Issue: 15 Wednesday, 18 October 2017
Dear ,
A warm thank you to those who made the journey to sunny Lisbon to celebrate ICAP’s 10 Year Anniversary and contributed to a stimulating debate on the future of emissions trading. We look forward to another decade of working with you!
As always, we are pleased to share the ICAP newsletter, a quarterly summary of the latest developments in emissions trading around the world and an update on ICAP activities.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,
On 22 September 2017, Governor Brown of California, Ontario Premier Wynne and Québec Premier Couillard signed a linking agreement extending the existing link of the California and Québec cap-and-trade programs to also include the Ontario program. The agreement will come into effect on 1 January 2018. As part of a linked program, allowances from any of the jurisdictions can be used interchangeably for compliance. Allowances will also be auctioned jointly.
Read more…
On 25 July 2017, Governor Brown signed a bill to extend the California Cap-and-Trade Program until 2030. The Californian State Assembly and the Californian Senate passed the bill with a two-thirds majority, garnering some Republican support, as well as support by many business and environmentalist groups alike. Beyond bill AB 398, which extends and adjusts the cap-and-trade program, a second bill targeting local air pollution, AB 617, was also passed. Bill AB 398 aligns the cap-and-trade system with California's climate goal of -40% by 2030. It also contains several changes to the program’s offsets, allocation mechanism, as well as a new price stability mechanism.
On 31 August 2017, Québec published a draft regulation that paves the way for future linking with Ontario, plots the cap trajectory for the period 2021-2030, and ensures the ongoing compatibility of their joint market in light of the changes recently made to the Californian system. The 60-day public consultation period concludes at the end of October.
The European Commission, European Council and the European Parliament are seeking consensus on the design of the EU Emissions Trading System (EU ETS) for Phase IV. Key elements of the review include a strengthening of the system through changes to the Market Stability Reserve (MSR), benchmark rules, options to address carbon leakage, and the design of the innovation and modernization funds. It is hoped that final agreement will be found before the UN Climate Conference in Bonn in November.
Negotiations between EU law-makers are also ongoing regarding the role of aviation under the EU ETS. EU institutions are in agreement that the EU ETS should continue to cover only EU-internal flights in the light of the adoption of the global market-based measure under the International Civil Aviation Organization (ICAO), but they disagree on the timeframe for extending this stop-the-clock provision, as well as the application of the linear reduction factor to the aviation cap and future allocation methods for the sector.
The so-called “Brexit-amendment”, which is negotiated alongside the aviation dossier, addresses growing concern that if a transitional deal cannot be found before the United Kingdom’s (UK) scheduled departure from the EU (March 2019), there would be a large sell off of allowances that would no longer be required by UK installations given they would no longer be regulated by the EU ETS. Finally, the EU and Switzerland have moved one step closer to linking their respective emissions trading systems (ETSs). The Swiss Federal Council approved the signing of the corresponding agreement at its meeting on 16 August 2017. On the same day, the European Commission adopted a proposal for the signature of the linking agreement, as well as for its ratification.
For more on aviation and Brexit read here, for more on the link with Switzerland read here.
On 23 August 2017, the Regional Greenhouse Gas Initiative (RGGI), a compact of nine Northeastern and Mid-Atlantic U.S. states, announced in a press release that the participating states had agreed on draft program elements that will guide the program between 2020 and 2030. A key element is a further reduction of the emissions cap to 30% below 2020 levels and the introduction of a new emissions containment reserve that will adjust the cap downward if mitigation is cheaper than expected. After consideration of stakeholder comments and final economic analyses, a revised Model Rule will be released. The revised Model Rule must then be implemented by the participating states.
Earlier, on 11 August 2017, responding to a court ruling that the state needs to enact further legislation to meet its 2020 climate goal, the Massachusetts Executive Office of Energy and Environmental Affairs (EEA) announced regulation 310 CMR 7.74 establishing a new cap-and-trade system in the state. The system will be limited to the electricity sector, covering 21 fossil-based power plants. It will start in 2018 with free allocation of allowances to utilities. The new system will run in parallel to the existing RGGI program in Massachusetts.
For more on RGGI’s 2030 plans read here and for Massachusetts read here…
On 26 July 2017, the New Zealand government announced the long awaited outcome of the second stage of the New Zealand Emissions Trading Scheme (NZ ETS) review. The two-stage NZ ETS review began in 2015, and stage one has already resulted in policy changes. The 1-for-2 transitional measure, which allows participants to surrender one allowance for every two tons of emissions, will be phased out by 2019. Stage two of the review had a broader scope, aimed at addressing fundamental design elements of the NZ ETS to enable greater control of unit supply, increase market predictability, and to support New Zealand’s current and future climate targets under the Paris Agreement. The following decisions were announced: (1) the introduction of auctioning in the NZ ETS; (2) limited future access to international credits; (3) the development of alternatives to the current fixed price ceiling (NZD 25); and (4) procedures for coordinating the supply of allowances in the NZ ETS, whereby decisions on supply settings will be announced five years in advance.
China will launch its national ETS at the end of this year. The system will initially start out with a limited scope, i.e. either only one sector (power) or three sectors (power, cement, and electrolytic aluminum). It is still uncertain whether the domestic aviation sector will also be covered. The other sectors that were initially targeted for inclusion are likely to be phased in at a later stage.
Meanwhile, all the Chinese ETS pilots (except for Chongqing) have completed their 2016 compliance period with 97-100% compliance rates, following the trend of previous years. After the launch of the national ETS, the pilots are expected to continue operating independently for some time, with those sectors not covered under the national ETS continuing compliance under the pilot systems.
CNY 49.10 (USD 7.46)**CNY 1.70 (USD 0.26)**CNY 14.10 (USD 2.14)**CNY 28.24 (USD 4.29)**CNY 14.61 (USD 2.22)**CNY 28.01 (USD 4.26)**CNY 8.51 (USD 1.29)**CNY 22.50 (USD 3.42)**
13.10.2017
Tanjiaoyi News Service (Chinese)
KRW 20,900 (USD 18.53)**
Carbon News New Zealand
On 23 October 2017 ICAP and ADB will jointly host a meeting of the Asia-Pacific regional platform on emissions trading in Tokyo, Japan. The platform brings together ten jurisdictions from the region that have or are interested in ETS. The meeting will focus on the rationale for introducing ETS, decisions on key design elements and challenges for emissions trading in emerging economies.
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