Building a global carbon market The European Unions vision Artur Runge-Metzger Head of International...
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Transcript of Building a global carbon market The European Unions vision Artur Runge-Metzger Head of International...
Building a global carbon market
The European Union’s vision
Artur Runge-MetzgerHead of International Climate Negotiations,
European Commission
In-session workshop on means to reach emission reduction targets,
AWG 5.1, Bangkok, 1-3 April 2008
2
The EU’s global vision – 2 degrees objective
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Mitigation by industrialised countries
Common but differentiated responsibility: take the lead and make most of the effort
EU commitments: 20% unilaterally by 2020 30% in context global deal 60-80% by 2050
Carbon market as a key tool
Binding and effective rules for monitoring and enforcing commitments
Developed countries GHG emissions
0%
20%
40%
60%
80%
100%
120%
140%
1990 2005 2020 2030 2040 2050
Baseline Reduction Scenario
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Mitigation in developing countries
Toolbox:o No commitments for least
developed countrieso Sustainable development
policieso Enhanced CDMo Performance-based
fundingo Sectoral approacheso Quantified emission limits
Developing countries GHG emissions
0%
40%
80%
120%
160%
200%
240%
280%
320%
1990 2005 2020 2030 2040 2050
Baseline Reduction Scenario
• Reaching development objectives will be imperative; mitigation and adaptation
• Reduce growth of emissions asap, and absolute reductions after 2020
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Building a global carbon market
The carbon market: cost-effective and flexible mitigation tool and source of finance for low-GHG technology development
EU’s aim: progressive development towards global carbon market
Countries take part according to different responsibilities and capabilities
Backed by ambitious mitigation commitments in line with 2 degree objective
Build on existing mechanisms, link schemes and develop new mechanisms
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The role of the carbon market (I): 27 Gt CO2e emission reduction potential below € 40/ton CO2
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Each Parties’ opportunity + responsibility mainly in household, buildings, transport
Exchange good practice in policy design: e.g.– Abandon energy subsidies
(fossil fuels: ~ € 130 billion p.a.)
– Domestic company-based emissions trading
– Set energy efficiency standards, building codes, labelling schemes, 1-Watt-Initiative
– ‘Ban the bulb’: CFL, LED– Progressive taxation– Address potential cash flow
issues, e.g. targeted loan schemes (e.g. refurbishment of existing power plants)
The role of the carbon market (II): No. 1 = 6-7 Gt CO2e: Harvest all low hanging fruits by 2020
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Domestic emissions trading schemes to set carbon price for private sector.
Less developed countries: strengthened CDM to drive technology transfer and economic transformation
Complementary approaches needed to address sectors not covered by the carbon market, other barriers and possibly to scale up finance
Advanced developing countries: move beyond offsetting, new mechanisms to incentivise increased mitigation contributions
Carefully watch demand and supply!
The role of the carbon market (III): No. 2 = 10 – 12 Gt CO2e: carbon market will be the main driver
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Promote co-operation for research and technology development (e.g. joint ventures, PPP)
Subsidies for demonstration, e.g. NZEC
Direct subsidies for deployment of clean technologies, e.g. GEEREF, export credits, PPP, concessional IFI loans
Reduce tariffs for advanced ‘GHG-efficient’ products and services
Promote regulatory approaches gaining energy security/clean air benefits: e.g. mandatory standards (cars, appliances), fuel taxes, portfolio standards (e.g. renewable energy, CCS)
The role of the carbon market (IV):
No. 3 = 10 – 12 Gt CO2e: promote high-end options
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Clean Development Mechanism (I) CDM has delivered real and measurable benefits and
generated a multi-billion dollar market (€28 billion in 2007)
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Continuity for the CDM post-2012 EU Commission proposal would allow 2.63 Gt (1.4 Gt in the
EU ETS, 1.23 Gt MS use) of CERs to be used until 2020 independent of an international agreement
Includes ongoing projects registered before 2012 and projects established post-2012 in LDCs
EU first to provide certainty for CER use post-2012 – no one else does so far!
About one third of the necessary reduction effort towards 20% target from CDM/JI - other two thirds ensure real emission reductions in Europe
Unlimited access to CDM/JI under the 20% target would lead to drop in CER price to €4 and increase of EU domestic emissions to about 4% above 1990 = contradicts EU objectives of climate policy leadership and energy security.
Substantial increase as part of Copenhagen agreement: EU Commission proposal would allow half of the additional effort (~1.2 Gt extra: totalling ~70bn€ of transfers, i.e. ~6bn€ annually) to be met by CDM/JI or new mechanisms.
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Clean Development Mechanism (II)
Reform of CDM for post-2012 needs to address the following concerns:– strengthen environmental integrity: ensure real and
additional emission reductions (key to offsetting mechanism)– address possible perverse incentives resulting from (low-
cost) CDM– review current institutional set-up and procedures (Article 9)
Strengthen CDM’s contribution to technology transfer and economic transformation in less developed regions
Need to move beyond offsetting for advanced developing countries will be key for post-2012 – explore new approaches, e.g. baseline/credit, sectoral approaches
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CDM – some proposals
More executive and supervisory role of EB, including delegation of decision-making and strengthened professional support staff
Revision of CDM decision-making procedures, including strengthening the basis and transparency of decision-making
Assessment of roles and responsibilities of DOEs Increased use of technology benchmarks for
baseline setting and additionality testing Dialogue with host countries on how to strengthen
contribution to SD and tech transfer More differentiated approach to CDM will help
improve regional distribution
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Joint Implementation JI has delivered benefits, but not yet realised its full potential Role for JI post-2012: stimulating international collaboration and
channeling investment and technology towards certain mitigation opportunities and sectors, which otherwise lack access to the global carbon market
JI allows for institutional learning about market-based approaches and a transitional step before wider application of cap-and-trade
Need to discuss JI post-2012 and explore new concepts:
– May need to continue with a two-track approach with internationally supervised procedure (track 2) for countries that still lack institutional and legislative framework for JI track 1
– Explore synergies and parallels with revision of CDM for track 2 procedure, e.g. on simplifying and streamlining institutional set-up and procedures and strengthening environmental integrity
– Explore new concepts such as programmatic JI
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Shared vision of a low-carbon future: Annex I “Offsetting” is not enough
How can the carbon market build on “measurable, reportable and verifiable mitigation action” by developing countries?
What means of support are needed in addition to the carbon market?
In which way can the carbon market most effectively contribute to sustainable development and technology transfer? What is needed in which countries and which sectors?
IPCC 2007, WGIII, ch. 13
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Need to explore new mechanisms to incentivise enhanced mitigation: e.g. no-lose sectoral crediting mechanism
Source: Ecofys
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Conclusions
Significant role of the carbon market already today – should be strenghtened post-2012. An environmentally more effective CDM should continue to play a role
Offsetting is not enough – carbon market offers promising potential if we succeed in developing new tools that build on differentiated contributions by developing countries
Carbon market is part of the solution but not a panacea – needs to be combined with other tools to further technology cooperation, financial flows and investment
Thank you!