Review Existing and Proposed Emissions Trading Systems

Reviewing Existing and Proposed Emissions Trading Systems

Executive Summary

• Purpose: Prepared for the IEA Standing Group on Long-Term Cooperation in October 2010.
• Prepared By: IEA Climate Change Unit.
• Focus: Analysis of existing and proposed emissions trading systems.

Introduction

• IEA Overview:
  • Established in November 1974.
  • Mandate: Promote energy security and sound energy policy.
  • Member countries: 28 advanced economies.
  • Key objectives: Secure energy access, promote sustainable policies, improve market transparency, support global collaboration, and find solutions to global energy challenges.

Basics of Emissions Trading

• Nature of Emissions Quotas: Assigned limits on greenhouse gas emissions.
• Participants and Timeframes: Varies by system (e.g., industries, regions).
• Coverage: Different sectors and regions (e.g., power generation, transport, industry).
• Cap and Allocation of Allowances: Caps set and allowances allocated through auctions or free allocations.
• Enforcement: Ensuring compliance and enabling trading mechanisms.
• Reducing Consumer Impact: Mechanisms to protect consumers and emissions-intensive sectors.
• Offsets and Linking: Allowing participation in other systems to offset emissions.

The Need for Ambitious Targets

• Importance: To achieve significant reductions in greenhouse gas emissions.

Current and Proposed Emissions Trading Systems

• United Kingdom ETS (UK ETS): UK’s national scheme.
• New South Wales Greenhouse Gas Reduction Scheme (NSW): Australian state-level scheme.
• European Union ETS (EU ETS): Comprehensive EU-wide scheme.
• Norway: National scheme with links to EU ETS.
• Alberta, Canada: Provincial scheme.
• Switzerland: National scheme.
• New Zealand: National scheme.
• Regional Greenhouse Gas Initiative (RGGI): U.S. regional scheme.
• Tokyo: Local government scheme.
• UK CRC Energy Efficiency Scheme: UK’s carbon reduction scheme.
• Western Climate Initiative (WCI): U.S. and Canadian regional scheme.
• California: State-level scheme.
• Australian Carbon Pollution Reduction Scheme (CPRS): National scheme.
• H.R.2454: American Clean Energy and Security (ACES) Act of 2009: U.S. federal proposal.
• Other Schemes Under Consideration: Various proposals and ongoing discussions.

Design Features and Key Lessons

• Coverage: Different sectors and regions.
• Cap Setting: Varied approaches to setting caps.
• Overall Costs: Management of costs and financial implications.
• Price Uncertainty and Volatility: Measures to stabilize prices.
• Long-term Investment Signals: Promoting certainty for low-carbon investments.
• Free Allocation and Auctioning: Methods for distributing allowances.
• Competitiveness: Addressing competitiveness concerns.
• Use of ETS Revenue: Utilization of funds generated from emissions trading.
• Market Oversight: Ensuring fair and transparent trading practices.

Complementary and Supplementary Policies

• Need for additional policies: To complement and enhance the effectiveness of emissions trading systems.

Conclusions

• Summary: Detailed analysis of various emissions trading systems and key design features.
• Implications: Importance of ambitious targets and comprehensive policies for achieving climate goals.

References

• List of references: Not provided but available for detailed analysis.

Annex: Design Details of Emissions Trading Systems

• Summary Tables: Detailed breakdowns of various aspects of emissions trading systems.