ETS EUROPEAN TRADING SYSTEM COMMODITY EXCHANGE.
O Sistema de Comércio de Emissões da UE deve reconhecer aqueles ...
22.11.2018 & # 0183; & # 32; O sistema ETS reformado deve. O Sistema de Comércio de Emissões da UE deve reconhecer esses setores incapazes. Sistema de comércio de emissões na Europa ...
Moscow Exchange.
Moscow Exchange começa a negociar os primeiros certificados de hipoteca russa. . Mercado de commodities: 10.00 horas. ETS Сommodity Exchange.
O futuro do Sistema Europeu de Comércio de Emissões e ...
O futuro do Sistema Europeu de Comércio de Emissões e o Desenvolvimento Limpo. o Sistema Europeu de Comércio de Emissões (EU ETS). Chicago Climate Exchange; .
Parceria Internacional de Ação de Carbono de maio de 2018 em ...
Um sistema de comércio de emissões (ETS). tais como mudanças repentinas nos preços das commodities ou taxas de câmbio. . O mercado europeu de carbono.
Sistema de Comércio de Emissões da UE - update. revolvy.
27.10.2005 & # 0183; & # 32; O Sistema de Comércio de Emissões da União Européia (EU ETS), também conhecido como o Esquema de Comércio de Emissões da União Européia, foi ...
Vorteile | Benefícios.
A PEGAS oferece aos clientes acesso a produtos europeus de gás natural em uma plataforma de negociação usando o Trayport & # 174; Tecnologia Global Vision ETS (Exchange Trading System), que.
O sistema de comércio de licenças de emissão da UE, Parte 1: Em avaliação.
Esta é a parte 1 de um artigo que revisita o Sistema de Comércio de Emissões da União Européia. O Sistema de Comércio de Emissões da UE (EU ETS). uma mercadoria / ativo subjacente.
Mudança climática: o comércio de emissões da União Européia.
31.07.2006 & # 0183; & # 32; Mudança climática: o sistema de comércio de licenças de emissão da União Européia (EU-ETS) Resumo O Sistema de Comércio de Emissões da União Européia (ETS) ...
ANÁLISE PILOTO DO COMPORTAMENTO DAS EMPRESAS ...
DE COMPANHIAS NO 3º PERÍODO DE NEGOCIAÇÃO DA UE ETS NO CHECO. o chamado Sistema de Comércio de Emissões da UE (EU ETS). . EEX da ELE.
Mercados de comércio de emissões de carbono em todo o mundo: mercado.
Mercados de comércio de emissões de carbono em todo o mundo. Multi-Commodity Exchange of India. Sistema de comércio da União Européia Mercado Volume,.
Mercados de carbono.
A Evolution Markets é pioneira nos mercados mundiais de carbono, auxiliando na formação de programas de cap-and-trade e facilitando muitos dos mercados & rsquo; primeiro comércio. Como um meio viável e econômico para reduzir as emissões globais de emissões de gases de efeito estufa, o comércio de carbono é uma parte cada vez maior da abordagem internacional, nacional e local para enfrentar as mudanças climáticas. Nossa experiência nos mercados de carbono é profunda e nossos corretores são os mercados & rsquo; mais experiente. Aconselhamos clientes em desenvolvimentos de mercado e gerenciamento de riscos. Desde a execução comercial em mercados de licenças altamente liquidas até a estruturação de transações de crédito de carbono a longo prazo, nossas equipes de mercados de carbono em Londres, Nova York e São Francisco podem atender às suas necessidades de hedge de risco e de acesso ao mercado.
O regime de comércio de licenças de emissão da UE (ETS da UE) é um sistema baseado em instalação, de capitalização e de comércio criado para lidar com a questão das alterações climáticas e a emissão de gases com efeito de estufa, como o dióxido de carbono (CO2). O ETS da UE exige grandes emissores de emissões de carbono para monitorar, relatar e reduzir suas emissões anuais. A UE atribui fontes participantes, como a energia e a indústria pesada, um certo número de "permissões" de emissões (ou EUAs) com base no desempenho passado e outros parâmetros. Os subsídios remanescentes nas quotas de emissão são leiloados pela UE.
A Evolution Markets foi um dos primeiros corretores no ETS da UE e foi reconhecida de forma consistente pela excelência no serviço.
Nossa equipe com sede em Londres ajuda os clientes a gerenciar riscos no ETS da UE através de compras estruturadas de créditos de carbono, negociação de contratos de futuros listados para compensação de bolsas ou execução de estratégias de hedge no mercado de opções.
Para saber mais sobre os mercados de carbono europeus, contate: +44 (0) 207 264 4550, londoncarbon @ evomarkets.
Mercados de carbono da Us.
Califórnia.
A Califórnia opera um dos mercados de comércio de carbono mais ativos do mundo, com uma diversidade de contrapartes que cobrem 85% da economia do Estado e comercializaram ativamente os mercados de subsídios e créditos. O mercado de carbono da Califórnia começou em 2018 e é uma das principais ferramentas do Estado para atingir seu objetivo de reduzir as emissões de gases de efeito estufa para os níveis de 1990 até 2020.
O mercado de carbono da Califórnia está vinculado a um esquema similar de redução de carbono na província canadense de Quebec.
A Evolution Markets é um intermediário líder no mercado de carbono da Califórnia, e tem facilitado muitos dos negócios de referência dos mercados. Seus corretores localizados em São Francisco e Nova York facilitam negociações em excesso de permissões e créditos para execução bi-lateral, além de bloquear transações de futuros canceladas no ICE.
Quando a Evolution Markets atua como corretora em contratos de futuros de carbono, está atuando por meio de sua subsidiária regulada pela NFA, a Evolution Markets Futures LLC.
Para saber mais sobre os mercados de carbono da Califórnia, entre em contato com nossas equipes na Califórnia: +1 (415) 963 9120 e Nova York: +1 (914) 323 0265, uscarbon @ evomarkets.
Mercados de carbono da Us.
Em resposta à crescente ameaça das mudanças climáticas, um grupo de nove estados do nordeste formaram uma abordagem regional para reduzir as emissões de gases de efeito estufa usando medidas de mercado eficazes em termos de custos.
A resultante Iniciativa Regional de Gases de Efeito Estufa (RGGI) é um mercado pioneiro de carbono nos Estados Unidos que tem sido eficaz para atingir os objetivos de redução de carbono dos estados participantes ao menor custo possível.
A RGGI tampa as emissões de CO2 dos geradores de energia de combustíveis fósseis localizados em estados participantes ao licitador de leilões iguais às suas emissões de carbono alocadas. Esses subsídios são rastreados em um registro central da RGGI e podem ser negociados livremente.
A Evolution Markets participou do estabelecimento deste mercado e continua a fornecer serviços de execução comercial. Organizamos negociações de provisão no mercado de balcão, incluindo negociações em futuros de provisão RGGI para compensar a troca da ICE.
Além disso, oferecemos transparência de preços através de recursos de dados de mercado e serviços de consultoria de gerenciamento de riscos.
Para saber mais sobre os mercados da RGGI, entre em contato: +1 (914) 323 0255, emissões de materiais @ evomarkets.
Com a crescente conscientização sobre as mudanças climáticas, muitas corporações e agências governamentais assumiram compromissos voluntários para reduzir suas emissões de gases de efeito estufa.
Embora esses compromissos assumam várias formas, é difícil eliminar completamente sua pegada de carbono. Muitos compensam suas emissões de carbono ao financiar a redução das emissões de carbono em outros lugares, uma estratégia viável considerando o impacto global dos gases de efeito estufa.
Offsets, ou reduções voluntárias de emissões (VERs), são criados quando uma entidade se compromete a realizar ações para criar reduções verificadas de GEE. Os créditos resultantes podem ser vendidos a entidades para cumprir seus compromissos voluntários. O fornecimento de compensação geralmente vem com critérios de crédito específicos (localização, tipo, etc.) e com metas de custo-eficiência.
A Evolution Markets pode ajudar sua organização a formular um programa abrangente de deslocamento e fornecer uma fonte de custo efetivo para atingir esses objetivos.
O Sistema de Comércio de Emissões da UE (EU ETS)
O Sistema de Comércio de Emissões da UE explicou.
O sistema de comércio de emissões da UE (EU ETS) é uma pedra angular da política da UE para combater as alterações climáticas e a sua ferramenta chave para reduzir as emissões de gases com efeito de estufa de forma rentável. É o primeiro mercado de carbono do mundo e continua sendo o maior.
opera em 31 países (todos os 28 países da UE, mais a Islândia, o Liechtenstein e a Noruega) limita as emissões de mais de 11 mil instalações de energia pesada (centrais eléctricas e instalações industriais) e as companhias aéreas que operam entre esses países cobre cerca de 45% dos gases de efeito estufa da UE emissões.
Para uma visão geral detalhada, veja:
Um sistema "cap and trade".
O EU ETS trabalha no princípio do "capital e do comércio".
Um limite é fixado na quantidade total de certos gases de efeito estufa que podem ser emitidos por instalações cobertas pelo sistema. A tampa é reduzida ao longo do tempo para que as emissões totais caírem.
Dentro do limite, as empresas recebem ou compram licenças de emissão que podem trocar entre si, conforme necessário. Eles também podem comprar quantidades limitadas de créditos internacionais de projetos de poupança de emissões em todo o mundo. O limite do número total de permissões disponíveis garante que eles tenham um valor.
Depois de cada ano, uma empresa deve entregar subsídios suficientes para cobrir todas as suas emissões, caso contrário multas pesadas são impostas. Se uma empresa reduz suas emissões, ela pode manter os subsídios de reposição para cobrir suas necessidades futuras, ou então vendê-las para outra empresa que não possui subsídios.
O comércio traz flexibilidade que garante que as emissões sejam reduzidas, quando menos custa. Um preço robusto do carbono também promove o investimento em tecnologias limpas e com baixas emissões de carbono.
Principais características da fase 3 (2018-2020)
O EU ETS está agora em sua terceira fase - significativamente diferente das fases 1 e 2.
As principais mudanças são:
Um único limite de emissões a nível da UE aplica-se ao sistema anterior de capitais nacionais. O leilão é o método padrão para a alocação de licenças (em vez da alocação gratuita), e as regras de alocação harmonizadas se aplicam às licenças ainda concedidas gratuitamente. Mais setores e Os gases incluíram 300 milhões de licenças reservadas na Reserva dos Novos Participantes para financiar a implantação de tecnologias inovadoras de energia renovável e captura e armazenamento de carbono através do programa NER 300.
Sectores e gases abrangidos.
O sistema abrange os seguintes setores e gases com foco em emissões que podem ser medidas, reportadas e verificadas com um alto nível de precisão:
dióxido de carbono (CO 2) da geração de energia e geração de energia setores industriais intensivos em energia, incluindo refinarias de petróleo, siderúrgicas e produção de ferro, alumínio, metais, cimento, lima, vidro, cerâmica, celulose, papel, papelão, ácidos e produtos químicos orgânicos a granel Óxido de nitrogênio da aviação comercial (N 2 O) a partir da produção de ácidos nítrico, adípico e glioxílico e perfluorocarbonos de glioxal (PFCs) da produção de alumínio.
A participação no ETS da UE é obrigatória para as empresas desses sectores, mas.
Em alguns sectores, apenas as instalações acima de um certo tamanho estão incluídas, certas pequenas instalações podem ser excluídas se os governos implementarem medidas fiscais ou outras que reduzam suas emissões por um montante equivalente no setor de aviação, até 2018 o ETS da UE se aplica apenas aos vôos entre aeroportos localizados no Espaço Económico Europeu (EEE).
Fornecer reduções de emissões.
O ETS da UE provou que colocar um preço sobre o carbono e negociá-lo pode funcionar. As emissões das instalações no esquema estão caindo como previsto - em cerca de 5% em relação ao início da fase 3 (2018) (ver figuras de 2018).
Em 2020, as emissões dos setores abrangidos pelo sistema serão 21% menores do que em 2005.
Desenvolvendo o mercado do carbono.
Criado em 2005, o EU ETS é o primeiro e maior sistema internacional de comércio de emissões do mundo, representando mais de três quartos do comércio internacional de carbono.
O ETS da UE também está inspirando o desenvolvimento do comércio de emissões em outros países e regiões. A UE pretende ligar o EU ETS a outros sistemas compatíveis.
A legislação principal do EU ETS.
30/04/2018 - Versão consolidada da Directiva 2003/87 / CE do Parlamento Europeu e do Conselho que estabelece um regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade e que altera a Directiva 96/61 / CE do Conselho 23/04/2009 - Directiva 2009/29 / CE do Parlamento Europeu e do Conselho que altera a Directiva 2003/87 / CE de modo a melhorar e alargar o regime de comércio de licenças de emissão de gases com efeito de estufa da Comunidade 19/11/2008 - Directiva 2008/101 / CE do Conselho o Parlamento Europeu e o Conselho que altera a Directiva 2003/87 / CE, de modo a incluir actividades de aviação no âmbito do regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade 27/10/2004 - Directiva 2004/101 / CE do Parlamento Europeu e do O Conselho que altera a Directiva 2003/87 / CE que estabelece um regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade, no que diz respeito aos mecanismos de projecto do Protocolo de Quioto 13/10/2003 - Directiva 2003/87 / CE do Parlamento Europeu e do Conselho ncil que estabelece um regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade e que altera a Directiva 96/61 / CE do Conselho.
Relatórios do mercado de carbono.
23/11/2017 - COM (2017) 693 - Relatório sobre o funcionamento do mercado europeu do carbono 01/02/2017 - COM (2017) 48 - Relatório sobre o funcionamento do mercado europeu do carbono 18/11/2018 - COM 2018) 576 - Relatório sobre o funcionamento do mercado europeu do carbono 14/11/2018 - COM (2018) 652 - O estado do mercado europeu do carbono em 2018.
Revisão do RCLE da UE para a fase 3.
04/02/2018 - Conclusões do Conselho Europeu de 4 de fevereiro de 2018 (ver conclusões 23 e 24) 18/03/2018 - Orientações sobre a interpretação do Anexo I da Diretiva EET da UE (exceto atividades de aviação) 18/03/2018 - Orientação documento para identificar geradores de eletricidade 06/04/2009 - Comunicado de imprensa do Conselho sobre a adoção do pacote de clima e energia 12/12/2008 - Conclusões da Presidência do Conselho Europeu (11 e 12 de dezembro de 2008) 12/12/2008 - Conselho Europeu Declaração sobre a utilização das receitas de leilões 23/01/2008 - Proposta de directiva do Parlamento Europeu e do Conselho que altera a Directiva 2003/87 / CE, a fim de melhorar e alargar o sistema de comércio de licenças de emissão de gases com efeito de estufa da Comunidade 23 / 01/2008 - Documento de trabalho dos serviços da Comissão - Documento de acompanhamento da Proposta de directiva do Parlamento Europeu e do Conselho que altera a Directiva 2003/87 / CE, a fim de melhorar e alargar o sistema de comércio de licenças de emissão de gases com efeito de estufa da UE - Avaliação de impacto.
Implementação.
04/07/2018 - Projecto de regulamento alterado sobre a determinação dos direitos creditórios internacionais 05/06/2018 - Projecto de regulamento relativo à determinação dos direitos creditórios internacionais 05/05/2018 Regulamento (UE) n. º 389/2018 da Comissão, de 2 de Maio de 2018, que estabelece um cadastro da União nos termos do da Directiva 2003/87 / CE do Parlamento Europeu e do Conselho, decisões n. ° 280/2004 / CE e 406/2009 / CE do Parlamento Europeu e do Conselho e que revoga os Regulamentos (UE) n. ° 920/2018 da Comissão e N. º 1193/2018 Texto relevante para efeitos do EEE 18/11/2018 - Regulamento da Comissão que estabelece um Registo da União para o período de negociação com início em 1 de Janeiro de 2018 e períodos de negociação subsequentes do regime de comércio de emissões da União nos termos da Directiva 2003/87 / CE do o Parlamento Europeu e do Conselho e a Decisão 280/2004 / CE do Parlamento Europeu e do Conselho e que altera os Regulamentos (CE) n. º 2216/2004 e (UE) n. º 920/2018 - ainda não publicado no Jornal Oficial 07 / 10/2018 - Regulamento da Comissão (UE) n. º 920/2018 para um sistema de registos normalizado e seguro, nos termos da Directiva 2003/87 / CE do Parlamento Europeu e do Conselho e da Decisão n. º 280/2004 / CE do Parlamento Europeu e do Conselho - versão não incluindo as alterações introduzidas pelo Regulamento de 18 de Novembro de 2018 08/10/2008 - Regulamento (CE) n. º 994/2008 da Comissão para um sistema de registos normalizado e seguro, nos termos da Directiva 2003/87 / CE do Parlamento Europeu e do Conselho e Decisão no 280/2004 / CE do Parlamento Europeu e do Conselho - versão aplicável até 31 de Dezembro de 2018 26/10/2007 - Decisão do Comité Misto do EEE n. ° 146/2007 que liga o RCLE UE à Noruega, à Islândia e ao Liechtenstein 13/11 / 2006 - Decisão 2006/780 / CE da Comissão relativa à prevenção da contenção dupla de reduções das emissões de gases com efeito de estufa no âmbito do regime comunitário de comércio de licenças de emissão para as actividades dos projectos no âmbito do Protocolo de Quioto nos termos da Directiva 2003/87 / CE do Parlamento Europeu e do Conselho (n documentado no documento C (2006) 5362) 21/12/2004 - Versão consolidada do Regulamento (CE) n. º 2216/2004 da Comissão relativa a um sistema de registos normalizado e seguro, alterado pelo Regulamento (CE) n. º 916/2007 da Comissão, de 31 de Julho 2007, Regulamento (CE) n. º 994/2008 da Comissão, de 8 de Outubro de 2008, e Regulamento (UE) n. º 920/2018 da Comissão, de 7 de Outubro de 2018 - versão não incluída alterações introduzidas pelo Regulamento de 18 de Novembro de 2018.
Aplicação do IVA.
História legislativa da Directiva 2003/87 / CE.
Trabalho anterior à proposta da Comissão.
08/02/2000 - COM (2000) 87 - Livro Verde sobre o comércio de emissões de gases com efeito de estufa na União Europeia Mandato e resultados do Grupo de Trabalho 1 do ECCP: Mecanismos flexíveis 04/09/2001 - Resumo do Presidente da reunião da consulta das partes interessadas (com Indústria e ONGs ambientais) 19/05/1999 - COM (1999) 230 - Preparação para a implementação do Protocolo de Quioto 03/06/1998 - COM (1998) 353 - Alterações climáticas - Rumo a uma estratégia pós-Quioto da UE Âmbito do ETS da UE : 07/2007 - Instalações pequenas no sistema de comércio de licenças de emissão da UE 10/2006 - Inclusão de atividades e gases adicionais no sistema de comércio de licenças da UE Mais harmonização e maior previsibilidade: 12/2006 - A abordagem para novos operadores e fechamentos 10/2006 - Leilão das licenças de emissão de CO2 no RCLE-UE 10/2006 - Harmonização das metodologias de atribuição 12/2006 - Relatório sobre a competitividade internacional Grupo de trabalho do ECCP sobre o comércio de emissões sobre a revisão do RCLE da UE 15/06/2007 - Relatório final do 4º mee sobre a ligação com os sistemas de comércio de emissões em países terceiros 22/05/2007 - Relatório final da 3ª reunião sobre mais harmonização e previsibilidade aumentada 26/04/2007 - Relatório final da 2ª reunião sobre conformidade robusta e execução 09/03/2007 - Relatório final da 1ª reunião sobre o alcance da directiva.
Proposta da Comissão de outubro de 2001.
22/01/2002 - Documento não oficial sobre sinergias entre a proposta de comércio de emissões da CE (COM (2001) 581) e a Directiva IPPC 23/10/2001 - COM (2001) 581 - Proposta de directiva-quadro relativa ao comércio de emissões de gases com efeito de estufa dentro da Comunidade Europeia.
Reação da Comissão à leitura da proposta no Conselho e no Parlamento (incluindo a posição comum do Conselho)
18/07/2003 - COM (2003) 463 - Parecer da Comissão sobre as alterações do Parlamento Europeu à posição comum do Conselho respeitante à proposta de directiva do Parlamento Europeu e do Conselho 20/06/2003 - COM (2003) 364 - Comunicação da Comissão ao Parlamento Europeu relativa à posição comum do Conselho sobre a adopção de uma directiva que estabelece um regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade e que altera a Directiva 96/61 / CE do Conselho 18/03/2003 - Posição comum (CE ) N. º 28/2003 - Posição comum do Conselho sobre a adopção de uma directiva que estabelece um regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade e que altera a Directiva 96/61 / CE do Conselho 27/11/2002 - COM (2002) 680 - Proposta alterada para uma directiva do Parlamento Europeu e do Conselho que estabelece um regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade e que altera a Directiva 96/61 / CE do Conselho Faq.
Abra todas as perguntas.
Perguntas e Respostas sobre o Sistema de Comércio de Emissões revisado (dezembro de 2008)
Qual é o objetivo do comércio de emissões?
O objectivo do Sistema de Comércio de Emissões da UE (EU ETS) é ajudar os Estados-Membros da UE a cumprir os seus compromissos de limitar ou reduzir as emissões de gases com efeito de estufa de forma rentável. Permitir que as empresas participantes compram ou vendam permissões de emissão significa que os cortes de emissão podem ser alcançados ao menos custo.
O RCLE da UE é a pedra angular da estratégia da UE para lutar contra as alterações climáticas. É o primeiro sistema de comércio internacional de emissões de CO 2 no mundo e está em operação desde 2005. A partir de janeiro de 2008, aplica-se não apenas aos 27 Estados-Membros da UE, mas também aos outros três membros da Área Econômica Européia - Noruega, Islândia e Liechtenstein. Atualmente, abrange mais de 10.000 instalações nos setores de energia e industrial, que são coletivamente responsáveis por cerca de metade das emissões de CO 2 da UE e 40% de suas emissões totais de gases de efeito estufa. Uma alteração à Directiva ETS da UE, acordada em Julho de 2008, trará o sector da aviação para o sistema a partir de 2018.
Como funciona o comércio de emissões?
O ETS da UE é um sistema de "capitalização e comércio", ou seja, indica que ele limita o nível geral de emissões permitido, mas, dentro desse limite, permite que os participantes no sistema compram e vendam as licenças conforme exigirem. Essas provisões são a "moeda" comercial comum no coração do sistema. Um subsídio dá ao titular o direito de emitir uma tonelada de CO 2 ou a quantidade equivalente de outro gás com efeito de estufa. O limite do número total de licenças cria escassez no mercado.
No primeiro e segundo período de negociação ao abrigo do regime, os Estados-Membros tiveram de elaborar planos nacionais de atribuição (NAPs) que determinassem o seu nível total de emissões de ETS e quantos subsídios de emissão cada instalação em seu país recebe. No final de cada ano, as instalações devem render subsídios equivalentes às suas emissões. As empresas que mantêm suas emissões abaixo do nível de suas licenças podem vender seus excedentes de licenças. Aqueles que enfrentam dificuldade em manter suas emissões de acordo com suas licenças têm a opção de tomar medidas para reduzir suas próprias emissões - como investir em tecnologia mais eficiente ou usar fontes de energia menos intensivas em carbono - ou comprar os subsídios extras que precisam no mercado , Ou uma combinação de ambos. Essas escolhas provavelmente serão determinadas por custos relativos. Desta forma, as emissões são reduzidas sempre que é mais rentável fazê-lo.
Há quanto tempo o EU ETS está operando?
O ETS da UE foi lançado em 1 de Janeiro de 2005. O primeiro período de negociação foi de três anos até o final de 2007 e foi uma fase de "aprendizagem por fazer" para se preparar para o segundo período de negociação crucial. O segundo período de negociação começou em 1 de Janeiro de 2008 e é executado por cinco anos até o final de 2018. A importância do segundo período de negociação decorre do facto de coincidir com o primeiro período de compromisso do Protocolo de Quioto, durante o qual a UE e outros os países industrializados devem atingir seus objetivos para limitar ou reduzir as emissões de gases de efeito estufa. Para o segundo período comercial, as emissões do ETS da UE limitaram-se a cerca de 6,5% abaixo dos níveis de 2005, a fim de garantir que a UE como um todo e os Estados-Membros individualmente cumprem os compromissos de Quioto.
Quais são as principais lições aprendidas com a experiência até agora?
O EU ETS colocou um preço sobre o carbono e provou que o comércio de emissões de gases de efeito estufa funciona. O primeiro período comercial estabeleceu com sucesso a livre negociação de licenças de emissão em toda a UE, implementou a infra-estrutura necessária e desenvolveu um mercado de carbono dinâmico. O benefício ambiental da primeira fase pode ser limitado devido à alocação excessiva de subsídios em alguns Estados-Membros e em alguns setores, devido principalmente à dependência das projeções de emissões antes que os dados de emissão verificados estejam disponíveis no âmbito do RCLE da UE. Quando a publicação de dados de emissões verificadas para 2005 destacou essa "sobreavaliação", o mercado reagiu como seria esperado pela redução do preço de mercado das licenças. A disponibilidade de dados de emissões verificadas permitiu à Comissão garantir que o limite das dotações nacionais na segunda fase se estabeleça em um nível que resulte em reduções reais de emissões.
Além de sublinhar a necessidade de dados verificados, a experiência até agora demonstrou que uma maior harmonização dentro do RCLE da UE é imperativa para garantir que a UE alcance os seus objetivos de redução de emissões pelo menos com custos e com distorções competitivas mínimas. A necessidade de mais harmonização é mais clara em relação à forma como o limite das licenças de emissão globais é definido.
Os dois primeiros períodos de negociação também mostram que métodos nacionais amplamente diferentes para alocação de licenças para instalações ameaçam uma concorrência leal no mercado interno. Além disso, é necessária uma maior harmonização, esclarecimento e aperfeiçoamento no que se refere ao alcance do sistema, ao acesso a créditos de projetos de redução de emissões fora da UE, as condições para vincular o ETS da UE aos sistemas de comércio de emissões em outros lugares e o monitoramento, verificação e requisitos de relatórios.
Quais são as principais alterações ao ETS da UE e a partir de quando serão aplicadas?
As alterações de design acordadas serão aplicadas a partir do terceiro período de negociação, ou seja, janeiro de 2018. Enquanto os trabalhos preparatórios serão iniciados imediatamente, as regras aplicáveis não mudarão até janeiro de 2018 para garantir a manutenção da estabilidade regulatória.
O EU ETS no terceiro período será um sistema mais eficiente, mais harmonizado e mais justo.
O aumento da eficiência é alcançado por meio de um período de negociação mais longo (8 anos em vez de 5 anos), um limite de emissões robusto e anualmente decrescente (redução de 21% em 2020 em relação a 2005) e um aumento substancial da quantidade de leilão (de menos de 4% na fase 2 para mais da metade na fase 3).
Mais uma harmonização foi acordada em muitas áreas, inclusive no que se refere à definição de limite (um limite da UE em vez dos limites nacionais nas fases 1 e 2) e as regras para a alocação livre de transição.
A equidade do sistema foi substancialmente aumentada pela mudança para as regras de atribuição gratuita da UE para as instalações industriais e pela introdução de um mecanismo de redistribuição que permite aos novos Estados-Membros licitar mais subsídios.
Como o texto final se compara à proposta inicial da Comissão?
Os objectivos de clima e energia acordados pelo Conselho Europeu da Primavera de 2007 foram mantidos e a arquitectura geral da proposta da Comissão sobre o RCLE da UE permanece intacta. Ou seja, haverá um limite máximo da UE sobre o número de licenças de emissão e este limite diminuirá anualmente ao longo de uma linha de tendência linear, que continuará para além do final do terceiro período de negociação (2018-2020). A principal diferença, em comparação com a proposta, é que o leilão de licenças será gradualmente mais lento.
Quais são as principais mudanças em relação à proposta da Comissão?
Em resumo, as principais mudanças que foram feitas na proposta são as seguintes:
Alguns Estados-Membros podem beneficiar de uma derrogação facultativa e temporária da regra segundo a qual as licenças de emissão devem ser atribuídas gratuitamente aos geradores de electricidade a partir de 2018. Esta opção de derrogação está disponível para os Estados-Membros que cumpram certas condições relacionadas com a interconectividade de sua eletricidade grade, participação de um único combustível fóssil na produção de eletricidade e PIB / habitação em relação à média da UE-27. Além disso, a quantidade de licenças gratuitas que um Estado-Membro pode atribuir a usinas de energia é limitada a 70% das emissões de dióxido de carbono das plantas relevantes na fase 1 e diminui nos anos subseqüentes. Além disso, a alocação gratuita na fase 3 só pode ser dada às usinas que estejam operacionais ou em construção até o final de 2008. Veja a resposta à pergunta 15 abaixo. Haverá mais detalhes na directiva sobre os critérios a serem utilizados para determinar os setores ou subsectores considerados expostos a um risco significativo de vazamento de carbono e uma data anterior à publicação da lista da Comissão desses setores (31 de dezembro 2009). Além disso, sujeito a revisão quando um acordo internacional satisfatório for alcançado, as instalações em todas as indústrias expostas receberão 100% de licenças gratuitas na medida em que usem a tecnologia mais eficiente. A alocação gratuita para a indústria é limitada à participação das emissões dessas emissões nas emissões totais em 2005 a 2007. O número total de licenças atribuídas gratuitamente às instalações nos setores da indústria diminuirá anualmente de acordo com o declínio do limite de emissões. Os Estados-Membros podem também compensar certas instalações para os custos de CO 2 repercutidos nos preços da electricidade se os custos de CO 2 puderem, de outro modo, expô-los ao risco de vazamento de carbono. A Comissão comprometeu-se a modificar as orientações comunitárias relativas aos auxílios estatais a favor do ambiente a este respeito. Veja a resposta à pergunta 15 abaixo. O nível de leilão de licenças para a indústria não exposta aumentará de forma linear, conforme proposto pela Comissão, mas, em vez de atingir 100% até 2020, atingirá 70%, com vista a atingir 100% até 2027. Conforme previsto em Na proposta da Comissão, 10% das licenças para leilão serão redistribuídas de Estados-Membros com elevado rendimento per capita para pessoas com baixo rendimento per capita, a fim de reforçar a capacidade financeira destes últimos para investir em tecnologias amigáveis com o clima. Foi adicionada uma provisão para outro mecanismo redistributivo de 2% das licenças de leilão para levar em consideração os Estados-Membros que em 2005 alcançaram uma redução de pelo menos 20% nas emissões de gases de efeito estufa em relação ao ano de referência estabelecido pelo Protocolo de Quioto. A participação das receitas de leilão que os Estados-Membros recomendam utilizar para combater e adaptar-se às alterações climáticas, principalmente na UE, mas também nos países em desenvolvimento, é aumentada de 20% para 50%. O texto fornece um complemento para o nível de uso permitido proposto de créditos JI / CDM no cenário de 20% para os operadores existentes que receberam os orçamentos mais baixos para importar e usar esses créditos em relação às alocações e acesso aos créditos no período 2008-2018. Novos setores, novos participantes nos períodos 2018-2020 e 2008-2018 também poderão usar créditos. O montante total de créditos que podem ser utilizados não excederá, no entanto, 50% da redução entre 2008 e 2020. Com base em uma redução mais rigorosa das emissões no contexto de um acordo internacional satisfatório, a Comissão poderia permitir o acesso adicional às RCE e UREs para os operadores do regime comunitário. Veja a resposta à pergunta 20 abaixo. O produto do leilão de 300 milhões de licenças da reserva dos novos participantes será utilizado para apoiar até 12 projetos e projetos de demonstração de captura e armazenamento de carbono que demonstram tecnologias inovadoras de energia renovável. Uma série de condições são anexadas a este mecanismo de financiamento. Veja a resposta à pergunta 30 abaixo. A possibilidade de excluir as pequenas instalações de combustão, desde que estejam sujeitas a medidas equivalentes, tenha sido ampliada para cobrir todas as pequenas instalações, independentemente da atividade, o limite de emissão foi aumentado de 10.000 para 25.000 toneladas de CO 2 por ano e o limite de capacidade que As instalações de combustão devem ser cumpridas, além disso, foram aumentadas de 25MW para 35MW. Com esses limiares aumentados, a participação das emissões cobertas que poderiam ser excluídas do sistema de comércio de emissões torna-se significativa e, consequentemente, uma provisão foi adicionada para permitir uma redução correspondente do limite máximo da UE em subsídios.
Ainda haverá planos nacionais de alocação (NAPs)?
Não. Nos seus PAN para os primeiros períodos de negociação (2005-2007) e segundo (2008-2018), os Estados-Membros determinaram a quantidade total de licenças de emissão a serem emitidas - o limite - e como estas seriam alocadas às instalações em questão. This approach has generated significant differences in allocation rules, creating an incentive for each Member State to favour its own industry, and has led to great complexity.
As from the third trading period, there will be a single EU-wide cap and allowances will be allocated on the basis of harmonised rules. National allocation plans will therefore not be needed any more.
How will the emission cap in phase 3 be determined?
The rules for calculating the EU-wide cap are as follows:
From 2018, the total number of allowances will decrease annually in a linear manner. The starting point of this line is the average total quantity of allowances (phase 2 cap) to be issued by Member States for the 2008-12 period, adjusted to reflect the broadened scope of the system from 2018 as well as any small installations that Member States have chosen to exclude. The linear factor by which the annual amount shall decrease is 1.74% in relation to the phase 2 cap.
The starting point for determining the linear factor of 1.74% is the 20% overall reduction of greenhouse gases compared to 1990, which is equivalent to a 14% reduction compared to 2005. However, a larger reduction is required of the EU ETS because it is cheaper to reduce emissions in the ETS sectors. The division that minimises overall reduction cost amounts to:
a 21% reduction in EU ETS sector emissions compared to 2005 by 2020; a reduction of around 10% compared to 2005 for the sectors that are not covered by the EU ETS.
The 21% reduction in 2020 results in an ETS cap in 2020 of a maximum of 1720 million allowances and implies an average phase 3 cap (2018 to 2020) of some 1846 million allowances and a reduction of 11% compared to the phase 2 cap.
All absolute figures indicated correspond to the coverage at the start of the second trading period and therefore don't take account of aviation, which will be added in 2018, and other sectors that will be added in phase 3.
The final figures for the annual emission caps in phase 3 will be determined and published by the Commission by 30 September 2018.
How will the emission cap beyond phase 3 be determined?
The linear factor of 1.74% used to determine the phase 3 cap will continue to apply beyond the end of the trading period in 2020 and will determine the cap for the fourth trading period (2021 to 2028) and beyond. It may be revised by 2025 at the latest. In fact, significant emission reductions of 60%-80% compared to 1990 will be necessary by 2050 to reach the strategic objective of limiting the global average temperature increase to not more than 2°C above pre-industrial levels.
An EU-wide cap on emission allowances will be determined for each individual year. Will this reduce flexibility for the installations concerned?
No, flexibility for installations will not be reduced at all. In any year, the allowances to be auctioned and distributed have to be issued by the competent authorities by 28 February. The last date for operators to surrender allowances is 30 April of the year following the year in which the emissions took place. So operators receive allowances for the current year before they have to surrender allowances to cover their emissions for the previous year. Allowances remain valid throughout the trading period and any surplus allowances can now be "banked" for use in subsequent trading periods. In this respect nothing will change.
The system will remain based on trading periods, but the third trading period will last eight years, from 2018 to 2020, as opposed to five years for the second phase from 2008 to 2018.
For the second trading period Member States generally decided to allocate equal total quantities of allowances for each year. The linear decrease each year from 2018 will correspond better to expected emissions trends over the period.
What are the tentative annual ETS cap figures for the period 2018 to 2020?
The tentative annual cap figures are as follows:
These figures are based on the scope of the ETS as applicable in phase 2 (2008 to 2018), and the Commission's decisions on the national allocation plans for phase 2, amounting to 2083 million tonnes. These figures will be adjusted for several reasons. Firstly, adjustment will be made to take into account the extensions of the scope in phase 2, provided that Member States substantiate and verify their emissions accruing from these extensions. Secondly, adjustment will be made with respect to further extensions of the scope of the ETS in the third trading period. Thirdly, any opt-out of small installations will lead to a corresponding reduction of the cap. Fourthly, the figures do not take account of the inclusion of aviation, nor of emissions from Norway, Iceland and Liechtenstein.
Will allowances still be allocated for free?
Sim. Industrial installations will receive transitional free allocation. And in those Member States that are eligible for the optional derogation, power plants may, if the Member State so decides, also receive free allowances. It is estimated that at least half of the available allowances as of 2018 will be auctioned.
While the great majority of allowances has been allocated free of charge to installations in the first and second trading periods, the Commission proposed that auctioning of allowances should become the basic principle for allocation. This is because auctioning best ensures the efficiency, transparency and simplicity of the system and creates the greatest incentive for investments in a low-carbon economy. It best complies with the “polluter pays principle” and avoids giving windfall profits to certain sectors that have passed on the notional cost of allowances to their customers despite receiving them for free.
How will allowances be handed out for free?
By 31 December 2018, the Commission will adopt EU-wide rules, which will be developed under a committee procedure (“Comitology”). These rules will fully harmonise allocations and thus all firms across the EU with the same or similar activities will be subject to the same rules. The rules will ensure as far as possible that the allocation promotes carbon-efficient technologies. The adopted rules provide that to the extent feasible, allocations are to be based on so-called benchmarks, e. g. a number of allowances per quantity of historical output. Such rules reward operators that have taken early action to reduce greenhouse gases, better reflect the polluter pays principle and give stronger incentives to reduce emissions, as allocations would no longer depend on historical emissions. All allocations are to be determined before the start of the third trading period and no ex-post adjustments will be allowed.
Which installations will receive free allocations and which will not? How will negative impacts on competitiveness be avoided?
Taking into account their ability to pass on the increased cost of emission allowances, full auctioning is the rule from 2018 onwards for electricity generators. However, Member States who fulfil certain conditions relating to their interconnectivity or their share of fossil fuels in electricity production and GDP per capita in relation to the EU-27 average, have the option to temporarily deviate from this rule with respect to existing power plants. The auctioning rate in 2018 is to be at least 30% in relation to emissions in the first period and has to increase progressively to 100% no later than 2020. If the option is applied, the Member State has to undertake to invest in improving and upgrading of the infrastructure, in clean technologies and in diversification of their energy mix and sources of supply for an amount to the extent possible equal to the market value of the free allocation.
In other sectors, allocations for free will be phased out progressively from 2018, with Member States agreeing to start at 20% auctioning in 2018, increasing to 70% auctioning in 2020 with a view to reaching 100% in 2027. However, an exception will be made for installations in sectors that are found to be exposed to a significant risk of 'carbon leakage'. This risk could occur if the EU ETS increased production costs so much that companies decided to relocate production to areas outside the EU that are not subject to comparable emission constraints. The Commission will determine the sectors concerned by 31 December 2009. To do this, the Commission will assess inter alia whether the direct and indirect additional production costs induced by the implementation of the ETS Directive as a proportion of gross value added exceed 5% and whether the total value of its exports and imports divided by the total value of its turnover and imports exceeds 10%. If the result for either of these criteria exceeds 30%, the sector would also be considered to be exposed to a significant risk of carbon leakage. Installations in these sectors would receive 100% of their share in the annually declining total quantity of allowances for free. The share of these industries' emissions is determined in relation to total ETS emissions in 2005 to 2007.
CO 2 costs passed on in electricity prices could also expose certain installations to the risk of carbon leakage. In order to avoid such risk, Member States may grant a compensation with respect to such costs. In the absence of an international agreement on climate change, the Commission has undertaken to modify the Community guidelines on state aid for environmental protection in this respect.
Under an international agreement which ensures that competitors in other parts of the world bear a comparable cost, the risk of carbon leakage may well be negligible. Therefore, by 30 June 2018, the Commission will carry out an in-depth assessment of the situation of energy-intensive industry and the risk of carbon leakage, in the light of the outcome of the international negotiations and also taking into account any binding sectoral agreements that may have been concluded. The report will be accompanied by any proposals considered appropriate. These could potentially include maintaining or adjusting the proportion of allowances received free of charge to industrial installations that are particularly exposed to global competition or including importers of the products concerned in the ETS.
Who will organise the auctions and how will they be carried out?
Member States will be responsible for ensuring that the allowances given to them are auctioned. Each Member State has to decide whether it wants to develop its own auctioning infrastructure and platform or whether it wants to cooperate with other Member States to develop regional or EU-wide solutions. The distribution of the auctioning rights to Member States is largely based on emissions in phase 1 of the EU ETS, but a part of the rights will be redistributed from richer Member States to poorer ones to take account of the lower GDP per head and higher prospects for growth and emissions among the latter. It is still the case that 10% of the rights to auction allowances will be redistributed from Member States with high per capita income to those with low per capita income in order to strengthen the financial capacity of the latter to invest in climate friendly technologies. However, a provision has been added for another redistributive mechanism of 2% to take into account Member States which in 2005 had achieved a reduction of at least 20% in greenhouse gas emissions compared with the reference year set by the Kyoto Protocol. Nine Member States benefit from this provision.
Any auctioning must respect the rules of the internal market and must therefore be open to any potential buyer under non-discriminatory conditions. By 30 June 2018, the Commission will adopt a Regulation (through the comitology procedure) that will provide the appropriate rules and conditions for ensuring efficient, coordinated auctions without disturbing the allowance market.
How many allowances will each Member State auction and how is this amount determined?
All allowances which are not allocated free of charge will be auctioned. A total of 88% of allowances to be auctioned by each Member State is distributed on the basis of the Member State's share of historic emissions under the EU ETS. For purposes of solidarity and growth, 12% of the total quantity is distributed in a way that takes into account GDP per capita and the achievements under the Kyoto-Protocol.
Which sectors and gases are covered as of 2018?
The ETS covers installations performing specified activities. Since the start it has covered, above certain capacity thresholds, power stations and other combustion plants, oil refineries, coke ovens, iron and steel plants and factories making cement, glass, lime, bricks, ceramics, pulp, paper and board. As for greenhouse gases, it currently only covers carbon dioxide emissions, with the exception of the Netherlands, which has opted in emissions from nitrous oxide.
As from 2018, the scope of the ETS will be extended to also include other sectors and greenhouse gases. CO 2 emissions from petrochemicals, ammonia and aluminium will be included, as will N2O emissions from the production of nitric, adipic and glyocalic acid production and perfluorocarbons from the aluminium sector. The capture, transport and geological storage of all greenhouse gas emissions will also be covered. These sectors will receive allowances free of charge according to EU-wide rules, in the same way as other industrial sectors already covered.
As of 2018, aviation will also be included in the EU ETS.
Will small installations be excluded from the scope?
A large number of installations emitting relatively low amounts of CO 2 are currently covered by the ETS and concerns have been raised over the cost-effectiveness of their inclusion. As from 2018, Member States will be allowed to remove these installations from the ETS under certain conditions. The installations concerned are those whose reported emissions were lower than 25 000 tonnes of CO 2 equivalent in each of the 3 years preceding the year of application. For combustion installations, an additional capacity threshold of 35MW applies. In addition Member States are given the possibility to exclude installations operated by hospitals. The installations may be excluded from the ETS only if they will be covered by measures that will achieve an equivalent contribution to emission reductions.
How many emission credits from third countries will be allowed?
For the second trading period, Member States allowed their operators to use significant quantities of credits generated by emission-saving projects undertaken in third countries to cover part of their emissions in the same way as they use ETS allowances. The revised Directive extends the rights to use these credits for the third trading period and allows a limited additional quantity to be used in such a way that the overall use of credits is limited to 50% of the EU-wide reductions over the period 2008-2020. For existing installations, and excluding new sectors within the scope, this will represent a total level of access of approximately 1.6 billion credits over the period 2008-2020. In practice, this means that existing operators will be able to use credits up to a minimum of 11% of their allocation during the period 2008-2018, while a top-up is foreseen for operators with the lowest sum of free allocation and allowed use of credits in the 2008-2018 period. New sectors and new entrants in the third trading period will have a guaranteed minimum access of 4.5% of their verified emissions during the period 2018-2020. For the aviation sector, the minimum access will be 1.5%. The precise percentages will be determined through comitology.
These projects must be officially recognised under the Kyoto Protocol’s Joint Implementation (JI) mechanism (covering projects carried out in countries with an emissions reduction target under the Protocol) or Clean Development Mechanism (CDM) (for projects undertaken in developing countries). Credits from JI projects are known as Emission Reduction Units (ERUs) while those from CDM projects are called Certified Emission Reductions (CERs).
On the quality side only credits from project types eligible for use in the EU trading scheme during the period 2008-2018 will be accepted in the period 2018-2020. Furthermore, from 1 January 2018 measures may be applied to restrict the use of specific credits from project types. Such a quality control mechanism is needed to assure the environmental and economic integrity of future project types.
To create greater flexibility, and in the absence of an international agreement being concluded by 31 December 2009, credits could be used in accordance with agreements concluded with third countries. The use of these credits should however not increase the overall number beyond 50% of the required reductions. Such agreements would not be required for new projects that started from 2018 onwards in Least Developed Countries.
Based on a stricter emissions reduction in the context of a satisfactory international agreement , additional access to credits could be allowed, as well as the use of additional types of project credits or other mechanisms created under the international agreement. However, once an international agreement has been reached, from January 2018 onwards only credits from projects in third countries that have ratified the agreement or from additional types of project approved by the Commission will be eligible for use in the Community scheme.
Will it be possible to use credits from carbon ‘sinks’ like forests?
No. Before making its proposal, the Commission analysed the possibility of allowing credits from certain types of land use, land-use change and forestry (‘LULUCF’) projects which absorb carbon from the atmosphere. It concluded that doing so could undermine the environmental integrity of the EU ETS, for the following reasons:
LULUCF projects cannot physically deliver permanent emissions reductions. Insufficient solutions have been developed to deal with the uncertainties, non-permanence of carbon storage and potential emissions 'leakage' problems arising from such projects. The temporary and reversible nature of such activities would pose considerable risks in a company-based trading system and impose great liability risks on Member States. The inclusion of LULUCF projects in the ETS would require a quality of monitoring and reporting comparable to the monitoring and reporting of emissions from installations currently covered by the system. This is not available at present and is likely to incur costs which would substantially reduce the attractiveness of including such projects. The simplicity, transparency and predictability of the ETS would be considerably reduced. Moreover, the sheer quantity of potential credits entering the system could undermine the functioning of the carbon market unless their role were limited, in which case their potential benefits would become marginal.
The Commission, the Council and the European Parliament believe that global deforestation can be better addressed through other instruments. For example, using part of the proceeds from auctioning allowances in the EU ETS could generate additional means to invest in LULUCF activities both inside and outside the EU, and may provide a model for future expansion. In this respect the Commission has proposed to set up the Global Forest Carbon Mechanism that would be a performance-based system for financing reductions in deforestation levels in developing countries.
Besides those already mentioned, are there other credits that could be used in the revised ETS?
Sim. Projects in EU Member States which reduce greenhouse gas emissions not covered by the ETS could issue credits. These Community projects would need to be managed according to common EU provisions set up by the Commission in order to be tradable throughout the system. Such provisions would be adopted only for projects that cannot be realised through inclusion in the ETS. The provisions will seek to ensure that credits from Community projects do not result in double-counting of emission reductions nor impede other policy measures to reduce emissions not covered by the ETS, and that they are based on simple, easily administered rules.
Are there measures in place to ensure that the price of allowances won't fall sharply during the third trading period?
A stable and predictable regulatory framework is vital for market stability. The revised Directive makes the regulatory framework as predictable as possible in order to boost stability and rule out policy-induced volatility. Important elements in this respect are the determination of the cap on emissions in the Directive well in advance of the start of the trading period, a linear reduction factor for the cap on emissions which continues to apply also beyond 2020 and the extension of the trading period from 5 to 8 years. The sharp fall in the allowance price during the first trading period was due to over-allocation of allowances which could not be “banked” for use in the second trading period. For the second and subsequent trading periods, Member States are obliged to allow the banking of allowances from one period to the next and therefore the end of one trading period is not expected to have any impact on the price.
A new provision will apply as of 2018 in case of excessive price fluctuations in the allowance market. If, for more than six consecutive months, the allowance price is more than three times the average price of allowances during the two preceding years on the European market, the Commission will convene a meeting with Member States. If it is found that the price evolution does not correspond to market fundamentals, the Commission may either allow Member States to bring forward the auctioning of a part of the quantity to be auctioned, or allow them to auction up to 25% of the remaining allowances in the new entrant reserve.
The price of allowances is determined by supply and demand and reflects fundamental factors like economic growth, fuel prices, rainfall and wind (availability of renewable energy) and temperature (demand for heating and cooling) etc. A degree of uncertainty is inevitable for such factors. The markets, however, allow participants to hedge the risks that may result from changes in allowances prices.
Are there any provisions for linking the EU ETS to other emissions trading systems?
Sim. One of the key means to reduce emissions more cost-effectively is to enhance and further develop the global carbon market. The Commission sees the EU ETS as an important building block for the development of a global network of emission trading systems. Linking other national or regional cap-and-trade emissions trading systems to the EU ETS can create a bigger market, potentially lowering the aggregate cost of reducing greenhouse gas emissions. The increased liquidity and reduced price volatility that this would entail would improve the functioning of markets for emission allowances. This may lead to a global network of trading systems in which participants, including legal entities, can buy emission allowances to fulfil their respective reduction commitments.
The EU is keen to work with the new US Administration to build a transatlantic and indeed global carbon market to act as the motor of a concerted international push to combat climate change.
While the original Directive allows for linking the EU ETS with other industrialised countries that have ratified the Kyoto Protocol, the new rules allow for linking with any country or administrative entity (such as a state or group of states under a federal system) which has established a compatible mandatory cap-and-trade system whose design elements would not undermine the environmental integrity of the EU ETS. Where such systems cap absolute emissions, there would be mutual recognition of allowances issued by them and the EU ETS.
What is a Community registry and how does it work?
Registries are standardised electronic databases ensuring the accurate accounting of the issuance, holding, transfer and cancellation of emission allowances. As a signatory to the Kyoto Protocol in its own right, the Community is also obliged to maintain a registry. This is the Community Registry, which is distinct from the registries of Member States. Allowances issued from 1 January 2018 onwards will be held in the Community registry instead of in national registries.
Will there be any changes to monitoring, reporting and verification requirements?
The Commission will adopt a new Regulation (through the comitology procedure) by 31 December 2018 governing the monitoring and reporting of emissions from the activities listed in Annex I of the Directive. A separate Regulation on the verification of emission reports and the accreditation of verifiers should specify conditions for accreditation, mutual recognition and cancellation of accreditation for verifiers, and for supervision and peer review as appropriate.
What provision will be made for new entrants into the market?
Five percent of the total quantity of allowances will be put into a reserve for new installations or airlines that enter the system after 2018 (“new entrants”). The allocations from this reserve should mirror the allocations to corresponding existing installations.
A part of the new entrant reserve, amounting to 300 million allowances, will be made available to support the investments in up to 12 demonstration projects using the carbon capture and storage technology and demonstration projects using innovative renewable energy technologies. There should be a fair geographical distribution of the projects.
In principle, any allowances remaining in the reserve shall be distributed to Member States for auctioning. The distribution key shall take into account the level to which installations in Member States have benefited from this reserve.
What has been agreed with respect to the financing of the 12 carbon capture and storage demonstration projects requested by a previous European Council?
The European Parliament's Environment Committee tabled an amendment to the EU ETS Directive requiring allowances in the new entrant reserve to be set aside in order to co-finance up to 12 demonstration projects as requested by the European Council in spring 2007. This amendment has later been extended to include also innovative renewable energy technologies that are not commercially viable yet. Projects shall be selected on the basis of objective and transparent criteria that include requirements for knowledge sharing. Support shall be given from the proceeds of these allowances via Member States and shall be complementary to substantial co-financing by the operator of the installation. No project shall receive support via this mechanism that exceeds 15% of the total number of allowances (i. e. 45 million allowances) available for this purpose. The Member State may choose to co-finance the project as well, but will in any case transfer the market value of the attributed allowances to the operator, who will not receive any allowances.
A total of 300 million allowances will therefore be set aside until 2018 for this purpose.
What is the role of an international agreement and its potential impact on EU ETS?
When an international agreement is reached, the Commission shall submit a report to the European Parliament and the Council assessing the nature of the measures agreed upon in the international agreement and their implications, in particular with respect to the risk of carbon leakage. On the basis of this report, the Commission shall then adopt a legislative proposal amending the present Directive as appropriate.
For the effects on the use of credits from Joint Implementation and Clean Development Mechanism projects, please see the reply to question 20.
Quais são os próximos passos?
Member States have to bring into force the legal instruments necessary to comply with certain provisions of the revised Directive by 31 December 2009. This concerns the collection of duly substantiated and verified emissions data from installations that will only be covered by the EU ETS as from 2018, and the national lists of installations and the allocation to each one. For the remaining provisions, the national laws, regulations and administrative provisions only have to be ready by 31 December 2018.
The Commission has already started the work on implementation. For example, the collection and analysis of data for use in relation to carbon leakage is ongoing (list of sectors due end 2009). Work is also ongoing to prepare the Regulation on timing, administration and other aspects of auctioning (due by June 2018), the harmonised allocation rules (due end 2018) and the two Regulations on monitoring and reporting of emissions and verification of emissions and accreditation of verifiers (due end 2018).
Emissões de comércio.
Emissions trading or cap and trade is a government-mandated, market-based approach to controlling pollution by providing economic incentives for achieving reductions in the emissions of pollutants. [1] In contrast to command-and-control environmental regulations such as best available technology (BAT) standards and government subsidies, cap and trade schemes are a type of flexible environmental regulation [2] that allows organizations to decide how best to meet policy targets. Various countries, states and groups of companies have adopted such trading systems, notably for mitigating climate change. [3]
A central authority (usually a governmental body) allocates or sells a limited number of permits to discharge specific quantities of a specific pollutant per time period. [4] Polluters are required to hold permits in amount equal to their emissions. Polluters that want to increase their emissions must buy permits from others willing to sell them. [1] [5] [6] [7] [8] Financial derivatives of permits can also be traded on secondary markets. [9]
In theory, polluters who can reduce emissions most cheaply will do so, achieving the emission reduction at the lowest cost to society. [10] Cap and trade is meant to provide the private sector with the flexibility required to reduce emissions while stimulating technological innovation and economic growth. [11]
There are active trading programs in several air pollutants. For greenhouse gases, which may cause dangerous climate change, permit units are often called carbon credits. The largest greenhouse gases trading program is the European Union Emission Trading Scheme, [12] which trades primarily in European Union Allowances ( EUAs ); the Californian scheme trades in California Carbon Allowances, the New Zealand scheme in New Zealand Units and the Australian scheme in Australian Units. [2] [9] The United States has a national market to reduce acid rain and several regional markets in nitrogen oxides. [13]
Pollution is the prime example of a market externality. An externality is an effect of some activity on an entity (such as a person) that is not party to a market transaction related to that activity. Emissions trading is a market-based approach, among others, to address pollution. The overall goal of an emissions trading plan is to minimize the cost of meeting a set emissions target. [14]
In an emissions trading system, the government sets an overall limit on emissions, and defines permits (also called allowances), or limited authorizations to emit, up to the level of the overall limit. The government may sell the permits, but in many existing schemes, it gives permits to participants (regulated polluters) equal to each participant's baseline emissions. The baseline is determined by reference to the participant's historical emissions. To demonstrate compliance, a participant must hold permits at least equal to the quantity of pollution it actually emitted during the time period. If every participant complies, the total pollution emitted will be at most equal to the sum of individual limits. [15] Because permits can be bought and sold, a participant can choose either to use its permits exactly (by reducing its own emissions); or to emit less than its permits, and perhaps sell the excess permits; or to emit more than its permits, and buy permits from other participants. In effect, the buyer pays a charge for polluting, while the seller gains a reward for having reduced emissions.
In many schemes, organizations which do not pollute (and therefore have no obligations) may also trade permits and financial derivatives of permits. In some schemes, participants can bank allowances to use in future periods. [16] In some schemes, a proportion of all traded permits must be retired periodically, causing a net reduction in emissions over time. Thus, environmental groups may buy and retire permits, driving up the price of the remaining permits according to the law of demand. [17] In most schemes, permit owners can donate permits to a nonprofit entity and receive a tax deduction. Usually, the government lowers the overall limit over time, with an aim towards a national emissions reduction target. [14]
According to the Environmental Defense Fund, cap-and-trade is the most environmentally and economically sensible approach to controlling greenhouse gas emissions, the primary cause of global warming, because it sets a limit on emissions, and the trading incentivizes companies innovate in order to emit less. [18]
"International trade can offer a range of positive and negative incentives to promote international cooperation on climate change (robust evidence, medium agreement). Three issues are key to developing constructive relationships between international trade and climate agreements: how existing trade policies and rules can be modified to be more climate friendly; whether border adjustment measures (BAMs) or other trade measures can be effective in meeting the goals of international climate agreements; whether the UNFCCC, World Trade Organization (WTO), hybrid of the two, or a new institution is the best forum for a trade-and-climate architecture." [19]
Market and least-cost.
Economy-wide pricing of carbon is the centre piece of any policy designed to reduce emissions at the lowest possible costs.
Many economists have urged the use of market-based instruments such as emissions trading to address environmental problems instead of prescriptive "command-and-control" regulation. [21] Command and control regulation is criticized for being insensitive to geographical and technological differences, and therefore inefficient. [22] After an emissions limit has been set by a government political process, individual companies are free to choose how or whether to reduce their emissions. Failure to report emissions and surrender emission permits is often punishable by a further government regulatory mechanism, such as a fine that increases costs of production. Firms will choose the least-cost way to comply with the pollution regulation, which will lead to reductions where the least expensive solutions exist, while allowing emissions that are more expensive to reduce.
Under an emissions trading system, each regulated polluter has flexibility to use the most cost-effective combination of buying or selling emission permits, reducing its emissions by installing cleaner technology, or reducing its emissions by reducing production. The most cost-effective strategy depends on the polluter's marginal abatement cost and the market price of permits. In theory, a polluter's decisions should lead to an economically efficient allocation of reductions among polluters, and lower compliance costs for individual firms and for the economy overall, compared to command-and-control mechanisms. [23] [24]
Emission markets.
For emissions trading where greenhouse gases are regulated, one emissions permit is considered equivalent to one metric ton of carbon dioxide (CO 2 ) emissions. Other names for emissions permits are carbon credits, Kyoto units, assigned amount units, and Certified Emission Reduction units (CER). These permits can be sold privately or in the international market at the prevailing market price. These trade and settle internationally, and hence allow permits to be transferred between countries. Each international transfer is validated by the United Nations Framework Convention on Climate Change (UNFCCC). Each transfer of ownership within the European Union is additionally validated by the European Commission.
Emissions trading programmes such as the European Union Emissions Trading System (EU ETS) complement the country-to-country trading stipulated in the Kyoto Protocol by allowing private trading of permits. Under such programmes – which are generally co-ordinated with the national emissions targets provided within the framework of the Kyoto Protocol – a national or international authority allocates permits to individual companies based on established criteria, with a view to meeting national and/or regional Kyoto targets at the lowest overall economic cost. [25]
Trading exchanges have been established to provide a spot market in permits, as well as futures and options market to help discover a market price and maintain liquidity. Carbon prices are normally quoted in euros per tonne of carbon dioxide or its equivalent (CO 2 e). Other greenhouse gases can also be traded, but are quoted as standard multiples of carbon dioxide with respect to their global warming potential. These features reduce the quota's financial impact on business, while ensuring that the quotas are met at a national and international level.
Currently, there are six exchanges trading in UNFCCC related carbon credits: the Chicago Climate Exchange (until 2018 [26] ), European Climate Exchange, NASDAQ OMX Commodities Europe, PowerNext, Commodity Exchange Bratislava and the European Energy Exchange. NASDAQ OMX Commodities Europe listed a contract to trade offsets generated by a CDM carbon project called Certified Emission Reductions. Many companies now engage in emissions abatement, offsetting, and sequestration programs to generate credits that can be sold on one of the exchanges. At least one private electronic market has been established in 2008: CantorCO2e. [27] Carbon credits at Commodity Exchange Bratislava are traded at special platform called Carbon place. [28]
Trading in emission permits is one of the fastest-growing segments in financial services in the City of London with a market estimated to be worth about €30 billion in 2007. Louis Redshaw, head of environmental markets at Barclays Capital, predicts that "carbon will be the world's biggest commodity market, and it could become the world's biggest market overall." [29]
The international community began the long process towards building effective international and domestic measures to tackle GHG [30] (Carbon dioxide, methane, nitrous oxide, hydroflurocarbons, perfluorocarbons and sulphur hexafluoride) emissions in response to the increasing assertions that global warming is happening due to man-made emissions and the uncertainty over its likely consequences. That process began in Rio in 1992, when 160 countries agreed the UN Framework Convention on Climate Change (UNFCCC). The UNFCCC is, as its title suggests, simply a framework; the necessary detail was left to be settled by the Conference of Parties (CoP) to the UNFCCC. [31]
The efficiency of what later was to be called the "cap-and-trade" approach to air pollution abatement was first demonstrated in a series of micro-economic computer simulation studies between 1967 and 1970 for the National Air Pollution Control Administration (predecessor to the United States Environmental Protection Agency's Office of Air and Radiation) by Ellison Burton and William Sanjour. These studies used mathematical models of several cities and their emission sources in order to compare the cost and effectiveness of various control strategies. [32] [33] [34] [35] [36] Each abatement strategy was compared with the "least cost solution" produced by a computer optimization program to identify the least costly combination of source reductions in order to achieve a given abatement goal. In each case it was found that the least cost solution was dramatically less costly than the same amount of pollution reduction produced by any conventional abatement strategy. [37] Burton and later Sanjour along with Edward H. Pechan continued improving [38] and advancing [39] these computer models at the newly created U. S. Environmental Protection Agency. The agency introduced the concept of computer modeling with least cost abatement strategies (i. e. emissions trading) in its 1972 annual report to Congress on the cost of clean air. [40] This led to the concept of "cap and trade" as a means of achieving the "least cost solution" for a given level of abatement.
The development of emissions trading over the course of its history can be divided into four phases: [41]
Gestation: Theoretical articulation of the instrument (by Coase, [42] Crocker, [43] Dales, [44] Montgomery [10] etc.) and, independent of the former, tinkering with "flexible regulation" at the US Environmental Protection Agency. Proof of Principle: First developments towards trading of emission certificates based on the "offset-mechanism" taken up in Clean Air Act in 1977. A company could get allowance from the Act on greater amount of emission when it paid another company to reduce the same pollutant. [45] Prototype: Launching of a first "cap-and-trade" system as part of the US Acid Rain Program in Title IV of the 1990 Clean Air Act, officially announced as a paradigm shift in environmental policy, as prepared by "Project 88", a network-building effort to bring together environmental and industrial interests in the US. Regime formation: branching out from the US clean air policy to global climate policy, and from there to the European Union, along with the expectation of an emerging global carbon market and the formation of the "carbon industry".
In the United States, the "acid rain"-related emission trading system was principally conceived by C. Boyden Gray, a G. H.W. Bush administration attorney. Gray worked with the Environmental Defense Fund (EDF), who worked with the EPA to write the bill that became law as part of the Clean Air Act of 1990. The new emissions cap on NO x and SO.
2 gases took effect in 1995, and according to Smithsonian magazine, those acid rain emissions dropped 3 million tons that year. [46] In 1997, the CoP agreed, in what has been described as a watershed in international environmental treaty making, the Kyoto Protocol where 38 developed countries(Annex 1 countries.) committed themselves to targets and timetables for the reduction of GHGs. [47] These targets for developed countries are often referred to as Assigned Amounts.
One important economic reality recognised by many of the countries that signed the Kyoto Protocol is that, if countries have to solely rely on their own domestic measures, the resulting inflexible limitations on GHG growth could entail very large costs, perhaps running into many trillions of dollars globally. [48] As a result, international mechanisms which would allow developed countries flexibility to meet their targets were included in the Kyoto Protocol. The purpose of these mechanisms is to allow the parties to find the most economic ways to achieve their targets. These international mechanisms are outlined under Kyoto Protocol. [49]
On April 17, 2009, the Environmental Protection Agency (EPA) formally announced that it had found that greenhouse gas (GHG) poses a threat to public health and the environment (EPA 2009a). This announcement was significant because it gives the executive branch the authority to impose carbon regulations on carbon-emitting entities. [50]
A carbon cap-and-trade system is to be introduced nationwide in China in 2018 [51] (China's National Development and Reform Commission proposed that an absolute cap be placed on emission by 2018.) [52]
Public opinion.
In the United States, most polling shows large support for emissions trading (often referred to as cap-and-trade). This majority support can be seen in polls conducted by Washington Post/ABC News, [53] Zogby International [54] and Yale University. [55] A new Washington Post-ABC poll reveals that majorities of the American people believe in climate change, are concerned about it, are willing to change their lifestyles and pay more to address it, and want the federal government to regulate greenhouse gases. They are, however, ambivalent on cap-and-trade. [56]
More than three-quarters of respondents, 77.0%, reported they “strongly support” (51.0%) or “somewhat support” (26.0%) the EPA’s decision to regulate carbon emissions. While 68.6% of respondents reported being “very willing” (23.0%) or “somewhat willing” (45.6%), another 26.8% reported being “somewhat unwilling” (8.8%) or “not at all willing” (18.0%) to pay higher prices for “Green” energy sources to support funding for programs that reduce the effect of global warming. [56]
According to PolitiFact, it is a misconception that emissions trading is unpopular in the United States because of earlier polls from Zogby International and Rasmussen which misleadingly include "new taxes" in the questions (taxes aren't part of emissions trading) or high energy cost estimates. [57] However, home energy costs are going up directly due to government-mandated cap and trade programs. "New taxes" and "higher energy costs" are integral to public opinion polling on this subject.
Comparison with other methods of emission reduction.
Cap e comércio é o programa de comércio de emissões de livros didáticos. Outras abordagens baseadas no mercado incluem base-e-crédito e imposto sobre poluição. Todos eles colocam um preço sobre a poluição (por exemplo, veja o preço do carbono) e, portanto, fornecem um incentivo econômico para reduzir a poluição, começando com as oportunidades de menor custo. By contrast, in a command-and-control approach, a central authority designates pollution levels each facility is allowed to emit.
Baseline and credit.
In a baseline and credit program, polluters can create permits, called credits or offsets, by reducing their emissions below a baseline level, which is often the historical emissions level from a designated past year . [58] Such credits can be bought by polluters that have a regulatory limit. [59]
Pollution tax.
Emissions fees or environmental tax is a surcharge on the pollution created while producing goods and services. [60] For example, a carbon tax is a tax on the carbon content of fossil fuels that aims to discourage their use and thereby reduce carbon dioxide emissions. [61] The two approaches are overlapping sets of policy designs. Both can have a range of scopes, points of regulation, and price schedules. They can be fair or unfair, depending on how the revenue is used. Both have the effect of increasing the price of goods (such as fossil fuels) to consumers. [62] A comprehensive, upstream, auctioned cap-and-trade system is very similar to a comprehensive, upstream carbon tax. Yet, many commentators sharply contrast the two approaches.
The main difference is what is defined and what derived. A tax is a price control, while cap-and-trade method acts is a quantity control instrument. [62] That is, a tax is a unit price for pollution that is set by authorities, and the market determines the quantity emitted; in cap and trade, authorities determine the amount of pollution, and the market determines the price. [63] This difference affects a number of criteria. [60]
Responsiveness to inflation: Cap-and-trade has the advantage that it adjusts to inflation (changes to overall prices) automatically, while emissions fees must be changed by regulators.
Responsiveness to cost changes: It is not clear which approach is better. It is possible to combine the two into a safety valve price: a price set by regulators, at which polluters can buy additional permits beyond the cap.
Responsiveness to recessions: This point is closely related to responsiveness to cost changes, because recessions cause a drop in demand. Under cap and trade, the emissions cost automatically decreases, so a cap-and-trade scheme adds another automatic stabilizer to the economy - in effect, an automatic fiscal stimulus. However, a lower pollution price also results in reduced efforts to reduce pollution. If the government is able to stimulate the economy regardless of the cap-and-trade scheme, an excessively low price causes a missed opportunity to cut emissions faster than planned. Instead, it might be better to have a price floor (a tax). This is especially true when cutting pollution is urgent, as with greenhouse gas emissions. A price floor also provides certainty and stability for investment in emissions reductions: recent experience from the UK shows that nuclear power operators are reluctant to invest on "un-subsidised" terms unless there is a guaranteed price floor for carbon (which the EU emissions trading scheme does not presently provide).
Responsiveness to uncertainty: As with cost changes, in a world of uncertainty, it is not clear whether emissions fees or cap-and-trade systems are more efficient — it depends on how fast the marginal social benefits of reducing pollution fall with the amount of cleanup (e. g., whether inelastic or elastic marginal social benefit schedule).
Other: The magnitude of the tax will depend on how sensitive the supply of emissions is to the price. The permit price of cap-and-trade will depend on the pollutant market. A tax generates government revenue, but full-auctioned emissions permits can do the same. A similar upstream cap-and-trade system could be implemented. An upstream carbon tax might be the simplest to administer. Setting up a complex cap-and-trade arrangement that is comprehensive has high institutional needs. [64]
Command-and-control regulation.
Command and control is a system of regulation that prescribes emission limits and compliance methods for each facility or source. It is the traditional approach to reducing air pollution. [58]
Command-and-control regulations are more rigid than incentive-based approaches such as pollution fees and cap and trade. An example of this is a performance standard which sets an emissions goal for each polluter that is fixed and, therefore, the burden of reducing pollution cannot be shifted to the firms that can achieve it more cheaply. As a result, performance standards are likely to be more costly overall. [60] The additional costs would be passed to end consumers. [65]
Economics of international emissions trading.
It is possible for a country to reduce emissions using a Command-Control approach, such as regulation, direct and indirect taxes. The cost of that approach differs between countries because the Marginal Abatement Cost Curve (MAC) — the cost of eliminating an additional unit of pollution — differs by country. It might cost China $2 to eliminate a ton of CO 2 , but it would probably cost Norway or the U. S. much more. International emissions-trading markets were created precisely to exploit differing MACs.
Emissions trading through Gains from Trade can be more beneficial for both the buyer and the seller than a simple emissions capping scheme.
Consider two European countries, such as Germany and Sweden. Each can either reduce all the required amount of emissions by itself or it can choose to buy or sell in the market.
Suppose Germany can abate its CO 2 at a much cheaper cost than Sweden, i. e. MAC S > MAC G where the MAC curve of Sweden is steeper (higher slope) than that of Germany, and R Req is the total amount of emissions that need to be reduced by a country.
On the left side of the graph is the MAC curve for Germany. R Req is the amount of required reductions for Germany, but at R Req the MAC G curve has not intersected the market emissions permit price of CO 2 (market permit price = P = λ). Thus, given the market price of CO 2 allowances, Germany has potential to profit if it abates more emissions than required.
On the right side is the MAC curve for Sweden. R Req is the amount of required reductions for Sweden, but the MAC S curve already intersects the market price of CO 2 permits before R Req has been reached. Thus, given the market price of CO 2 permits, Sweden has potential to make a cost saving if it abates fewer emissions than required internally, and instead abates them elsewhere.
In this example, Sweden would abate emissions until its MAC S intersects with P (at R*), but this would only reduce a fraction of Sweden's total required abatement.
After that it could buy emissions credits from Germany for the price P (per unit). The internal cost of Sweden's own abatement, combined with the permits it buys in the market from Germany, adds up to the total required reductions (R Req ) for Sweden. Thus Sweden can make a saving from buying permits in the market (Δ d-e-f). This represents the "Gains from Trade", the amount of additional expense that Sweden would otherwise have to spend if it abated all of its required emissions by itself without trading.
Germany made a profit on its additional emissions abatement, above what was required: it met the regulations by abating all of the emissions that was required of it (R Req ). Additionally, Germany sold its surplus permits to Sweden, and was paid P for every unit it abated, while spending less than P . Its total revenue is the area of the graph (R Req 1 2 R*), its total abatement cost is area (R Req 3 2 R*), and so its net benefit from selling emission permits is the area (Δ 1-2-3) i. e. Gains from Trade.
The two R* (on both graphs) represent the efficient allocations that arise from trading.
Germany: sold (R* - R Req ) emission permits to Sweden at a unit price P . Sweden bought emission permits from Germany at a unit price P .
If the total cost for reducing a particular amount of emissions in the Command Control scenario is called X , then to reduce the same amount of combined pollution in Sweden and Germany, the total abatement cost would be less in the Emissions Trading scenario i. e. (X — Δ 123 - Δ def).
The example above applies not just at the national level, but also between two companies in different countries, or between two subsidiaries within the same company.
Applying the economic theory.
The nature of the pollutant plays a very important role when policy-makers decide which framework should be used to control pollution. CO 2 acts globally, thus its impact on the environment is generally similar wherever in the globe it is released. So the location of the originator of the emissions does not matter from an environmental standpoint. [66]
The policy framework should be different for regional pollutants [67] (e. g. SO 2 and NO x , and also mercury) because the impact of these pollutants may differ by location. The same amount of a regional pollutant can exert a very high impact in some locations and a low impact in other locations, so it matters where the pollutant is released. This is known as the Hot Spot problem.
A Lagrange framework is commonly used to determine the least cost of achieving an objective, in this case the total reduction in emissions required in a year. In some cases, it is possible to use the Lagrange optimization framework to determine the required reductions for each country (based on their MAC) so that the total cost of reduction is minimized. In such a scenario, the Lagrange multiplier represents the market allowance price (P) of a pollutant, such as the current market price of emission permits in Europe and the USA. [68]
Countries face the permit market price that exists in the market that day, so they are able to make individual decisions that would minimize their costs while at the same time achieving regulatory compliance. This is also another version of the Equi-Marginal Principle, commonly used in economics to choose the most economically efficient decision.
Prices versus quantities, and the safety valve.
There has been longstanding debate on the relative merits of price versus quantity instruments to achieve emission reductions. [69]
An emission cap and permit trading system is a quantity instrument because it fixes the overall emission level (quantity) and allows the price to vary. Uncertainty in future supply and demand conditions (market volatility) coupled with a fixed number of pollution permits creates an uncertainty in the future price of pollution permits, and the industry must accordingly bear the cost of adapting to these volatile market conditions. The burden of a volatile market thus lies with the industry rather than the controlling agency, which is generally more efficient. However, under volatile market conditions, the ability of the controlling agency to alter the caps will translate into an ability to pick "winners and losers" and thus presents an opportunity for corruption.
In contrast, an emission tax is a price instrument because it fixes the price while the emission level is allowed to vary according to economic activity. A major drawback of an emission tax is that the environmental outcome (e. g. a limit on the amount of emissions) is not guaranteed. On one hand, a tax will remove capital from the industry, suppressing possibly useful economic activity, but conversely, the polluter will not need to hedge as much against future uncertainty since the amount of tax will track with profits. The burden of a volatile market will be borne by the controlling (taxing) agency rather than the industry itself, which is generally less efficient. An advantage is that, given a uniform tax rate and a volatile market, the taxing entity will not be in a position to pick "winners and losers" and the opportunity for corruption will be less.
Assuming no corruption and assuming that the controlling agency and the industry are equally efficient at adapting to volatile market conditions, the best choice depends on the sensitivity of the costs of emission reduction, compared to the sensitivity of the benefits (i. e., climate damage avoided by a reduction) when the level of emission control is varied.
Because there is high uncertainty in the compliance costs of firms, some argue that the optimum choice is the price mechanism. However, the burden of uncertainty cannot be eliminated, and in this case it is shifted to the taxing agency itself.
Some scientists have warned of a threshold in atmospheric concentrations of carbon dioxide beyond which a run-away warming effect could take place, with a large possibility of causing irreversible damage. With such a risk, a quantity instrument may be a better choice because the quantity of emissions may be capped with more certainty. However, this may not be true if this risk exists but cannot be attached to a known level of greenhouse gas (GHG) concentration or a known emission pathway. [70]
A third option, known as a safety valve , is a hybrid of the price and quantity instruments. The system is essentially an emission cap and permit trading system but the maximum (or minimum) permit price is capped. Emitters have the choice of either obtaining permits in the marketplace or buying them from the government at a specified trigger price (which could be adjusted over time). The system is sometimes recommended as a way of overcoming the fundamental disadvantages of both systems by giving governments the flexibility to adjust the system as new information comes to light. It can be shown that by setting the trigger price high enough, or the number of permits low enough, the safety valve can be used to mimic either a pure quantity or pure price mechanism. [71]
All three methods are being used as policy instruments to control greenhouse gas emissions: the EU-ETS is a quantity system using the cap and trading system to meet targets set by National Allocation Plans; Denmark has a price system using a carbon tax (World Bank, 2018, p. 218), [72] while China uses the CO 2 market price for funding of its Clean Development Mechanism projects, but imposes a safety valve of a minimum price per tonne of CO 2 .
Carbon leakage.
Carbon leakage is the effect that regulation of emissions in one country/sector has on the emissions in other countries/sectors that are not subject to the same regulation (Barker et al. , 2007). [73] There is no consensus over the magnitude of long-term carbon leakage (Goldemberg et al. , 1996, p. 31). [74]
In the Kyoto Protocol, Annex I countries are subject to caps on emissions, but non-Annex I countries are not. Barker et al. (2007) assessed the literature on leakage. The leakage rate is defined as the increase in CO 2 emissions outside the countries taking domestic mitigation action, divided by the reduction in emissions of countries taking domestic mitigation action. Accordingly, a leakage rate greater than 100% means that actions to reduce emissions within countries had the effect of increasing emissions in other countries to a greater extent, i. e., domestic mitigation action had actually led to an increase in global emissions.
Estimates of leakage rates for action under the Kyoto Protocol ranged from 5% to 20% as a result of a loss in price competitiveness, but these leakage rates were considered very uncertain. [75] For energy-intensive industries, the beneficial effects of Annex I actions through technological development were considered possibly substantial. However, this beneficial effect had not been reliably quantified. On the empirical evidence they assessed, Barker et al. (2007) concluded that the competitive losses of then-current mitigation actions, e. g., the EU ETS, were not significant.
Under the EU ETS rules Carbon Leakage Exposure Factor is used to determine the volumes of free allocation of emission permits to industrial installations.
To understand carbon trading, it is important to understand the products that are being traded. The primary product in carbon markets is the trading of GHG emission permits. Under a cap-and-trade system, permits are issued to various entities for the right to emit GHG emissions that meet emission reduction requirement caps. [50]
One of the controversies about carbon mitigation policy is how to "level the playing field" with border adjustments. [76] For example, one component of the American Clean Energy and Security Act, along with several other energy bills put before US Congress, calls for carbon surcharges on goods imported from countries without cap-and-trade programs. Besides issues of compliance with the General Agreement on Tariffs and Trade, such border adjustments presume that the producing countries bear responsibility for the carbon emissions.
A general perception among developing countries is that discussion of climate change in trade negotiations could lead to "green protectionism" by high-income countries (World Bank, 2018, p. 251). [72] Tariffs on imports ("virtual carbon") consistent with a carbon price of $50 per ton of CO 2 could be significant for developing countries. World Bank (2018) commented that introducing border tariffs could lead to a proliferation of trade measures where the competitive playing field is viewed as being uneven. Tariffs could also be a burden on low-income countries that have contributed very little to the problem of climate change.
Sistemas de negociação.
Kyoto Protocol.
As the Intergovernmental Panel on Climate Change (IPCC) reports came in over the years, they shed abundant light on the true state of global warming and they gave support to the environmental effort to address this unprecedented problem. However, the same discussions that started decades back had never ceased and the crusade for a tangible solution to global climate change had gone on all the while. In 1997 the Kyoto Protocol was adopted. The Kyoto Protocol is a 1997 international treaty that came into force in 2005. In the treaty, most developed nations agreed to legally binding targets for their emissions of the six major greenhouse gases. [77] Emission quotas (known as "Assigned amounts") were agreed by each participating 'Annex I' country, with the intention of reducing the overall emissions by 5.2% from their 1990 levels by the end of 2018. The United States is the only industrialized nation under Annex I that has not ratified the treaty, and is therefore not bound by it. The IPCC has projected that the financial effect of compliance through trading within the Kyoto commitment period will be limited at between 0.1-1.1% of GDP among trading countries. [78] The agreement was intended to result in industrialized countries' emissions declining in aggregate by 5.2 percent below 1990 levels by the year of 2018. Despite the failure of the United States and Australia to ratify the protocol, the agreement became effective in 2005, once the requirement that 55 Annex I (predominantly industrialized) countries, jointly accounting for 55 percent of 1990 Annex I emissions, ratify the agreement was met. [79]
The Protocol defines several mechanisms ("flexible mechanisms") that are designed to allow Annex I countries to meet their emission reduction commitments (caps) with reduced economic impact (IPCC, 2007). [80]
Under Article 3.3 of the Kyoto Protocol, Annex I Parties may use GHG removals, from afforestation and reforestation (forest sinks) and deforestation (sources) since 1990, to meet their emission reduction commitments. [81]
Annex I Parties may also use International Emissions Trading (IET). Under the treaty, for the 5-year compliance period from 2008 until 2018, [82] nations that emit less than their quota will be able to sell assigned amount units (each AAU representing an allowance to emit one metric tonne of CO 2 ) to nations that exceed their quotas. [83] It is also possible for Annex I countries to sponsor carbon projects that reduce greenhouse gas emissions in other countries. These projects generate tradable carbon credits that can be used by Annex I countries in meeting their caps. The project-based Kyoto Mechanisms are the Clean Development Mechanism (CDM) and Joint Implementation (JI). There are four such international flexible mechanisms, or Kyoto Mechanism [84] written in the Kyoto Protocol.
Article 17 if the Protocol authorizes Annex 1 countries that have agreed to the emissions limitations to take part in emissions trading with other Annex 1 Countries.
Article 4 authorizes such parties to implement their limitations jointly, as the member states of the EU have chosen to do.
Article 6 provides that such Annex 1 countries may take part in joint initiatives (JIs) in return for emissions reduction units (ERUs) to be used against their Assigned Amounts.
Art 12 provides for a mechanism known as the clean development mechanism (CDM), [85] under which Annex 1 countries may invest in emissions limitation projects in developing countries and use certified emissions reductions (CERs) generated against their own Assigned Amounts. [86]
The CDM covers projects taking place in non-Annex I countries, while JI covers projects taking place in Annex I countries. CDM projects are supposed to contribute to sustainable development in developing countries, and also generate "real" and "additional" emission savings, i. e., savings that only occur thanks to the CDM project in question (Carbon Trust, 2009, p. 14). [87] Whether or not these emission savings are genuine is, however, difficult to prove (World Bank, 2018, pp. 265–267). [72]
In 2003 the New South Wales (NSW) state government unilaterally established the NSW Greenhouse Gas Abatement Scheme [88] to reduce emissions by requiring electricity generators and large consumers to purchase NSW Greenhouse Abatement Certificates (NGACs). This has prompted the rollout of free energy-efficient compact fluorescent lightbulbs and other energy-efficiency measures, funded by the credits. This scheme has been criticised by the Centre for Energy and Environmental Markets (CEEM) of the UNSW because of its lack of effectiveness in reducing emissions, its lack of transparency and its lack of verification of the additionality of emission reductions. [89]
Both the incumbent Howard Coalition government and the Rudd Labor opposition promised to implement an emissions trading scheme (ETS) before the 2007 federal election. Labor won the election, with the new government proceeding to implement an ETS. The government introduced the Carbon Pollution Reduction Scheme, which the Liberals supported with Malcolm Turnbull as leader. Tony Abbott questioned an ETS, saying the best way to reduce emissions is with a "simple tax". [90] Shortly before the carbon vote, Abbott defeated Turnbull in a leadership challenge, and from there on the Liberals opposed the ETS. This left the government unable to secure passage of the bill and it was subsequently withdrawn.
Julia Gillard defeated Rudd in a leadership challenge and promised not to introduce a carbon tax, but would look to legislate a price on carbon [91] when taking the government to the 2018 election. In the first hung parliament result in 70 years, the government required the support of crossbenchers including the Greens. One requirement for Greens support was a carbon price, which Gillard proceeded with in forming a minority government. A fixed carbon price would proceed to a floating-price ETS within a few years under the plan. The fixed price leant itself to characterisation as a carbon tax and when the government proposed the Clean Energy Bill in February 2018, [92] the opposition claimed it to be a broken election promise. [93]
The bill was passed by the Lower House in October 2018 [94] and the Upper House in November 2018. [95] The Liberal Party vowed to overturn the bill if elected. [96] The bill thus resulted in passage of the Clean Energy Act, which possessed a great deal of flexibility in its design and uncertainty over its future.
The Liberal/National coalition government elected in September 2018 has promised to reverse the climate legislation of the previous government. [97] In July 2018, the carbon tax was repealed as well as the Emissions Trading Scheme (ETS) that was to start in 2018. [98]
New Zealand.
The New Zealand Emissions Trading Scheme (NZ ETS) is a partial-coverage all-free allocation uncapped highly internationally linked emissions trading scheme. The NZ ETS was first legislated in the Climate Change Response (Emissions Trading) Amendment Act 2008 in September 2008 under the Fifth Labour Government of New Zealand [99] [100] and then amended in November 2009 [101] and in November 2018 [102] by the Fifth National Government of New Zealand.
The NZ ETS covers forestry (a net sink), energy (43.4% of total 2018 emissions), industry (6.7% of total 2018 emissions) and waste (2.8% of total 2018 emissions) but not pastoral agriculture (47% of 2018 total emissions). [103] Participants in the NZ ETS must surrender one emission unit (either an international 'Kyoto' unit or a New Zealand-issued unit) for every two tonnes of carbon dioxide equivalent emissions reported or they may choose to buy NZ units from the government at a fixed price of NZ$25. [104]
Individual sectors of the economy have different entry dates when their obligations to report emissions and surrender emission units take effect. Forestry, which contributed net removals of 17.5 Mts of CO 2 e in 2018 (19% of NZ's 2008 emissions, [105] ) entered the NZ ETS on 1 January 2008. [106] The stationary energy, industrial processes and liquid fossil fuel sectors entered the NZ ETS on 1 July 2018. The waste sector (landfill operators) entered on 1 January 2018. [107] Methane and nitrous oxide emissions from pastoral agriculture are not included in the NZ ETS. (From November 2009, agriculture was to enter the NZ ETS on 1 January 2018 [104] )
The NZ ETS is highly linked to international carbon markets as it allows the importing of most of the Kyoto Protocol emission units. However, as of June 2018, the scheme will effectively transition into a domestic scheme, with restricted access to international Kyoto units (CERs, ERUs and RMUs). [108] The NZ ETS has a domestic unit; the 'New Zealand Unit' (NZU), which is issued by free allocation to emitters, with no auctions intended in the short term. [109] Free allocation of NZUs varies between sectors. The commercial fishery sector (who are not participants) have a free allocation of units on a historic basis. [104] Owners of pre-1990 forests have received a fixed free allocation of units. [106] Free allocation to emissions-intensive industry, [110] [111] is provided on an output-intensity basis. For this sector, there is no set limit on the number of units that may be allocated. [112] The number of units allocated to eligible emitters is based on the average emissions per unit of output within a defined 'activity'. [113] Bertram and Terry (2018, p 16) state that as the NZ ETS does not 'cap' emissions, the NZ ETS is not a cap and trade scheme as understood in the economics literature. [114]
Some stakeholders have criticized the New Zealand Emissions Trading Scheme for its generous free allocations of emission units and the lack of a carbon price signal (the Parliamentary Commissioner for the Environment), [115] and for being ineffective in reducing emissions (Greenpeace Aotearoa New Zealand). [116]
The NZ ETS was reviewed in late 2018 by an independent panel, which reported to the Government and public in September 2018. [117]
União Européia.
The European Union Emission Trading Scheme (or EU ETS) is the largest multi-national, greenhouse gas emissions trading scheme in the world. It is one of the EU's central policy instruments to meet their cap set in the Kyoto Protocol (Jones et al. ., 2007, p. 64). [118]
After voluntary trials in the UK and Denmark, Phase I began operation in January 2005 with all 15 member states of the European Union participating. [119] The program caps the amount of carbon dioxide that can be emitted from large installations with a net heat supply in excess of 20 MW, such as power plants and carbon intensive factories [120] and covers almost half (46%) of the EU's Carbon Dioxide emissions. [121] Phase I permits participants to trade among themselves and in validated credits from the developing world through Kyoto's Clean Development Mechanism. Credits are gained by investing in clean technologies and low-carbon solutions, and by certain types of emission-saving projects around the world to cover a proportion of their emissions. [122]
During Phases I and II, allowances for emissions have typically been given free to firms, which has resulted in them getting windfall profits (CCC, 2008, p. 149). [123] Ellerman and Buchner (2008) (referenced by Grubb et al. ., 2009, p. 11) suggested that during its first two years in operation, the EU ETS turned an expected increase in emissions of 1%-2% per year into a small absolute decline. [124] Grubb et al. . (2009, p. 11) suggested that a reasonable estimate for the emissions cut achieved during its first two years of operation was 50-100 MtCO 2 per year, or 2.5%-5%.
A number of design flaws have limited the effectiveness of scheme (Jones et al. ., 2007, p. 64). In the initial 2005-07 period, emission caps were not tight enough to drive a significant reduction in emissions (CCC, 2008, p. 149). The total allocation of allowances turned out to exceed actual emissions. This drove the carbon price down to zero in 2007. This oversupply was caused because the allocation of allowances by the EU was based on emissions data from the European Environmental Agency in Copenhagen, which uses a horizontal activity-based emissions definition similar to the United Nations, the EU ETS Transaction log in Brussels, but a vertical installation-based emissions measurement system. This caused an oversupply of 200 million tonnes (10% of market) in the EU ETS in the first phase and collapsing prices. [125]
Phase II saw some tightening, but the use of JI and CDM offsets was allowed, with the result that no reductions in the EU will be required to meet the Phase II cap (CCC, 2008, pp. 145, 149). For Phase II, the cap is expected to result in an emissions reduction in 2018 of about 2.4% compared to expected emissions without the cap (business-as-usual emissions) (Jones et al. ., 2007, p. 64). For Phase III (2018–20), the European Commission proposed a number of changes, including:
Setting an overall EU cap, with allowances then allocated to EU members; Tighter limits on the use of offsets; Unlimited banking of allowances between Phases II and III; A move from allowances to auctioning.
In January 2008, Norway, Iceland, and Liechtenstein joined the European Union Emissions Trading System (EU ETS), according to a publication from the European Commission. [126] The Norwegian Ministry of the Environment has also released its draft National Allocation Plan which provides a carbon cap-and-trade of 15 million metric tonnes of CO 2 , 8 million of which are set to be auctioned. [127] According to the OECD Economic Survey of Norway 2018, the nation "has announced a target for 2008-12 10% below its commitment under the Kyoto Protocol and a 30% cut compared with 1990 by 2020." [128] In 2018, EU-15 emissions was 15.1% below their base year level. Based on figures for 2018 by the European Environment Agency, EU-15 emissions averaged 11.8% below base-year levels during the 2008-2018 period. This means the EU-15 over-achieved its first Kyoto target by a wide margin. [129]
Tokyo, Japan.
The Japanese city of Tokyo is like a country in its own right in terms of its energy consumption and GDP. Tokyo consumes as much energy as "entire countries in Northern Europe, and its production matches the GNP of the world's 16th largest country". [130] A scheme to limit carbon emissions launched in April 2018 covers the top 1,400 emitters in Tokyo, and is enforced and overseen by the Tokyo Metropolitan Government. [131] [132] Phase 1, which is similar to Japan's scheme, ran until 2018. (Japan had an ineffective voluntary emissions reductions system for years, [133] but no nationwide cap-and-trade program.) Emitters must cut their emissions by 6% or 8% depending on the type of organization; from 2018, those who exceed their limits must buy matching allowances or invest in renewable-energy certificates or offset credits issued by smaller businesses or branch offices. [134] Polluters that fail to comply will be fined up to 500,000 yen plus credits for 1.3 times excess emissions. [135] In its fourth year, emissions were reduced by 23% compared to base-year emissions. [136] In phase 2, (FY2018-FY2019), the target is expected to increase to 15%-17%. The aim is to cut Tokyo's carbon emissions by 25% from 2000 levels by 2020. [134] These emission limits can be met by using technologies such as solar panels and advanced fuel-saving devices. [132]
United States.
An early example of an emission trading system has been the SO 2 trading system under the framework of the Acid Rain Program of the 1990 Clean Air Act in the U. S. Under the program, which is essentially a cap-and-trade emissions trading system, SO 2 emissions were reduced by 50% from 1980 levels by 2007. [137] Some experts argue that the cap-and-trade system of SO 2 emissions reduction has reduced the cost of controlling acid rain by as much as 80% versus source-by-source reduction. [21] [138] The SO 2 program was challenged in 2004, which set in motion a series of events that led to the 2018 Cross-State Air Pollution Rule (CSAPR). Under the CSAPR, the national SO 2 trading program was replaced by four separate trading groups for SO 2 and NO x . [139] California’s cap-and-trade program ranks only second to the ETS (European Trading System) carbon market in the world. [140]
In 1997, the State of Illinois adopted a trading program for volatile organic compounds in most of the Chicago area, called the Emissions Reduction Market System. [141] Beginning in 2000, over 100 major sources of pollution in eight Illinois counties began trading pollution credits.
In 2003, New York State proposed and attained commitments from nine Northeast states to form a cap-and-trade carbon dioxide emissions program for power generators, called the Regional Greenhouse Gas Initiative (RGGI). This program launched on January 1, 2009 with the aim to reduce the carbon "budget" of each state's electricity generation sector to 10% below their 2009 allowances by 2018. [142]
Also in 2003, U. S. corporations were able to trade CO 2 emission allowances on the Chicago Climate Exchange under a voluntary scheme. In August 2007, the Exchange announced a mechanism to create emission offsets for projects within the United States that cleanly destroy ozone-depleting substances. [143]
Also in 2003, the Environmental Protection Agency (EPA) began to administer the NOx Budget Trading Program (NBP)under the NOx State Implementation Plan (also known as the "NOx SIP Call") The NOx Budget Trading Program was a market-based cap and trade program created to reduce emissions of nitrogen oxides (NO x ) from power plants and other large combustion sources in the eastern United States. NO x is a prime ingredient in the formation of ground-level ozone (smog), a pervasive air pollution problem in many areas of the eastern United States. The NBP was designed to reduce NO x emissions during the warm summer months, referred to as the ozone season, when ground-level ozone concentrations are highest. In March 2008, EPA again strengthened the 8-hour ozone standard to 0.075 parts per million (ppm) from its previous 0.008 ppm. [144]
In 2006, the California Legislature passed the California Global Warming Solutions Act, AB-32, which was signed into law by Governor Arnold Schwarzenegger. Thus far, flexible mechanisms in the form of project based offsets have been suggested for three main project types. The project types include: manure management, forestry, and destruction of ozone-depleted substances. However, a recent ruling from Judge Ernest H. Goldsmith of San Francisco's Superior Court states that the rules governing California's cap-and-trade system were adopted without a proper analysis of alternative methods to reduce greenhouse gas emissions. [145] The tentative ruling, issued on January 24, 2018, argues that the California Air Resources Board violated state environmental law by failing to consider such alternatives. If the decision is made final, the state would not be allowed to implement its proposed cap-and-trade system until the California Air Resources Board fully complies with the California Environmental Quality Act. [146]
In February 2007, five U. S. states and four Canadian provinces joined together to create the Western Climate Initiative (WCI), a regional greenhouse gas emissions trading system. [147] In July 2018, a meeting took place to further outline the cap-and-trade system. [148] In November 2018, Arizona, Montana, New Mexico, Oregon, Utah and Washington withdrew from the WCI. [149] [150]
On November 17, 2008 President-elect Barack Obama clarified, in a talk recorded for YouTube, his intentions for the US to enter a cap-and-trade system to limit global warming. [151]
SO 2 emissions from Acid Rain Program sources have fallen from 17.3 million tons in 1980 to about 7.6 million tons in 2008, a decrease in emissions of 56 percent. Ozone season NOx emissions decreased by 43 percent between 2003 and 2008, even while energy demand remained essentially flat during the same period. CAIR will result in $85 billion to $100 billion in health benefits and nearly $2 billion in visibility benefits per year by 2018 and will substantially reduce premature mortality in the eastern United States. A recent EPA analysis shows that implementation of the Acid Rain Program is expected to reduce between 20,000 and 50,000 incidences of premature mortality annually due to reductions of ambient PM2.5 concentrations, and between 430 and 2,000 incidences annually due to reductions of ground-level ozone. NOx reductions due to the NOx Budget Trading Program have led to improvements in ozone and PM2.5, saving an estimated 580 to 1,800 lives in 2008. [152]
The 2018 United States federal budget proposes to support clean energy development with a 10-year investment of US $15 billion per year, generated from the sale of greenhouse gas (GHG) emissions credits. Under the proposed cap-and-trade program, all GHG emissions credits would be auctioned off, generating an estimated $78.7 billion in additional revenue in FY 2018, steadily increasing to $83 billion by FY 2019. [153]
The American Clean Energy and Security Act (H. R. 2454), a greenhouse gas cap-and-trade bill, was passed on June 26, 2009, in the House of Representatives by a vote of 219-212. The bill originated in the House Energy and Commerce Committee and was introduced by Representatives Henry A. Waxman and Edward J. Markey. [154] The political advocacy organizations FreedomWorks and Americans for Prosperity, funded by brothers David and Charles Koch of Koch Industries, encouraged the Tea Party movement to focus on defeating the legislation. [155] [156] Although cap and trade also gained a significant foothold in the Senate via the efforts of Republican Lindsey Graham, Independent and former Democrat Joe Lieberman, and Democrat John Kerry, [157] the legislation died in the Senate. [158]
In 2018, under the auction, the reserve price, which is the price per ton of CO2 permit is $10. Some of the emitters obtain allowances for free, which is for the electric utilities, industrial facilities and natural gas distributors, whereas some of the others have to go to the auction. [159]
Coreia do Sul.
South Korea's national emissions trading scheme officially launched on 1 January 2018, covering 525 entities from 23 sectors. With a three-year cap of 1.8687 billion tCO2e, it now forms the second largest carbon market in the world following the EU ETS. This amounts to roughly two thirds of the country's emissions. The Korean emissions trading scheme is part of the Republic of Korea's efforts to reduce greenhouse gas emissions by 30% compared to the business-as-usual scenario by 2020. [160]
In November 2018, China approved pilot tests of carbon trading in seven provinces and cities – Beijing, Chongqing, Shanghai, Shenzhen, Tianjin as well as Guangdong Province and Hubei Province, with different prices in each region. [161] The pilot is intended to test the waters and provide valuable lessons for the design of a national system in the near future. Their successes or failures will therefore have far reaching implications for carbon market development in China in terms of trust in a national carbon trading market. Some of the pilot regions can start trading as early as 2018/2018. [162] National trading is expected to start in 2017, latest in 2020. China currently emits about 30% of global emissions, and it became the largest emitter in the world. When the market launched, it will be the largest carbon market in the world. It has made a voluntary pledge under the UNFCCC to lower CO2 per unit of GDP by 40 to 45% in 2020 when comparing to the 2005 levels. [163]
Trading is set to begin in 2018 after a three-year rollout period. It is a mandatory energy efficiency trading scheme covering eight sectors responsible for 54 per cent of India’s industrial energy consumption. India has pledged a 20 to 25 per cent reduction in emissions intensity from 2005 levels by 2020. Under the scheme, annual efficiency targets will be allocated to firms. Tradable energy-saving permits will be issued depending on the amount of energy saved during a target year. [162]
Renewable energy certificates.
Renewable Energy Certificates (occasionally referred to as or "green tags" [citation required]), are a largely unrelated form of market-based instruments that are used to achieve renewable energy targets, which may be environmentally motivated (like emissions reduction targets), but may also be motivated by other aims, such as energy security or industrial policy.
Carbon market.
Carbon emissions trading is emissions trading specifically for carbon dioxide (calculated in tonnes of carbon dioxide equivalent or tCO 2 e) and currently makes up the bulk of emissions trading. It is one of the ways countries can meet their obligations under the Kyoto Protocol to reduce carbon emissions and thereby mitigate global warming.
Market trend.
Trading can be done directly between buyers and sellers, through several organised exchanges or through the many intermediaries active in the carbon market. The price of allowances is determined by supply and demand. As many as 40 million allowances have been traded per day. In 2018, 7.9 billion allowances were traded with a total value of €56 billion. [122] Carbon emissions trading declined in 2018, and is expected to decline in 2018. [164]
According to the World Bank's Carbon Finance Unit, 374 million metric tonnes of carbon dioxide equivalent (tCO 2 e) were exchanged through projects in 2005, a 240% increase relative to 2004 (110 mtCO 2 e) [165] which was itself a 41% increase relative to 2003 (78 mtCO 2 e). [166]
Global carbon markets have shrunk in value by 60% since 2018, but are expected to rise again in 2018. [167]
In terms of dollars, the World Bank has estimated that the size of the carbon market was 11 billion USD in 2005, 30 billion USD in 2006, [165] and 64 billion in 2007. [168]
The Marrakesh Accords of the Kyoto protocol defined the international trading mechanisms and registries needed to support trading between countries ( sources can buy or sell allowances on the open market. Because the total number of allowances is limited by the cap, emission reductions are assured. ). [169] Allowance trading now occurs between European countries and Asian countries. However, while the USA as a nation did not ratify the Protocol, many of its states are developing cap-and-trade systems and considering ways to link them together, nationally and internationally, to find the lowest costs and improve liquidity of the market. [170] However, these states also wish to preserve their individual integrity and unique features. For example, in contrast to other Kyoto-compliant systems, some states propose other types of greenhouse gas sources, different measurement methods, setting a maximum on the price of allowances, or restricting access to CDM projects. Creating instruments that are not fungible (exchangeable) could introduce instability and make pricing difficult. Various proposals for linking these systems across markets are being investigated, and this is being coordinated by the International Carbon Action Partnership (ICAP). [170] [171]
Business reaction.
In 2008, Barclays Capital predicted that the new carbon market would be worth $70 billion worldwide that year. [172] The voluntary offset market, by comparison, is projected to grow to about $4bn by 2018. [173]
23 multinational corporations came together in the G8 Climate Change Roundtable, a business group formed at the January 2005 World Economic Forum. The group included Ford, Toyota, British Airways, BP and Unilever. On June 9, 2005 the Group published a statement stating the need to act on climate change and stressing the importance of market-based solutions. It called on governments to establish "clear, transparent, and consistent price signals" through "creation of a long-term policy framework" that would include all major producers of greenhouse gases. [174] By December 2007, this had grown to encompass 150 global businesses. [175]
Business in the UK have come out strongly in support of emissions trading as a key tool to mitigate climate change, supported by NGOs. [176] However, not all businesses favor a trading approach. On December 11, 2008, Rex Tillerson, the CEO of Exxonmobil, said a carbon tax is "a more direct, more transparent and more effective approach" than a cap-and-trade program, which he said, "inevitably introduces unnecessary cost and complexity". He also said that he hoped that the revenues from a carbon tax would be used to lower other taxes so as to be revenue neutral. [177]
The International Air Transport Association, whose 230 member airlines comprise 93% of all international traffic, position is that trading should be based on "benchmarking", setting emissions levels based on industry averages, rather than "grandfathering", which would use individual companies’ previous emissions levels to set their future permit allowances. They argue grandfathering "would penalise airlines that took early action to modernise their fleets, while a benchmarking approach, if designed properly, would reward more efficient operations". [178]
Measuring, reporting, verification.
Assuring compliance with an emissions trading scheme requires measuring, reporting and verification (MRV). [179] Measurements are needed at each operator or installation. These measurements are reported to a regulator. For greenhouse gases, all trading countries maintain an inventory of emissions at national and installation level; in addition, trading groups within North America maintain inventories at the state level through The Climate Registry. For trading between regions, these inventories must be consistent, with equivalent units and measurement techniques. [180]
In some industrial processes, emissions can be physically measured by inserting sensors and flowmeters in chimneys and stacks, but many types of activity rely on theoretical calculations instead of measurement. Depending on local legislation, measurements may require additional checks and verification by government or third party auditors, prior or post submission to the local regulator.
Execução.
Another troublesome aspect of cap-and-trade is enforcement. [181] Without effective MRV and enforcement, the value of allowances diminishes. Enforcement methods include fines and sanctions for polluters that have exceeded their allowances. Concerns include the cost of MRV and enforcement, and the risk that facilities may lie about actual emissions. The net effect of a corrupt reporting system or poorly managed or financed regulator may be a discount on emission costs, and a hidden increase in actual emissions.
According to Nordhaus (2007, p. 27), strict enforcement of the Kyoto Protocol is likely to be observed in those countries and industries covered by the EU ETS. [182] Ellerman and Buchner (2007, p. 71) commented on the European Commission's (EC's) role in enforcing scarcity of permits within the EU ETS. [183] This was done by the EC's reviewing the total number of permits that member states proposed that their industries be allocated. Based on institutional and enforcement considerations, Kruger et al. (2007, pp. 130–131) suggested that emissions trading within developing countries might not be a realistic goal in the near-term. [184] Burniaux et al. . (2008, p. 56) argued that due to the difficulty in enforcing international rules against sovereign states, development of the carbon market would require negotiation and consensus-building. [185]
Emissions trading has been criticised for a variety of reasons.
For example, in the popular science magazine New Scientist , Lohmann (2006) argued that trading pollution allowances should be avoided as a climate stabilization policy for several reasons. First, climate change requires more radical changes than previous pollution trading schemes such as the US SO 2 market. It requires reorganizing society and technology to "leave most remaining fossil fuels safely underground". Carbon trading schemes have tended to reward the heaviest polluters with 'windfall profits' when they are granted enough carbon credits to match historic production. Expensive long-term structural changes will not be made if there are cheaper sources of carbon credits which are often available from less developed countries, where they may be generated by local polluters at the expense of local communities. [186]
Research by Preston Teeter and Jorgen Sandberg has shown that the flexibility, and thus complexity, inherent in cap and trade schemes has resulted in a great deal of policy uncertainty surrounding these schemes. Such uncertainty has beset such schemes in Australia, Canada, China, the EU, India, Japan, New Zealand, and the US. As a result of this uncertainty, organizations have little incentive to innovate and comply, resulting in an ongoing battle of stakeholder contestation for the past two decades. [2]
Lohmann (2006b) supported conventional regulation, green taxes, and energy policies that are "justice-based" and "community-driven." [187] According to Carbon Trade Watch (2009), carbon trading has had a "disastrous track record." The effectiveness of the EU ETS was criticized, and it was argued that the CDM had routinely favoured "environmentally ineffective and socially unjust projects." [188]
Annie Leonard's 2009 documentary The Story of Cap and Trade criticized carbon emissions trading for the free permits to major polluters giving them unjust advantages, cheating in connection with carbon offsets, and as a distraction from the search for other solutions. [189]
Forest campaigner Jutta Kill (2006) of European environmental group FERN argued that offsets for emission reductions were not substitute for actual cuts in emissions. Kill stated that "[carbon] in trees is temporary: Trees can easily release carbon into the atmosphere through fire, disease, climatic changes, natural decay and timber harvesting." [190]
Permit supply level.
Regulatory agencies run the risk of issuing too many emission credits, which can result in a very low price on emission permits (CCC, 2008, p. 140). [123] This reduces the incentive that permit-liable firms have to cut back their emissions. On the other hand, issuing too few permits can result in an excessively high permit price (Hepburn, 2006, p. 239). [191] This an argument for a hybrid instrument having a price-floor, i. e., a minimum permit price, and a price-ceiling, i. e., a limit on the permit price. However, a price-ceiling (safety value) removes the certainty of a particular quantity limit of emissions (Bashmakov et al. ., 2001). [192]
Permit allocation versus auctioning.
If polluters receive emission permits for free ("grandfathering"), this may be a reason for them not to cut their emissions because if they do they will receive fewer permits in the future (IMF, 2008, pp. 25–26). [193]
This perverse incentive can be alleviated if permits are auctioned, i. e., sold to polluters, rather than giving them the permits for free (Hepburn, 2006, pp. 236–237). [191] Auctioning is a method for distributing emission allowances in a cap-and-trade system whereby allowances are sold to the highest bidder. Revenues from auctioning go to the government and can be used for development of sustainable technology [194] or to cut distortionary taxes, thus improving the efficiency of the overall cap policy (Fisher et al. ., 1996, p. 417). [195]
On the other hand, allocating permits can be used as a measure to protect domestic firms who are internationally exposed to competition (p. 237). Isso ocorre quando as empresas nacionais competem contra outras empresas que não estão sujeitas ao mesmo regulamento. This argument in favor of allocation of permits has been used in the EU ETS, where industries that have been judged to be internationally exposed, e. g., cement and steel production, have been given permits for free (4CMR, 2008). [196]
This method of distribution may be combined with other forms of allowance distribution. [58]
Distributional effects.
The US Congressional Budget Office (CBO, 2009) examined the potential effects of the American Clean Energy and Security Act on US households. [197] This act relies heavily on the free allocation of permits. The Bill was found to protect low-income consumers, but it was recommended that the Bill be made more efficient by reducing welfare provisions for corporations, and more resources be made available for consumer relief.
Distinct cap-and-trade systems can be linked together through the mutual or unilateral recognition of emissions allowances for compliance. Linking systems creates a larger carbon market, which can reduce overall compliance costs, increase market liquidity and generate a more stable carbon market. [198] [199] Linking systems can also be politically symbolic as it shows willingness to undertake a common effort to reduce GHG emissions. [200] Some scholars have argued that linking may provide a starting point for developing a new, bottom-up international climate policy architecture, whereby multiple unique systems successively link their various systems. [201] [202] In 2018, the U. S. state of California and the Canadian province of Québec successfully linked their systems. In 2018, the provinces of Ontario and Manitoba agreed to join the linked system between Quebec and California. [203]
The International Carbon Action Partnership brings together regional, national and sub-national governments and public authorities from around the world to discuss important issues in the design of emissions trading schemes (ETS) and the way forward to a global carbon market. 30 national and subnational jurisdictions have joined ICAP as members since its establishment in 2007. [204]
Ensuring the integrity of the European carbon market.
The European carbon market has grown substantially since its start in 2005. As it gets more sophisticated, it is important that the rules governing oversight of the market keep pace with its development and adequately address risks that may arise.
In principle, anyone can trade in the carbon market. The main categories of traders are energy companies and industrial companies that have obligations under the EU ETS, and financial intermediaries such as banks which also act on behalf of smaller companies and emitters.
Preventing market abuse and other market misconduct.
To ensure a safe and efficient trading environment and to enhance confidence in the market, the scope of revised rules governing financial markets applicable to the carbon market will now include all segments of the carbon market. These revised rules have been adopted by the Council and the European Parliament.
The reviewed Market Abuse Regulation applies since July 2018 to derivative financial instruments relating to emission allowances. For emission allowances or auctioned products based thereon, the Regulation will apply as of January 2018.
These revised rules mean that:
High integrity standards will apply to all market participants, who would be prohibited from engaging in manipulation through practices such as spreading false information or rumours; Companies with large installations regulated by the EU ETS will not be able to profit from inside information at the detriment of other market participants; Better transparency and simpler access to information (e. g. how much is traded and at what price on carbon exchanges) will be available to all market participants; Anti-money laundering safeguards (e. g. know-your-customer checks) will be extended to all segments of the carbon market.
Further implementing and delegated legislation has also been developed with the European Securities and Markets Authority (ESMA), which has published Technical Advice and draft Implementing and Regulatory Technical Standards under the Market Abuse Regulation, as well as under the Markets in Financial Instruments Directive and Regulation, also addressing specific issues for the EU ETS. These are now being subjected to the due scrutiny and adoption process by the European Commission, the Council and the European Parliament.
Other legislation.
Other legislation related to market oversight with a direct relevance to carbon markets includes:
Market oversight legislation.
Outros documentos.
European Securities and Markets Authority's consultations on financial market rules 01/2018 - Interplay between EU ETS Registry and Post Trade Infrastructure: Consolidated Report 22/05/2018 – Analysis by consultants Europe Economics and Norton Rose Fulbright for impact assessment on threshold for disclosure of non-public information on emission allowances 21/12/2018 - Communication on enhanced market oversight framework for the ETS Faq.
Open all questions.
Frequently Asked Questions: General (April 2018)
What is the aim of enhancing oversight of the carbon market?
The lion's share of transactions in emission allowances is in the form of derivatives (futures, forwards, options), which are already subject to EU financial markets regulation (including the current MiFID). However, transactions for immediate delivery of allowances (also called "spot" transactions) are currently not subject to equivalent rules at the EU level and are not supervised. In the past, some carbon exchanges even "packaged" emission allowances as financial instruments (futures with a few days delivery period) which showed that many market participants expected protections and benefits of trading in financial instruments and had a clear preference for allowances offered in such form over instantly available allowances (spot) traded on other venues.
To address this gap, the Commission has decided to come forward with proposals for a suitable regulation of this segment of the carbon market, which have now been politically agreed by the Council and the European Parliament. Under the reviewed MiFID, spot transactions will also be subject to EU financial markets regulation (for more information see MEMO/14/305 on the reviewed MiFID).
What is the expected benefit of applying financial markets rules to all segments of the carbon market?
The carbon market has experienced significant growth in size and sophistication. The European carbon market is the EU's flagship policy to reduce greenhouse gas emissions and has a crucial role to play over the coming decades in the transition to a low-carbon economy. As the Commission's analysis for the 2030 climate and energy framework has indicated, this transition requires significant investments in the coming decades. The carbon market therefore needs a robust level of oversight in order to facilitate investments in this low-carbon transition.
The rules also aim to provide a safe and efficient trading environment to enhance confidence in the carbon market in the wake of a series of unfortunate fraudulent activities which the market has experienced a few years ago.
The rules will enhance this market's overall transparency both in terms of data publicly available to all participants and the information submitted to supervisors. They will also ensure the ability of supervisors to act swiftly and decidedly on cases of misconduct, unfair treatment of clients and threats to orderly functioning of the market. All this will be to the benefit of other market participants and clients of professional traders and intermediaries (often EU Emissions Trading Scheme (ETS) compliance buyers relying on professional help to buy and sell emission allowances). The rules of the Markets in Financial Instruments Directive (MiFID) and Regulation (MiFIR) will deal with all those matters.
It is furthermore necessary to minimise the risk of market abuse – comprising both insider dealing and market manipulation - in the carbon market. By virtue of cross-references to the reviewed MiFID, the politically agreed rules on market abuse – more specifically the Market Abuse Regulation (MAR) and a Criminal Sanctions for Market Abuse Directive (CSMAD) – will deliver that (for more information see MEMO/13/774 on MAR and MEMO/14/78 on CSMAD).
For further references new MAD regime or rules shall comprise the Market Abuse Regulation (MAR) and the Criminal Sanctions for Market Abuse Directive (CSMAD).
New MiFID regime or rules shall comprise the new Markets in Financial Instruments Directive (MiFID) and the Markets in Financial Instruments Regulation (MiFID).
Last but not least, professional intermediaries in the carbon market will be required to apply customer due diligence measures as provided by the Anti-Money Laundering Directive . Such verification will complement the measures foreseen already at the level of the EU ETS registry and will contribute to overall enhanced protection of the market from money laundering risks.
Has the Commission prepared an impact assessment?
The Commission has duly considered the impacts of classifying emission allowances as financial instruments and submitting them to financial markets rules. Those impacts were presented in the impact assessment report accompanying the MiFID/MIFIR review proposals.
Why has the EU opted for coverage of all segments of the carbon market by financial market rules instead of proposing a separate, tailor-made regime or the coverage of the carbon market by energy market rules?
Any emerging regime for the spot carbon market would need to be fully coherent with the regulation of financial markets, in particular as the lion's share of the carbon market today consists of derivatives trading and is hence covered by financial market rules. Furthermore, the regulatory framework for the auctioning of emission allowances is closely aligned in key respects with the rules applicable for the secondary market in financial instruments. Any regime would also need to embrace adequate measures against market abuse, based on the MAR/CSMAD.
Coverage by the financial market rules further stabilises the carbon market and ensures its robustness. It also gives a clearer regulatory status to emission allowances. In eight years, the European carbon market has grown from around €6 billion annual turnover to up to €90 billion. According to analysts, it is expected to continue to grow. As the market grows, the coverage by financial market rules will provide a comprehensive regulatory framework that will still be adaptable to carbon market specificities.
The Commission has examined the merits of a tailor-made regime. However, as all stakeholders acknowledge, even a tailor-made regime would have to reproduce the overall approach and most of the technical solutions already found in the MiFID/MAD. It is also questionable whether the coverage of the spot segment (currently a very small part of the overall carbon market activity) would actually justify development of a fully separate regime, which would also bear the risk of inconsistencies with the rules that already govern the largest part of the market.
Lastly, placing the spot carbon trade under a potentially less stringent set of rules than is the case for carbon derivatives trade may eventually be detrimental to the spot segment's prospects.
The proposed rules are coherent with the Regulation on Energy Markets Integrity and Transparency (REMIT), where appropriate, for example as regards the duties to disclose inside information. The REMIT established a suitable framework for transparency and integrity in the electricity and gas markets. However, there are many quite specific elements in the REMIT which build on past legislation developed exclusively for the energy sector. Although there is a strong interplay between the energy and carbon markets, there are many additional sectors covered by the EU ETS. The application of energy markets specific rules would not be appropriate in their case.
How has the MiFID/MAD regime been tailored to EU ETS specificities?
Individual ETS compliance buyers buying and/or selling emission allowances on own account will be exempted from authorisation and compliance duties under the new MiFID, as well as entities like trade associations which will provide investment services in emission allowances as long as (i) this activity will be ancillary and (ii) they are not part of a financial group. If those two conditions are fulfilled, this exemption will also be available to companies other than financial intermediaries providing investment services to the group they are part of. Another optional specific exemption may be available to joint ventures of local electricity and gas undertakings, and of EU ETS operators under certain conditions.
The position limits regime provided for under MiFID for commodity derivatives does not apply to emission allowances.
Specific pre - and post-trade transparency requirements will be developed in due consideration of the specificities of emission allowance as an instrument of trade and the genuine carbon market features.
The new market abuse regime includes several carbon-specific elements for example, a specific definition of inside information, a tailored inside information disclosure duty, and a complete coverage of the primary market (auctioning).
Who may benefit from the optional exemptions for joint ventures and under which conditions?
Joint ventures of local electricity and gas undertakings, and of firms subject to the EU ETS may be exempt if Member States chose to provide this derogation to the participants in their territory. These exemptions may be available as long as these Member States submit such joint ventures to national requirements which are at least analogous to certain requirements under MiFID/MiFIR (authorisation and supervision, conduct of business, organisational requirements on conflicts of interest, participation in an investor-compensation scheme or professional indemnity insurance etc.).
The joint ventures may qualify for the optional exemptions provided that:
they provide investment services exclusively in commodity derivatives, emission allowances and/or derivatives thereof for the sole purpose of hedging the commercial risk of their clients (i. e. local electricity and gas undertakings or firms subject to the EU ETS; their clients jointly hold 100% of the capital or the voting rights, exercise joint control and would be exempt themselves under the analogous exemptions under MiFID in relation to own account dealing / market making in emission allowances if they were to carry out these investment services.
What carbon market instruments are effectively included in the scope of the new MiFID and MAD?
The new MiFID/MiFIR and MAR/CSMAD rules will fully apply to emission allowances and derivatives thereof (i. e. as for derivatives with traditional financial underlying and unlike commodity derivatives). They also cover other units recognised for compliance under the EU ETS.
MAR and CSMAD also apply to behaviour or transactions, including bids, relating to the auctioning on an auction platform authorised as a regulated market of emission allowances or other auctioned products based thereon, including when auctioned products are not financial instruments, pursuant to Regulation (EU) No 1031/2018.
Are Certified Emission Reductions (CERs) and Emission Reduction Units (ERUs) covered?
The rules cover secondary market transactions in some, but not all, CERs and ERUs – those that are held on an EU ETS registry account. How the credits from a specific project will be treated is determined by the detailed rules of the EU ETS Directive (article 11a) and its implementing measures. As a rule, the registry now holds only units recognised for compliance use under the EU ETS.
Who will be required to disclose inside information regarding emission allowances?
The duty to disclose inside information will be placed not on the issuer (as is the case of traditional financial instruments such as shares and bonds), but on the emission allowance market participant. The information to be disclosed – satisfying all essential criteria of inside information set out in MAR – will concern the physical activity of the disclosing party (e. g. on capacity and utilisation of installations).
At the same time, MAR includes an exemption for those participants in the emission allowance market the activity of which (expressed in terms of annual emissions or thermal input or a combination thereof) falls below a certain minimum threshold. That threshold will be determined by the Commission by means of a delegated act.
As a result, the disclosure duty will apply to only those entities, the activity of which on an individual basis can have material impact on the price formation of emission allowances or the (consequential) risks of insider dealing.
Emission allowance market participants will typically be EU ETS operators in the sense of the EU ETS directive, but in specific cases this category may also cover other persons like trading entities belonging to a group which also includes one or more EU ETS operators with physical activities above the minimum threshold set.
How do the final MiFID texts compare to the initial Commission proposals?
The overall architecture of the Commission proposals concerning emission allowances remains intact. That is to say that reviewed MiFID rules applicable to traditional financial markets (including emission allowances derivatives trading on leading exchanges) will also apply to the emission allowances themselves. This will put them on equal footing with the derivatives transactions concerning the transparency, investor protection and integrity.
The main difference is that specific exemptions from MiFID/MiFIR for carbon market participants have been recast and two new exemptions added:
Exemption for all EU ETS operators dealing on own account in emission allowances; Optional (nationally decided) exemptions for joint ventures of firms subject to the EU ETS under certain conditions (for more see question above on the optional exemptions).
Impact of the proposal (April 2018)
Once financial market rules are extended to all segments of the carbon market, are we not exposing the carbon market to the risk of increasing speculation, and as a result, price volatility and disorderly pricing of carbon?
The European carbon market has grown substantially from around €6 billion turnover in 2005 to up to €90 billion. Fluctuations in the price of carbon under the EU ETS reflect the balance of supply and demand, driven by market fundamentals. Empirical evidence shows that historically high levels of volatility in carbon prices in 2005 to 2007 are due to some very specific reasons. There is no evidence of any pattern between the influx of investors and volatility in carbon prices.
Furthermore, financial intermediation is a necessary part of a market. Market intermediaries typically fill supply or demand voids by standing ready to buy or sell from market end-users (EU ETS compliance buyers) on a continuous basis. Such participants also may enhance the price discovery process by collecting and bringing information to the market. The lion's share of the carbon market today already consists of futures and other derivatives trading and is hence covered by financial market rules. That dominance of the financial segment has not led to any particular disturbances neither in the carbon market nor for the compliance by the EU ETS compliance buyers. It is the unregulated spot segment that has attracted illicit behaviour a few years ago.
Can we be confident that new demanding rules will not curb liquidity and thus hurt the carbon market?
Sim. Otherwise futures and forwards would not have become the dominant segment of the European carbon market. Stricter regulatory standards will provide for a safer and more reliable trading environment. Carbon market participants already now display a clear preference for concluding transactions in emission allowance derivatives on MiFID-licensed exchanges and mostly have their transactions cleared by a clearing house.
How will the new framework apply to… (April 2018)
…ETS compliance buyers?
The application of MiFID and MAD will not limit the possibilities of ETS compliance buyers to buy or sell allowances on the market, be it on exchange or over-the-counter. In most cases, where their emission allowances trading activity would be for their own account (hence not executing client orders), they will be dispensed from the duty to have a MiFID-licence normally required from investment firms. An additional requirement is that there is no use of high frequency trading technique. Authorisation under MiFID will not be required from those entities that will provide services relating to the emission allowances market exclusively for their group. Finally, joint ventures of ETS compliance buyers may also be dispensed from this duty in those Member States which have provided for an analogous regime at national level. Pursuant to the new market abuse regime, all ETS compliance buyers will need to respect the prohibitions of insider dealing and market manipulation. Emission allowance market participants (entities with emissions or rated thermal input above the specified threshold) will also need to follow additional obligations like disclosure of inside information, holding an insiders' list and notifications of own transactions by managers.
… professional traders in emission allowances?
As a rule, entities providing investment services specialising in emission allowances (e. g. reception and transmission of orders and their execution, safe-keeping and administration of clients' assets) would be required to hold a MiFID licence and comply with all MiFID organisational and operational requirements (including know-your customer checks, transactions reporting, record keeping and investor protection rules). It is only normal for companies with this kind of activity to be covered by financial market organisational and conduct of business rules and be subject to the supervision of financial regulators.
Traders in emission allowances may be eligible for an exemption from MiFID authorisation (e. g. on the basis of restricted and ancillary character of a firm's investment services activity relating to emission allowances or derivatives thereof and subject to additional strict criteria). However, in a large majority of cases, these traders also provide services involving derivatives of emission allowances or of commodities, and are hence already required to hold a MiFID licence, independent of the new framework for the spot carbon market.
…carbon exchanges?
Trading venues offering contracts for spot trade in emission allowances and not currently subject to the MiFID, would be expected to obtain a MiFID authorisation in accordance with their specific profile (as a regulated market, a multilateral trading facility (MTF), or the new category of organised trading facility (OTF)).
The application of the revised MiFID in their case would mean that in order to continue spot trading activity they would need to make necessary adaptations to be in a position to seek a MiFID authorisation.
Relation with other measures (April 2018)
Will financial services legislation cross-referring to MiFID also apply to the spot trade in emission allowances?
A number of other EU financial-market measures cross-referring to the MiFID would also be applicable to transactions and other market activity involving emission allowances. Those impacts would include, for example:
A number of other EU financial-market measures cross-referring to the MiFID would also be applicable to transactions and other market activity involving emission allowances. Those impacts would include, for example:
At the same time emission allowances trade would fall outside the scope of the following EU financial market measures:
Will the classification have a knock-on effect on the grounds of capital requirements legislation?
Legislation on capital requirements [1] only applies to credit institutions and investment firms. Most ETS compliance buyers which have limited trading activity, ancillary to their main business will be exempt from the MiFID and thus also exempt from such capital requirements.
Professional traders with investment services or activities involving emission allowances are typically also active in the trading of derivatives of emission allowances or of commodity derivatives. As a result, and without prejudice to currently applying transitional exemptions [2] , they are therefore anyhow covered by capital requirements stemming from the MiFID and the Capital Requirements Directive. This means that any future coverage of emission allowances by the MiFID would not impact their treatment under the Capital Requirements Directive. Such impacts could materialise in the unlikely case that a professional trader specialises solely in the spot trade of emissions allowances and is covered by the MiFID registration duties only on those grounds.
Will the clearing and settlement systems replace the system of EU ETS registries?
No, the system of EU ETS registries will not be redundant as a result of coverage of emission allowances by financial markets rules. Clearing houses and settlement systems will continue to provide support services to the trading pursued on - or off-exchange and will be complementary to the functions performed by the single Union registry. The registry does not record market transactions, but does record any resulting physical delivery of allowances. Furthermore, it also performs other (supporting) functions, such as recording the creation of allowances, surrendering for compliance with the EU ETS and their deletion, as well as free allocation and auctioning.
Will classification of emission allowances as financial instruments mean that they are to be treated as financial assets?
The proposals on carbon market oversight will not alter the fundamental purpose of the emission allowances. Their classification as financial instruments is made for the purposes of application of the EU financial markets regulation and is not aimed to deal with the legal nature of emission allowances (on the grounds of private law) or their accounting treatment.
Will the classification have an impact on the accounting treatment of emission allowances?
No, the classification of allowances as a financial instrument would have no direct impact on the accounting treatment of emission allowances under the Union law. Classification of emission allowances for accounting purposes depends on the criteria set by accounting standards only, which are under the authority of the International Accounting Standards Board (IASB).
The IASB currently lists emission trading systems as of its research projects. However, there are currently no harmonised accounting standards for emission allowances at international level. National approaches in a few Member States may already require companies to recognise them as regular (financial) assets. In absence of a harmonised accounting treatment of emission allowances at international level the Member States take individual responsibility in this regard.
When will the new MiFID and MAD rules apply to the emission allowances?
In the specific case of emission allowances (and auctioned products based thereon) the new MIFIR/MiFID and MAR/CSMAD frameworks will enter into application on the same date, 30 months after the entry into force of the new MIFIR/MiFID which in turn is envisaged on the 20th day following its publication. Thus the start of application is expected towards the end of 2018. The delayed application of MAR/CSMAD in the specific case of emission allowances is due to the fact that the new MIFIR/MIFID rules classifying emission allowances as financial instruments will not be in application until 30 months after the entry into force of MIFIR/MIFID.
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