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Trading Carbon : December - January 2011
28 CARBON EMISSIONS TRADING 2015. The 2020 cap is just over 334 Mt of CO2. More details of the programme and its r ules can be found on pages 24--26. The cap-and-trade scheme is also planned to be part of a wider proposal called the Western Climate Initiative (WCI), which, on current expectations could also include the Canadian provinces of British Columbia (BC), Ontario and Quebec. In Febr uary, BC's r uling Liberal Party elected Christy Clark as premier. Her cabinet has yet to consider and approve draft ETS regulations. However, regulators changed the first compliance year to 2013 from 2012 in line with California. In an interview with Canada's The Globe and Mail newspaper in June, Clark said the province is in negotiations with California on cap-and-trade. But, she said, that BC would not set up a scheme at "any cost" to the province. An election in October has held up progress in Ontario. The election resulted in the Liberal's winning, albeit without an absolute majority. The party and its leader in Ontario, Dalton McGuinty are thought by most observers to be pushing forward with a cap-and-trade scheme for the province and within the WCI. The scheme would aim to cut emissions 17 percent below 2005 levels by 2020. Quebec seems the furthest ahead of the Canadian provinces, having issued draft ETS r ules in July. The proposed regulations closely follow California's -- covering power and industry during 2013--2014 (27 percent of emissions) and expanding to include combustion fuels from 2015 (75 percent of emissions). The scheme would also start in January 2013. The r ules were pending approval, as Trading Carbon went to press in mid-November. Outside of the WCI, Canada's province of Alberta has been r unning an intensity-based -- CO2 per unit of output -- emissions trading scheme since 2007. It covers 107 Mt of CO2 and aims to reduce emissions per unit of output by 12 percent a year compared with a baseline of the average 2003--2005 emissions. The scheme could eventually be subsumed into a national ETS, if such a system ever gets off the ground. The passage of clean energy legislation in Australia in November means an A$23 ($23.80) tax will be put on CO2 emissions from the 500 biggest emitters in the country from July 1, 2012. The tax will develop into an ETS from July 1, 2015. There is still a chance that the main opposition party could win the 2013 general election and try to stop the carbon pricing mechanism, but analysts say this will be difficult given the expected make-up of Australia's lower and upper houses of parliament even after the next election. About 400 Mt of CO2 will be covered by the price, which rises 5 percent a year for the three years to 2015, across stationary energy, industrial processes, fugitive emissions, other than from decommissioned coal mines and the waste sector. The price will then float, although a floor price is planned at A$15/t and a price ceiling at about A$20/t above the international carbon price. Even during the fixed- price period, there is a carbon market aspect with emitters allowed to meet 5 percent of their obligation through a domestic offset scheme called the Carbon Farming Initiative (see pages 30--31). price -- resulting from governments' policy -- really ensure a future for emissions trading? There would surely be more pressure to relax a scheme's impact if it meant companies could go bust. As it is, prices are low. "If there's a second recession, prices would decline in relation to the recession, that's the good thing about the cap-and-trade model," said Dirk Forrister, principal at Colorado-based environmental and energy consultancy Forrister Advisory. So the EU ETS is set to continue and, in fact, will increase its industry coverage in the coming years. It will cap greenhouse gas emissions at almost 2,046 million tonnes (Mt) of CO2 in 2020 at the EU's current reduction target of 20 percent below 1990 levels, according to analysis by Thomson Reuters Point Carbon. That cap could be 1,605 Mt if the bloc's target rises to 30 percent, as some member states would like to see, the analysis projects. In the US, hopes for a federal cap-and-trade programme are a distant memory. But this does not mean that there is no activity on the carbon trading front. The Regional Greenhouse Gas Initiative (RGGI) -- which initially covered emissions from the power sector in 10 northeastern US states (New Jersey is withdrawing) -- is undergoing a review. The system started in 2009 and aims to stabilise emissions at 188 million short tons (171 million tonnes) of CO2 by 2014. From 2015, the cap will decrease by 2.5 percent per year, for a total reduction of 10 percent by 2018 across the 10 states -- Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey (first period only), New York, Rhode Island and Vermont. However, from the scheme's start it has been over-supplied with allowances. In 2010, emissions from covered entities stood at 137 million short tons. The ongoing review of the scheme, including stakeholder input, will conclude in spring 2012. According to the website of RGGI Inc -- the organisation that administers the programme -- in the spring it will "initiate state specific public process, and as necessary and appropriate, legislative and/or r ule-making processes with potential program(me) changes to the RGGI program(me) effective during the second control period (2012-- 2014)." The above-mentioned California system will initially cap 37 percent of the state's emissions, but expand to 85 percent in Dec 2011/Jan 2012 www.pointcarbon.com Apart from the EU ETS, the region has no other tool at hand to address climate change Emmanuel Fages, SG