Tag Archives: quebec
California Calling: Australia Isn’t Alone On Carbon Action
Tony Wood 2 Aug, 9:32 AM The Conversation Australia will not be linking its emissions trading scheme to California any time soon. But Australia will have to increase its emissions reduction targets to between 15-25 per cent below 2000 levels by 2020, following climate action by the European Union, US, Canada, and China. At a public seminar hosted by Grattan Institute earlier this week, the chairman of the California Air Resources Board destroyed two myths. Mary Nichols, one of Time Magazine’s 100 most influential people, demonstrated that the world is moving on climate change and that cap-and-trade emissions trading schemes are well and truly alive. However, political uncertainty regarding the future of Australia’s emissions trading scheme means that, for California, linking the Australian and Californian schemes, and by extension the EU scheme, are not an immediate priority. So, what can we learn from California and from climate action around the world? California dreaming This year President Obama resorted to regulation to ensure that the USA meets its target to reduce greenhouse gas emissions by 17 per cent below 2005 levels by 2020. Professor Ross Garnaut joined Mary Nichols at last night’s seminar and noted that, before its election, the Obama administration had been looking to cap-and-trade as the most efficient and lowest cost way to reduce emissions. Having failed to get that legislation through Congress, they accepted that regulation would be necessary , albeit inefficient and higher cost. However, individual states have flexibility in how they proceed, and California has adopted an ETS . Its target is to scale back emissions to 1990 levels by 2020. The scheme became operational from January 1 2013, and there have been three auctions of carbon allowances to date. The scheme now covers electricity, cement, refineries and other large industries, with natural gas and transport to be included from 2015. The scheme also covers emissions produced in other states to generate electricity consumed in California. Permits are currently trading above US$13 per tonne, and the scheme includes mechanisms to support companies so they don’t move operations elsewhere to avoid the carbon price. Linking to Quebec From January, 2014 the Californian scheme will be linked with Quebec’s cap-and-trade scheme . Mary Nichols made it very clear that this linkage had been carefully planned, and that there is close alignment between both schemes on the important design elements. While Quebec will auction its permits, in contrast to California’s decision to allocate most of its permits for free, this does not affect the value of the permits in the carbon market place. It will be interesting to see if and when other US states follow the Californian example, rather than go down the higher cost, regulatory route. While in Australia, Mary Nichols signed a Memorandum of Understanding with the chair of Australian Climate Change Regulator, Chloe Munro, to guide collaboration between the agencies in addressing the global issue of climate change. Both agencies intend to learn much from each other’s experiences in implementing an ETS. What about China? Discussion regarding international action on climate change and policies doesn’t make sense without considering China, now the world’s biggest emitter. Both Mary Nichols and Ross Garnaut highlighted progress being made in China to reduce the emissions intensity of its economy. Measures include shutting down old, dirty coal-fired power plants, constraining coal consumption, supporting renewable energy and introducing pilot ETS programs . At a conference on Tuesday, Xie Zhenhua, the vice chairman of the National Development and Reform Commission, said China could spend nearly $US300 billion on renewable energy in the current five-year plan. He also confirmed that, in 2015, the government will gradually expand the carbon trading pilot program towards the creation of a national market. Australia doing its part In Australia, both the government and the Coalition support Australia’s international commitment to reduce emission by 15-25 per cent below 2000 levels by 2020, conditional on international action. The actions being taken by the European Union and countries such as the US, Canada and China demonstrate that this commitment will need to be formally triggered. It may not be as neat as many environmental activists might wish, but global action on climate change is well beyond the claims of sceptics and those opposed to Australia’s playing its part in this action. In April, 2011 Grattan Institute’s report, Learning the hard way: Australia’s policies to reduce emissions , concluded that only an economy-wide carbon price can achieve the scale and speed of reductions required for Australia to meet its 2020 commitments without excessive cost to the economy or taxpayer. Adoption of this approach by an increasing range of governments suggests that this conclusion is the right one. Tony Wood is Program Director, Energy at Grattan Institute. He owns shares in a number of companies, both directly and via his superannuation fund. Some of these could be impacted positively or negatively by the policies associated with this article. This article was originally published at The Conversation . Read more: http://www.businesss…n#ixzz2atkOUETC Continue reading
Crikey Clarifier: Why Is The EU Carbon Scheme Hitting Our Budget?
Monday, 20 May 2013 Erwin Jackson Crikey Clarifier Last week’s federal budget showed the impact that Europe’s emissions trading scheme is having on Australia’s carbon scheme. The EU carbon price is currently a low 3.55 euros (A$4.67) per tonne of CO2. From 2015, when Australia’s carbon scheme is due to morph into an ETS and will be linked with the EU carbon market, our carbon price is now forecast to be much lower than expected. In the short term, this means less revenue from Australia’s carbon price — hence some budget cuts to climate programs last week. So why is the European carbon price so low — and what’s going to happen next? Firstly, don’t let this issue distract the debate from the fundamentals. The threat of repeal of the carbon price under a Coalition government creates far greater short-term uncertainty around Australia’s carbon price than the low EU carbon price does. For an investor, decisions around the future of EU carbon markets pale against the prospect of doing business in a country that would be the first to dismantle a carbon market. Secondly, the basic rationale for building the link between the two schemes (Australia’s and the EU’s) remains strong. In the longer term, linked markets will be central to boosting the more ambitious global action needed to cut emissions. Remember all the calls for Australia to wait till there is a global market for carbon? It’s not going to pop into place like Dr Who from the Tardis. It is going to come from markets growing and linking. Like Australia’s and EUs, like California’s and Quebec’s, and like China’s seven pilot schemes (China’s national scheme is due to start after 2015). Thirdly, recent budget changes in clean energy and other programs show that an over-reliance on the purse strings of governments does not provide policy stability. The government is better placed to define clear rules for the private sector to follow to reduce emissions. These are the principal policies that can help the government (of whichever party) meet the full range of their bipartisan target to cut emissions by 5 to 25% by 2020 (on 2000 levels). Why is the European carbon price low, and is it a problem? The main reason for the low EU price is that the limit Europe has placed on emissions is not ambitious enough. Like Australia, the EU plans to use the cap it places on emissions from its domestic industries as the principal mechanism to achieve its pollution targets. The economic downturn and the emission reductions from its ambitious renewable energy and energy efficiency policies mean the EU is likely to over-achieve its current 2020 target (i.e. it will pollute less than the cap). The EU system is acting like the market should — emissions are down, demand for emission credits is soft, so the price is low. This problem has been exacerbated by the EU being too generous in giving away free emission credits to some industries, and the lack of flexibility to adjust to changed circumstances. This is not a problem for the EU in meeting its emission targets at lowest cost. But it is a problem if you are an investor seeking to bankroll a major investment in clean energy (this is why the UK has implemented a minimum carbon price in its domestic electricity industry of around A$25/tonne). We are already seeing the EU starting to be challenged by Asia, particularly China, as the world’s clean energy superpower. Without stronger long, loud and legal price signals this is likely to continue. Why has the situation not been fixed so far? Recent attempts to bolster confidence in the EU carbon market have narrowly been put off by countries such as Poland, which want to protect their coal interests, or those that say “let the market sort itself out”. Upcoming German elections have not helped either. Chancellor Angela Merkel has been more timid than normal in sending a strong signal that the EU needs to be a leader in climate change. Does it seem that the EU will solve the problem? Even without short-term interventions, eventually, yes. The fundamentals of the European carbon market indicate prices will rise later this decade as market participants start to factor in the EU’s post-2020 emission caps (the EU has agreed to reduce its domestic emissions by 80-95% below 1990 levels by 2050). Current forecasts by market analysts suggest that EU carbon prices will average around A$10/tonne (a range of $3-$17) over the period to 2020, and up to $39/tonne in 2020. The European Commission is also re-engaging parliamentarians. In June it will revisit proposals to bolster short-term prices. The commission has also begun the process that seeks to strengthen the EU’s 2030 emission targets, which would result in even higher prices emerging later this decade. How would a low European carbon price affect Australia (especially from 2015)? A lower EU carbon a price means that meeting Australia’s emission targets can occur more cheaply. Australia should commit to a fairer contribution to global climate action and toughen its current minimum target to cut emissions by 5% by 2020 — the minimum should be around a 15% cut. Low short-term prices strengthen the case for policies such as the Renewable Energy Target to help grow a lower carbon Australian economy, until global prices better reflect the benefits of reducing emissions in the medium to long term. Continue reading
Carbon Market ‘Champions’ Undeterred: EU Climate Chief
10 May 2013 Carbon-market supporters from China to California will push for emissions trading even as they prepare for the end of the United Nations Kyoto Protocol in seven years, Europe’s top climate negotiator said. Nations including China and New Zealand and some US states have formed an informal group, “kind of the champions of the carbon market,” Artur Runge-Metzger said in a May 2 interview in Bonn, Germany. “It’s that club that’s going to set international standards” rather than UN talks, he said. Countries are increasing links between markets outside of the climate-protection targets set by the UN, which has led global efforts to reduce emissions since 1992. California last month approved rules that allow companies in the world’s ninth largest economy to trade pollution rights in Quebec, while Australia in 2012 agreed to use European permits to cut costs. The 1997 Kyoto Protocol sets market-based emission- reduction targets for the EU and 37 countries. The US and China, the biggest polluters, never signed, making the agreement “something that ended up in a kind of cul-de-sac,” Runge- Metzger said during the climate talks last week. Under the EU’s cap-and-trade system, designed to meet the bloc’s Kyoto targets, tradable permits are allocated to polluters that must surrender enough of them to cover their emissions or pay a fine. The euro area’s second recession since 2008 cut demand for allowances and UN credits, sending prices to record lows last month and reducing incentives to invest in low- carbon technologies. US scepticism Future agreements under the UN’s 1992 Framework Convention on Climate Change may never be implemented in “the real world,” US climate negotiators led by Todd Stern, said in a March 11 submission ahead of the Bonn talks. China has joined the World Bank’s Partnership for Market Readiness, a program which seeks to cut emissions at a faster pace than set out by existing national targets. The biggest energy user is preparing seven domestic carbon markets, covering 28 per cent of its economy. China is unlikely to link its existing and proposed carbon markets to those with emissions targets set by the UN, including the EU market, Su Wei, the nation’s lead climate negotiator, said May 2 in Bonn. “It’s too early to talk of a linkage with the EU market because that is a failed market,” Wei said in an interview. “If there are no ambitious targets there will be no demand. The carbon markets aren’t running very well.” Step back The UN has effectively “stepped back” from managing emissions programs partly because of resistance from countries against market-based climate strategies such as Bolivia, Venezuela and Cuba, Runge-Metzger said. Both international and national efforts to combat climate change are “absolutely critical” because efforts by countries and industries don’t match what’s required to stop temperatures from rising 2 degrees celsius, Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change, told reporters in Bonn. Governments are seeking to keep any increase in global average temperatures below that level. Climate envoys are debating whether allowances and credits used to comply with the Kyoto treaty can be used under a new market system beyond 2020 that may include more nations. Russia has the biggest stockpile of Kyoto units, according to UN data on Bloomberg. The debate over the use of the credits is “going to be quite political,” Runge-Metzger said. “The majority of countries don’t have them.” Price drop EU carbon for December plunged to a record 2.46 euros ($3.20) on April 17 on the ICE Futures Europe exchange in London after the European Parliament rejected a proposal to enable the reduction of the surplus of allowances. They slid 44 per cent in the past year and closed at 3.79 euros today. The EU’s change in emphasis toward nation-led markets is a “sensible shift in policy,” Daniel Rossetto, the London-based managing director of emissions markets adviser Climate Mundial Ltd., said in a May 7 interview. The UN approach “is probably destined to fail, while bilateral negotiations between like- minded countries is more likely to proceed,” he said. Bloomberg Read more: http://www.smh.com.au/business/carbon-economy/carbon-market-champions-undeterred-eu-climate-chief-20130510-2jbgu.html#ixzz2TGXtvt6E Continue reading
