Trading in London open to policymakers and other stakeholders from the private, academic and nongovernmental sectors. The course targets applicants with previous knowledge and practical experience with the design and operation of emissions trading systems. The application deadline has now passed.
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