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Greenhouse Gas Market Greenhouse Gas Market 2008 Piecing Together a Comprehensive International Agreement 2008 for a Truly Global Carbon Market

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Greenhouse Gas Market Greenhouse Gas Market 2008 Piecing Together a Comprehensive International Agreement 2008 for a Truly Global Carbon Market IETA - MAKING MARKETS WORK FOR THE ENVIRONMENT GREENHOUSE GAS MARKET GREENHOUSE GAS MARKET 2008 PIECING TOGETHER A COMPREHENSIVE INTERNATIONAL AGREEMENT 2008 FOR A TRULY GLOBAL CARBON MARKET Geneva Office (HQ) Rue Merle d’Aubigné, 24 Genève, Switzerland, CH -1207 Phone: + 41- 22 - 737 05 00 Fax: + 41- 22 - 737 05 08 www.ieta.org info @ ieta.org Greenhouse Gas Market Report 2008 Piecing Together a Comprehensive International Agreement for a Truly Global Carbon Market Editor: Kim Carnahan Editorial Board: Mark Proegler, David Hone, Jean-Yves Caneill, Lee Solsbery, Aimee Barnes, Edwin Aalders, Henry Derwent. Design: Heiko Ulrich, Marc Ziegler, www.formgeber.de Acknowledgements: IETA expresses its gratitude to all the authors for their contributions and all those who worked on the publication. Disclaimer: The views expressed in this publication are those of the authors and do not necessarily represent the views of the Editor, IETA or its member companies. Contact: International Emissions Trading Association rue Merle d’Aubigné, 24 Genève, Switzerland, CH-1207 Tel: +41 22 737 0500 Fax: +41 22 737 0508 Web: www.ieta.org Email: [email protected] © International Emissions Trading Association (IETA). Th is document may be freely used, copied and distributed on the condition that approval from IETA and the Author(s) is fi rst obtained and that each copy shall contain this copyright notice. i Greenhouse Gas Market Report 2008 Introduction Message from the Chairman Over this past year we have continue to examine and comment on existing and pro- built upon meaningful posed policies and their impacts on the market. With the growth in the carbon mar- largest and most diverse base of any trade group focused on kets, in new policy develop- carbon markets, IETA is uniquely positioned to provide in- ment, and in IETA. Our or- dustry’s view on the composition of demonstrably fair and ganisation is now comprised transparent GHG markets. As we affi rm in our vision state- of approximately 185 cor- ment, “IETA is dedicated to the establishment of eff ective porations from the indus- market-based trading systems for greenhouse gas emis- trial and service sectors. We sions.” have expanded our presence in Geneva, Washington, D.C, Th e year ahead will be one of continued growth and chal- and Ottawa. Our increasing lenges for IETA and its members. Climate policy should eff orts come in synchronicity with final plans for Phase 3 of take new shape under an incoming US President, Japan and the EU ETS, rapid activity around the US and within the US South Korea are road-testing GHG trading, and Australia Congress, and Australia’s hustle to develop a nation-wide will conclude market design proposals. In addition, building carbon market. IETA is and continues to be a growing, vi- upon the success of the CDM will continue to be essential tal organisation in which diverse constituents can debate cli- during the negotiations prior to COP 15 in Copenhagen. mate change policies and reach agreement on how best to achieve climate protection through the use of markets. Hen- I look forward to the coming year and in working with all of ry Derwent took the helm at IETA in early 2008, further in- you to aggressively promote our agenda in 2009. vigorating its capacity to contribute to design aspects of glo- bal emissions trading regimes. His leadership promises to steer IETA through new territories, in a direction that will gratify the growing membership. Th e eff orts of our working groups and the IETA secretariat have continued to positively aff ect the policy-making proc- Jack Cogen ess in 2008. Since the issues are global, our presence must be global as well. We are working in all regions of the world, commencing activities in nascent markets, and strengthen- ing offi ces where markets are taking foothold. Th e world- wide agenda for climate policy is progressing at an ever-in- creasing rate to shape national, regional and global respons- es to climate change. In addition to the knowledge embed- ded within the membership, we are continuing to work with experts around the world to supplement our eff orts. IETA has recently completed reports with external research or- ganisations on important issues such as CDM governance and reformation. Our work will be communicated around the world at important policy-making events. All of this activity assures that IETA is recognized by busi- ness, government and the environmental and research com- munities as the private sector source of information on is- sues that can aff ect the carbon market. We have and will ii Message from the President Th is 2008 GHG Market Re- of carbon fi nance and emissions trading. Articles includ- port, titled “Piecing Togeth- ed here address how the emissions trajectories of developing er a Comprehensive Interna- countries can be shift ed with the help of carbon fi nance, and tional Agreement for a Truly how carbon fi nance can better incentivise the development Global Carbon Market” cov- and deployment of low-carbon technology. ers a range of topics and re- gions that is more compre- Activity in the global carbon markets over the past year has hensive than ever before. Ar- been extensive. IETA has responded by increasing focus on ticles in this year’s Report emerging markets, CDM reform, and the ongoing nego- demonstrate how emissions tiations for a post-2012 agreement. As the IETA member- trading systems are not on- ship continues to grow— over 180 companies and count- ly spreading out across the ing— so does its capacity to contribute to relevant debates globe but are also increasing in scope as new sectors and around the world. IETA’s reach, and insight, is increasing al- gases are brought into the fold. most daily. Market participants in the EU ETS, which maintains its po- Th ere is something for everyone in this Report; it includes sition as the leader of the global carbon market, are now ea- the most comprehensive coverage of issues of immediate in- gerly awaiting the fi nalisation of Phase III negotiations, terest that IETA has been privileged to bring together in one which will result in a considerable expansion of that regime publication. Th e issues discussed refl ect the immense expe- and a move towards signifi cantly increased levels of auction- rience and enlightened viewpoints of the IETA membership ing. Developments around the world are increasingly steal- and a few invited guests who agreed to share their special ing the limelight from the EU-ETS, however. Developments knowledge. Th ese authors dig far into the development of in the US Congress and in the US regional schemes have at- emissions trading around the world, to explain what is most tracted wide attention in 2008, and the new US President important for businesses as well as policymakers. brings with him a new approach to global climate change. Activity in Australia, India, China, and many other coun- tries around the world are also drawing increased attention. Th is Report’s country-specifi c articles are wide-ranging and cover all of these areas and more. Th e success of the CDM has expanded over the last year, Henry Derwent with almost 4000 projects now in the pipeline. With suc- cess and expansion, however, come growing pains. Project developers have noted signifi cant diffi culties implement- ing Programmes of Activities, making the CDM work for road transport, and drawing project fi nance to underrepre- sented host countries. Similarly, concerns have arisen over the CDM’s environmental integrity and technology trans- fer benefi t and about the duration of project mechanisms in the post-2012 regime. All of these issues are thoroughly ad- dressed herein. In addition to all of these topics, IETA also made a point this year to ask authors to ‘think outside the box’ and ad- dress issues that, while complex, push forward to the future iii Greenhouse Gas Market Report 2008 Contents Introduction 00 Message from the Chairman ii 11 Message from the President iii The Global Carbon Market 01 The First Six Months of 2008 2 Endre Tvinnereim, Point Carbon 02 Australian Policy and Market Developments 4 Martijn Wilder and Louisa Fitz-Gerald, Baker & McKenzie 03 Recent Market Developments in India 10 Malini Mehra, Centre for Social Markets 04 Canada’s Federal and Provincial Developments 14 Gray E. Taylor, Bennett Jones LLP 05 Recent Carbon Market Developments in Japan 20 Tsuneo Takahashi, with Hirokazu Funatsu, Natsource Japan Co., Ltd. 06 The CDM Market in China: Developments and Challenges 24 DUAN Maosheng, Tsinghua University 07 Market Developments at the US Federal Level: A Federal Cap-and-Trade Programme within 4 Years 29 David Hunter, Ph.D., International Emissions Trading Association 08 Regional Trading Schemes in the United States 32 Jason R. Patrick, Merrill Lynch Commodities 09 The Road to New Zealand’s Emissions Trading Scheme 35 John Carnegie, Genesis Energy 10 The Korean Carbon Market: Getting Past the Toddling Stage 39 Hyoung Kun (Leo) Park, Korea Development Bank 11 The MRV Scheme for GHG Reduction in Taiwan 43 Wen- Cheng Hu, Fei-Chiao Yang, Yu-Tsang Lu, Zen Wang, Industrial Technology Research Institute Robert Smith, YC Consultants, Ltd. 12 The Russian Carbon Market: An Analysis of Barriers to Investing in Russian JI Projects 48 Tatiana Fayzullina, Gazprom Marketing & Trading Ltd European Union Emission Trading Scheme 13 Broader and Deeper: Proposed Reforms to the Third Phase of the EU ETS 52 Robin Rix and Leanne Paul, Clifford Chance LLP 14 Aviation and the EU Emissions Trading Scheme: Turbulence Ahead? 56 Nicholas Rock and Tim Baines, Dewey & LeBoeuf 15 CCS in the European Union: Policy Developments to Turn Words into Action 60 Frede Cappelen and Lyndsey Corrigan, Statoil Hydro 16 Forest Carbon Credits in the EU ETS 63 Eric Bettelheim, Sustainable Forestry Management Ltd.
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