Issue: 16 Wednesday, 17 January 2018
Dear ,
The end of 2017 was indeed a busy time in the ETS world, with several important milestones reached. After the hard work, we hope you had a chance to enjoy a well-deserved break and we wish you a good start to a happy and successful 2018.
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 19 December 2017, China launched its much-anticipated national ETS. The Chinese market now overtakes the European Union ETS (EU ETS) as the world’s largest carbon market. The launch took place via an inter-ministerial video conference call including both national ministries and provincial governments. The provisions for the launch and the incremental development of the ETS are laid out in the Work Plan for Construction of the National Emissions Trading System (Power Sector), (the 'Work Plan') (Chinese), which was approved by the State Council late in 2017. In its first phases, the Chinese carbon market covers some 1700 companies from the power sector, accounting for more than three billion tons of CO2e (around 30% of China’s national emissions). A three-phase roadmap has been adopted (Article 3, Work Plan). Phase one will focus on market development, phase two foresees simulation trading, and phase three will be the deepening and expanding phase, starting from around 2020 with spot trading for compliance and broader sectoral coverage.
Read more…
On 9 November, European leaders concluded a two-year long negotiation process to agree on crucial reforms for the EU ETS. With the resulting landmark agreement, the EU will implement a number of changes to the EU ETS during the next phase (2021-2030), ensuring that it remains fit for purpose and continues to play a major role in reaching the EU’s 2030 target. Most notably, the reforms include: steeper emissions cuts, changes to the Market Stability Reserve (MSR), more targeted industry assistance, as well as funds to help the industrial and power sectors meet the challenges of the low-carbon transition (European Commission). The reforms will pass into law once the European Parliament has voted on them, which is expected in February.
In another positive development, on 23 November 2017, the EU and Switzerland signed an agreement to link their ETSs. The agreement still needs to be approved by the European Parliament and adopted by the Council of the EU, which is expected in early 2018. Following approval by the Parliaments of Switzerland and the EU, and when all criteria within the agreement are met (for this, amendments to Swiss legislation are necessary), the link will become operational the following year. This could occur as soon as 1 January 2020.
Read more on the EU ETS reform here, and on the linking agreement here.
On 1 January 2018, Ontario linked its cap-and-trade system with California and Québec, forming the third largest carbon market in the world following China and the EU. The underlying linking agreement was signed by the three Western Climate Initiative parties on 22 September 2017. Under the linked program, allowances from any of the jurisdictions can be used interchangeably for compliance. California, Québec and Ontario will hold quarterly joint allowance auctions, with the first auction scheduled for 21 February 2018. In the lead up to the linking agreement, Ontario published final amendments to its cap-and-trade regulation.
Read more on the linking agreement here, and Ontario’s amendments here.
On 12 December 2017, the Second Chamber of the Mexican Parliament amended the General Law on Climate Change, mandating the establishment of an ETS for the country. The amendments (Spanish) still need to be approved by the Senate, but set the country on a path to implement a mandatory trading system in addition to its existing carbon tax. The Mexican Secretariat of Environment and Natural Resources, SEMARNAT plans (Spanish) to publish ETS market rules and updated rules for the National Emissions Register in the first half of 2018. According to their planning, the Mexican ETS would then begin operation in August 2018 with a three year pilot phase (2018-2021).
Read more on plans for a mandatory ETS here and on the ETS simulation currently being run in the country here.
On 19 December 2017, the Regional Greenhouse Gas Initiative (RGGI) released the updated 2017 Model Rule outlining the major program elements that will guide the program between 2020 and 2030. Key elements include a further reduction of the emissions cap to 30% below 2020 levels (more than 65% below the RGGI cap of 2009) and a new Emissions Containment Reserve (ECR), an automatic adjustment mechanism designed to adjust the cap downward in the face of lower-than-expected compliance costs.
On 16 November 2017, the Air Pollution Control Board of Virginia’s Department of Environmental Quality unanimously approved the proposed Regulation for Emissions Trading for the U.S. state. This followed an Executive Directive from May 2017, which directed the department to draft a regulation to limit CO2 emissions from the power sector that would be similar to measures in other states and allow for the use of market-based instruments. These developments set the scene for a future link of Virginia with the RGGI program.
An announcement by Governor McAuliffe and Governor-Elect Northam also raises the possibility of joining RGGI via the passage of legislation rather than through regulation and a link to RGGI. The announcement notes that Virginia will move forward regardless, with the regulation to be implemented when a legislative effort does not succeed.
Read more...
On 19 December 2017, the Republic of Korea announced that the cap for 2018 for the Korean Emissions Trading System (K-ETS) will be set at around 538.5 million tons for the close to 600 businesses covered by the system. This represents a 2.3% reduction from the 2017 cap, which was set at 551 million tons. The caps for 2019 and 2020 have not yet been determined. The method of allocation will be announced in the first half of 2018, while the first K-ETS auctions are now scheduled for the beginning of 2019.
Read more on the K-ETS cap here.
Following an almost two-year suspension, Kazakhstan’s Emissions Trading System (ETS) was relaunched on 1 January 2018. The new third phase (2018-2020) was launched after multiple amendments were made to the legislation to improve the functioning of Kazakhstan’s ETS, including the introduction of benchmark based allocation for certain sectors.
On 9 January 2018, the Ministry of Ecology and Natural Resources (MENR) of Ukraine published a draft national legislative package (Ukrainian), including the draft law on Monitoring Reporting and Verification (MRV) and the list of activity types subject to MRV (Ukrainian). These provisions lay the groundwork for Ukraine’s planned ETS, which is being developed in line with its obligations under the Ukraine-European Union Association Agreement. Activity types subject to MRV will be similar to those under the EU ETS and include large thermal power generators (>20MW) and fossil fuel intensive industrial activities.
CNY 51.58 (USD 8.01)**CNY 19.50 (USD 3.03)**CNY 13.90 (USD 2.16)**CNY 35.49 (USD 5.51)**CNY 15.34 (USD 2.38)**CNY 25.21 (USD 3.91)**CNY 8.51 (USD 1.32)**CNY 16.50 (USD 2.56)**
16.01.2018
Tanjiaoyi News Service (Chinese)
KRW 22,000 (USD 20.66)**
OMF CommTradeNew Zealand
On 20 February 2018, ICAP will launch its annual flagship report, ‘Emissions Trading Worldwide: Status Report 2018’. Last year was the culmination of several years of hard work for ETS policymakers, with major reforms in the pioneering systems of North America, Europe and New Zealand. In addition, new systems have been established, most notably in China and Ontario. The launch of the Status Report will be accompanied by two webinars examining the themes of the report and giving you a chance to discuss the latest developments with key policymakers and experts.
Keep updated on the launch of the ICAP Status Report 2018 here.
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