Factbox: Carbon trading schemes around the world

 

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(Reuters) - Carbon trading schemes are emerging all over the world as governments try to meet greenhouse gas emissions reduction targets in the fight against climate change.

Thailand and Vietnam this week announced plans to launch emissions trading schemes. The European Union has agreed to link its own carbon market with Australia's scheme in 2018 and has struck a deal with China to help with the design and implementation of its emissions trading schemes.
These moves are encouraging small steps towards a potential international scheme in the future, carbon analysts say.

Under cap-and-trade schemes, companies or countries face a carbon limit. If they exceed the limit they can buy allowances from others. They can also buy carbon offsets from outside projects which avoid emissions, often from developing countries.

Following is a list of established and emerging schemes:

ESTABLISHED SCHEMES:
1. Kyoto Protocol: Mandatory for 37 developed nations, excluding the United States which never ratified the pact. Launched: 2005. Covers: All six main greenhouse gases. Target: Five percent average cut in 1990 emissions in 2008-2012 first phase. How it works: Rich countries cut greenhouse gases at home or buy emissions rights from one other - if one country stays within its target it can sell the difference to another emitting too much. Or they can buy carbon offsets from projects in developing countries under Kyoto's Clean Development Mechanism.

2. European Union Emissions Trading Scheme. Launched: 2005 Covers: Nearly half of all EU CO2 emissions, 40 percent of greenhouse gas emissions. Mandatory for all 27 EU members, plus Iceland, Liechtenstein and Norway. Target: 21 percent emissions cut below 2005 levels by 2020. How it works: Member states allocate a quota of carbon permits to some 11,000 industrial firms and power plants. The lion's share of permits are currently allocated for free but about half of permits will be auctioned from 2013. More than 3,000 airline operators joined the scheme in 2012. Firms can buy a limited number of U.N.-backed carbon emission offsets if that works out cheaper than cutting their own emissions.

3. New Zealand emissions trading scheme: Launched: 2010. Electricity generators, manufacturers and the transport sector hand over to the government a carbon permit for every second tonne of greenhouse gases they emit. A bill last month postponed indefinitely plans to phase-out free handouts of permits and include agriculture in the scheme.

4. Northeast U.S. states' Regional Greenhouse Gas Initiative (RGGI). Launched: 2009. Covers: Carbon from power plants in nine northeast states. Target: Cut power sector emissions by 10 percent below 2009 levels by 2018.

5. Japan: Tokyo metropolitan trading scheme: Launched: 2010. Covers: Around 1,400 top emitters. Target: Japan aims to cut emissions by 25 percent by 2020 from 1990 levels. How it works: Tokyo city sets emissions limits for large factories and offices which can use technology such as solar panels and advanced fuel-saving devices.

6. Australia domestic emissions reduction scheme. Launched: July 2012. 300 of the biggest polluters, from coal plants to smelters, initially pay A$23($23) per tonne of CO2 emitted. They are banned from using U.N. carbon offsets until the system is replaced by a nationwide carbon trading scheme in July 2015 but can use a limited number of domestic credits. The EU has agreed to link its ETS with Australia's scheme by 2018.

EMERGING SCHEMES:
1. Californian scheme. Launch: 2013. Covers: Emissions from power plants, manufacturing and, in 2015, transportation fuels. Target: Cut the state's emissions to 1990 levels by 2020. How it works: Polluters receive 90 percent of permits they need to cover emissions for free at the outset and remaining permits to be offered at quarterly auctions, which begin this November.

2. Western Climate Initiative (WCI). Launch: 2013. Covers: California and Quebec. Target: Cut emissions 15 pct below 2005 levels by 2020. How it works: Polluters such as power plants would have to buy offsets to cover their emissions. Transport included in 2015.

3. South Korea emissions trading scheme. Launch: 2015. Covers: Around 500 companies, collectively responsible for 60 percent of the country's annual emissions. Target: Government has set a 2020 emissions reduction target of 30 percent below forecast "business as usual" levels

4. Mexican voluntary CO2 trading scheme. Launch: Unknown A commission has authority to implement a cap-and-trade system to help regulated sectors meet emissions cut targets which will eventually be set but the creation of a carbon market is not mandatory. Target: Mexico aims to cut emissions by 30 percent from business-as-usual levels by 2020.

5. Taiwan carbon offset scheme. Launch: Unknown. Covers: Nearly 270 companies responsible for more than half of Taiwan's greenhouse gas pollution have agreed to supply emissions data to the government to help it launch a carbon offset scheme. Target: Taiwan aims to cut CO2 to 2005 levels by 2020.

6. India: mandatory energy efficiency trading scheme. Launch: Trading is set to begin in 2014 after a three-year rollout period. Covers: Eight sectors responsible for 54 percent of India's industrial energy consumption. Target: India has pledged a 20-25 percent reduction in emissions intensity from 2005 levels by 2020.

7. China: Pilot carbon trading schemes in seven provinces and cities - Beijing, Chongqing, Guangdong, Hunan, Shanghai, Shenzhen and Tianjin. Launch: Some as early as 2013. They will cover energy production and various energy-intensive industries. Officials have said a national scheme might not emerge this decade as China plans to launch additional test schemes in 2016. Target: Cut CO2 emissions per unit of GDP to 40-45 percent below 2005 levels by 2020.

8. Thailand: voluntary emissions market. Launch: October 2014. Sectors not specified but government said it will discuss emissions targets with participants.

9. Vietnam: national scheme. Launch: By 2018. Details not yet revealed. Target: Cut greehnhouse gas emissions per unit of GDP by 8-10 percent below 2010 levels by 2020.

Sources: Reuters, Thomson Reuters Point Carbon
(Compiled by Nina Chestney; Editing by Catherine Evans)

California Adopts Limits on Greenhouse Gases

By FELICITY BARRINGER


Published: October 20, 2011

 SACRAMENTO — Fifteen months after a similar effort died in Congress, California regulators adopted a system on Thursday for combating climate change that sets limits on greenhouse gas emissions and creates market incentives to encourage oil refineries, electricity generators and other polluters to clean up their plants.

The eight members of the Air Resources Board who were present gave a unanimous vote of approval. “We are charting new ground here,” said Lydia
. Kennard, a board member, just before the vote. “The country and the world are watching.” The plan will take effect in 2013.

The board members seemed keenly aware that they were giving the state a policy prescription regarded as poison in some parts of the country. But in an interview before the vote, the board’s chairwoman, Mary D. Nichols, invoked the state’s history of national environmental leadership, suggesting that if California acted first, the rest of the country would eventually come around.

“We are staking out new ground in the battle against global warming,” she said. “And we are doing it in difficult times and doing it in a way we believe others will want to follow.”

More than 70 people, from environmentalists to lawyers for the petroleum industry to union members fearful for their refinery jobs, addressed the board before the vote. The air regulators have been working for four years to devise an efficient system that will avoid problems that have dogged the European carbon market, like missed targets or pollution allowances that critics found too generous.

The plan arises from trailblazing legislation signed in 2006 by Arnold Schwarzenegger, then the governor, requiring California to develop regulations that will reduce greenhouse gas emissions to 1990 levels by 2020. The market incentives, known as cap and trade, are considered crucial to meeting that target.

California’s ambitions are in striking contrast to those of much of the rest of the nation. A conservative political rebellion against cap and trade helped the Republican resurgence in 2010. Attacking the plan as “cap and tax,” opponents argued that it would impose excessive costs on energy industries in a weak economy.

In a cap-and-trade system, the government sets a cap on the amount of carbon dioxide and other greenhouse gases that refineries, chemical companies, cement plants and other businesses are allowed to release. It then issues permits to those companies allowing them to emit a certain amount.

Because some companies can rein in their emissions more easily or at less cost than other businesses, the
can profit by selling extra permits through the market to companies that find the cost of pollution-control technology prohibitive. In theory this ensures that heat-trapping gases are reduced at the lowest possible cost.

California’s nascent market already reaches beyond its borders. While most of the businesses responsible for reducing their emissions over time are based here, they can offset up to 8 percent of their emissions by buying so-called offset credits generated anywhere in the country by other ventures that cut their emissions.

Landfill operators around the Southeast have been isolating and destroying methane, for example, earning offset credits that can one day be sold on California’s carbon market. Intermediaries identify projects that are reducing emissions, verify that they are successful and seek credits for them.

This offset market cushions the polluters’ transition to expensive new technologies that scrub carbon dioxide from their emissions.

Yet skeptics of the program are not hard to come by. Steven F. Hayward, a specialist on environmental issues with the conservative American Enterprise Institute, said he doubted that the new program would have much of a future.

“In the absence of a national program or even regional programs getting much traction, I don’t think this will go far,” he said. “It will probably get off with a bang, with some big early trades capturing some low-hanging fruit. But then it will wither and die an ignominious death.”

In the short run, however, there have already been economic winners. While most of the 360 projects whose offsets have been approved are landfills, the biggest winner so far in this fledgling market may be Clean Harbors, a Massachusetts company whose hazardous waste disposal operation in El Dorado, Ark., has spent years destroying old refrigerants. Known as chlorofluorocarbons, the pre-1995 refrigerants are potent greenhouse gases.

According to a list of approved offset projects prepared by the Climate Action Reserve, a nonprofit organization whose standards are nearly identical to those developed by state regulators, the Clean Harbor site in Arkansas has already offset the equivalent of 2.3 million tons of carbon dioxide emissions, which translates to 2.3 million offset credits worth $10 to $11 each.

“The beauty of the California program is that it allows offsets from anywhere in the United States,” said Gary Gero, president of the Climate Action Reserve. “You don’t have to pass a litmus test that you believe in climate change,” he said. “If you think Californians are crazy, it doesn’t bar you from participating.”

The pre-1995 refrigerants, whose production is now banned worldwide because of their role in thinning the earth’s protective ozone layer, would otherwise probably have been recycled into the innards of older grocery freezer compartments.

“This is a clear case where the carbon market has provided the financial incentive to make an environmental improvement over the status quo,” said Arjun Patney, a carbon market strategist at Cargill, the agricultural and food processing giant, which markets the credits from the Arkansas operations.