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Who -- present and future players
Annex I Parties
: roughly 80
countries are on the Annex I list under the UNFCCC (United Nations
Framework Convention of Climate Change)
Annex B Parties
: nations that
will have commitments to limit greenhouse gas emissions if they
ratify the Kyoto Protocol to the UNFCCC and it comes into force
Issues relating to
new
participants
"Legal entities" -- any non-government entity -- can
participate in CDM and JI (status of Multi-National Corporations,
multiple-stakeholder initiatives, etc.); "authorization"
for supervised ET
Issues of
legal entity
eligibility to trade
Anticipatory domestic government/ industry emissions trading
(ET) systems -- existing and proposed
Countries that establish domestic ET programs but that do not
ratify Kyoto
What -- context and content
In accordance with Article 17 of Kyoto, Annex I Parties decide,
through Conferences of the Parties (COPs) which greenhouse gases (GHGs)
will fall under International Emissions Trading (IET) and how IET
will function
Six options to meet reduction targets under Article 3
(National approaches)
Policies and measures
Sinks Enhancement
(International approaches)
Joint Fulfillment
Joint Implementation (JI)
Clean Development Mechanism (CDM)
Emissions Trading (ET)
Collectively, the last three international approaches are known
as "flexibility mechanisms" and are jointly termed
"emissions trading"
Article 17 allows Annex B Parties to participate in emissions
trading to fulfill Article 3 commitments but trading must be
supplemental
to domestic actions
Current negotiating text indicates that CDM and JI projects
must be able to demonstrate "
additionality"
(no accepted definition as yet though):
emission reduction would not have occurred in the absence of
the project
financial resources not already dedicated to the host
developing nation for other purposes
value of credits "significantly improves the financial
and/or commercial viability of the project activity"
technology used is the "best available for the
circumstances of the host"
Where -- Snapshot of current happenings in Canada
Proposed national ET scheme -- Fed/Prov/Territorial Energy and
Environment Ministers establish the Tradable Permits Working Group
(TPWG)
Existing industry system -- Pilot Emission Reduction Trading
(PERT) in Ontario
Multi-stakeholder partnership in 1998 -- Pilot Greenhouse Gas
Emission Reduction Trading (GERT)
Canadian GHG Credit Registry
When -- Anticipating IET
Article 3, para. 2: parties must make "demonstrable
progress in achieving their commitments by 2005"
The first commitment period is 2008-2012 when IET would
regulate trading
Banking, credit periods, and no current requirement for
supplementarity
Kyoto requires monitoring, reporting, and review requirements
but does not require a review to determine trading eligibility;
delegates and industry advocate eligibility criteria:
National system to estimate emissions by sources and sinks
National registry to track transfers of Assigned Amount Units (AAUs),
Certified Emission Reductions (CERs) and Emission Reduction Units
(ERUs)
Accurate base year inventory
Periodic national communication
Why -- Departures from command and control models
Jacobson and Schumacher identify the following possibilities
from structured ET:
Meet reduction targets
Reduce non-compliance
Reduce cost of compliance (International Energy Agency (IEA)
estimates ET can reduce compliance costs by almost 60%)
Incentive for technological innovation and environmental
management
Monetary value to, and competitive advantage for, environmental
practices
How --CO2eq, AAUs, CERs, ERUs and liability
Carbon Dioxide equivalents form a universal standard of
measurement (CO2eq)
Each GHG has a Global Warming Potential (GWP): the additional
heat/energy retained in the atmosphere due to the emission; a
gases' GWP describes its effect on climate change relative to a
similar amount of CO2
Assigned Amount Units (AAUs) are the emissions allowances that
are set out ex ante under the IET; the IET is a "cap
and trade" system where an overall limit or "cap"
is set and allowances equal to the limit may be distributed and
traded
Annex I Participants must hold allowances equal to their actual
emissions
Certified Emission Reductions (CERs), generated
ex
post by CDM, and Emission Reduction
Units (ERUs), generated ex post by JI, are both
"baseline and credit" systems; a baseline of future
emissions is set and then reductions from that baseline must be
approved by a regulator
CERs and ERUs, as credits, can only offset emissions
allowances?
Allocation or auction?
Issues of
legal liability:
seller or buyer liability
Regulation at which point? -- upstream (fuel producers) or
downstream (fuel users/consumers)
transparency, embedded costs, enforcement
