Issue: 3 16 October 2014
Dear reader,
We are pleased to share the ICAP newsletter, a quarterly summary of the latest developments in emissions trading around the world and activities here at the International Carbon Action Partnership.
For more information on cap-and-trade programs in force and in the works around the world, please visit the ICAP Interactive ETS Map on the ICAP website. It is updated regularly as new information becomes available.
Kind regards,
The ICAP Secretariat
At the end of August, the pilot systems in Beijing, Shanghai, Tianjin, Guangdong and Shenzhen all finished their first emissions trading compliance cycles. According to the official results (see details for Beijing, Shanghai, Tianjin, Guangdong and Shenzhen), only 22 out of 1,539 entities covered by the 5 schemes failed to fulfil their obligations on time, resulting in an overall compliance rate of 98,5%. With 12 non-compliant entities, Beijing reported the highest number; in Shanghai, all companies were compliant. The deadline was delayed several times due to problems with the verification of emission reports, as well as resistance by some industry players. Despite the release of some official numbers, detailed information on emissions data, caps and allocation results in the pilots remain scarce. Entities in the Hubei and Chongqing ETS, which started only in 2014, will have to retroactively fulfil compliance obligations for both 2013 and 2014 next year.
As announced by a National Development and Reform Council (NDRC) official in August, China plans to start its national ETS as early as 2016 (news article – Chinese). The NDRC is currently drafting basic rules and guidelines, which are scheduled to be submitted to the State Council before the end of the year. The design of the national scheme and how the existing pilots will be integrated in it is still unclear. The NDRC said that it will be in charge of defining the overall cap, run the national registry and provide unified guidelines for monitoring, reporting and verification (MRV), while regions will have some flexibility on issues like coverage and allocation. At the beginning, the system will likely still focus on the pilot regions. Other regions that lack the technical infrastructure may join later or start as an offset provider.
In September, the Korean Ministry of Environment released the final allocation plan for the first phase of its planned trading scheme, which is scheduled to launch in January 2015 (National Allocation Plan – Korean). The cap for 2015-2017 is set at 1.687 billion tCO2e including a reserve of 88 million tCO2e for market stabilization measures, early action and new entrants. Permits will be grandfathered among 526 business entities from 23 different sectors. The overall cap is slightly higher than the one announced in the draft allocation plan published in June (press release), which was amended in the face of strong opposition from industry.
Entities covered by the ETS (companies with annual emissions over 125,000 tCO2e and individual installations with annual emissions over 25,000 tCO2e) had to submit their allocation application by 14 October. The Allocation Decision Review Committee will make a final decision on allocation to individual entities in November.
In simultaneous ceremonies, Parliaments of the European Union (EU) and Ukraine ratified the EU–Ukraine Association Agreement in September. The Agreement establishes a political association between Ukraine and the EU and includes broad trade liberalization as well as cooperation and convergence of national legislation and policies across a range of areas, including energy and environment. The Agreement also requires the establishment of an ETS in Ukraine within two years of the Agreement’s entry into force (see relevant annex of the Association Agreement). The system would at first be distinct from the EU ETS; Ukraine is to develop a national allocation plan to distribute allowances to covered entities, which can subsequently be traded domestically. Implementation of the Agreement is expected for 2016.
In July 2014, legislation repealing the Australian Carbon Pricing Mechanism (CPM) was passed after the new state Senators elected in September 2013 took their seats on 7 July. The CPM started in July 2012 with a fixed price of 23 AUD (about 18 EUR in 2012) and was to transition to a full-fledged ETS in July 2015. The repeal of the CPM was a key election pledge of current Prime Minister Tony Abbott. Abbott’s alternative climate policy, the Direct Action Plan, is still being considered. Although the details are still unclear, it would establish an Emissions Reduction Fund which would pay the industrial and agricultural sector to engage in emissions reductions. An estimated $2.55 billion AUD would be disbursed over 4 years to lower emissions in order to reach Australia’s commitment to reducing 5% below 2000 levels by 2020. The Abbott Government has also announced it would review Australia’s reduction targets early next year.
On 24 September, 150 government and corporate leaders joined a High-Level Carbon Pricing Dialog convened by ICAP and the International Emissions Trading Association (IETA) in New York to discuss state and prospects of carbon pricing worldwide.
Speakers and panelists from both policy and business agreed that despite some setbacks, carbon pricing mechanisms have proven to be the most feasible approach to efficiently stimulate innovation and a transition to a low-carbon economy. Korean Environment Minister Yoon emphasized the role of the planned Korean scheme as a role model for emerging economies and developing countries, Environment Ministers Hendricks from Germany and Sundtoft from Norway reviewed lessons learned by the EU ETS, and urged for a political dialogue on the way towards a global carbon market. Environment Commissioners Martens from New York State and Cash from Massachusetts emphasized the economic benefits that ETS has brought the members of the Regional Greenhouse Gas Initiative (RGGI).
The Dialogue closed with an urgent appeal by UNFCCC Executive Secretary Christiana Figueres. She underlined that carbon markets were “only a means to an end” to encourage the transition towards a low-carbon economy and urged participants to “get to work” ahead of the UN climate summit in Paris, which is to produce a new global climate agreement at the end of next year.
ICAP held its 2014 annual meeting in Montréal on 25-27 September. Policy-makers from 17 jurisdictions discussed recent developments and trends in existing and emerging ETS as well as ICAP activities in the areas of capacity-building and knowledge-sharing on ETS.
The meeting also included an internal workshop on technical and political dimensions of linking ETS, which kicked off a two-year work stream on this issue within ICAP. ICAP representatives from Québec and California, Tokyo and the neighboring prefecture of Saitama, the EU and Norway shared their first-hand experiences with linking, and members decided on priorities for ICAP in this domain in the coming time.
ICAP convened its 6th Summer School - and 11th course overall - on emissions trading in Paris from 25 August to 5 September 2014. 25 participants from 12 countries joined the training. Speakers included policy-makers from ICAP members, international ETS experts, carbon market analysts, and further practitioners of the carbon market. The ICAP Summer School 2014 in Paris was hosted by the French Ministry of Ecology, Sustainable Development and Energy and CDC Climat. It was funded by the European Commission.
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