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ETSS AROUND THE WORLD: A STATUS UPDATE
Chris Kardish19 September 2019
International Carbon Action Partnership Secretariat (ICAP)
1. The global spread of ETSs and key statistics
2. A more detailed, region-by-region perspective
3. Key reforms in established systems
4. Outlook in the near future
International Carbon Action Partnership 2
Outline
International Carbon Action Partnership 3
Global ETS, 2019• 20 ETSs worldwide, regulating emissions from 4.5 billion tons
CO2e
• 6 ETSs planned and 12 under consideration
Global emissions coverage over time
2005: 2.1 GtCO₂e ≈ 5% of global emissions
2019: 4.5 GtCO₂e ≈ 8% of global emissions
2020: 7.5 GtCO₂e ≈ 14% ofglobal emissions (China!)
Key statistics on emissions trading 2019
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8% of global GHG emissions
are covered by an ETS.
37%of global GDP are using emissions trading.
Jurisdictions making up
1/8 of the global population livesunder an ETS in force.
1. The global spread of ETSs and key statistics
2. A more detailed, region-by-region perspective
3. Key reforms in established systems
4. Outlook in the near future
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Outline
Europe – over ten years of experience with emissions trading
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EU Switzerland
Kazakhstan
Ukraine
Implemented Scheduled
North America – new systems and other potential expansions at sub-national level
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Nova Scotia
QuébecOntario (no longer operating)
Regional Greenhouse Gas Initiative (RGGI)
New JerseyVirginia Massachusetts
California
Oregon
New Mexico
Latin America– Mexico coming online; other key economies considering ETS
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Mexico
• ETS simulation completed in 2018
• Pilot ETS scheduled for 2020
• Mandatory ETS scheduled for 2023
Chile
Colombia
Three systems under consideration
Asia–Pacific: the most active region globally
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• 12 operating ETS• 2 scheduled ETS• 4 additional systems
under consideration
1. The global spread of ETSs and key statistics
2. A more detailed, region-by-region perspective
3. Key reforms in established systems
4. Outlook in the near future
International Carbon Action Partnership 11
Outline
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1. Increases in ambition – increasing rate at which cap reduces in size (“cap decline factor”)
2. Allocation – increasing auctioning and better targeting free allocation to those sectors that need it most
3. Market Stability – introduction of instruments to manage either allowance quantity or price, reflecting experience of the past (leading toward “hybrid instruments”)
4. Offsets – increasing the emphasis on domestic abatement, at least in the short-term
Key reforms in established systems in preparation for the 2020’s
The spread and diversification of market stabilityinstruments
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MARKET STABILIZATION AT THE UPPER BOUND
MARKET STABILIZATION AT THE LOWER BOUND
Auctioning ranges across ETSs
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Notes: * Auctioning is the only RGGI-wide allocation approach, but the actual percentage is less than 100% because some states have small dedicated “set-aside” accounts.** While entities in the Korea Emissions Trading Scheme are generally required to purchase 3% of their allowances at auction, sub-sectors that are considered vulnerable to international competitiveness and carbon leakage are exempted. This means auctioning system-wide is currently below 3%. *** Mexico is yet to launch its pilot ETS.
Sources: ICAP Status Report (2019) and EHR.
~57b USD in revenue to fund programming
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Notes: ***Eight EU member states held auctions during phase 2 of the EU ETS (2008-2012), but there is no consolidated and comprehensive source of data available. For some member states, the auctioning revenue generated during this period was substantial. Germany for instance raised about €3.2 billion, according to the German Emissions Trading Authority (DEHSt). Sources: Own calculation with figures from the EC, CARB, MELCC, RGGI, EXX, ICE, and EHR
42.55
0.03
9.47
2.24 3.08
1. The global spread of ETSs and key statistics
2. A more detailed, region-by-region perspective
3. Key reforms in established systems
4. Outlook in the near future
International Carbon Action Partnership 16
Outline
ETS – overarching trends and challenges
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• ETS is spreading; growing interest also in emerging economies
• Practical experience accumulating with different design options -> solid base for new systems to build on
• Trend toward hybrid instruments (e.g. ETS with price floor/ ceiling)
• Challenges in emerging economies: cap-setting in a dynamicallygrowing economy, electricity sector regulation
• Linking markets remains relevant but challenging (lots of demands e.g. alignment/coordination with less room for market intervention)
• Question of how long-term role of carbon pricing in achievingNDCs and raising amibition under Paris Agreement
Summary: outlook for ETS for 2019 and beyond
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• Key post-2020 ETS reforms nearly completed in major “mature” systems: California/Québec, EU, New Zealand, and RGGI
• Strong interest in the instrument in Latin America: draft regulation in Mexico; Colombia and Chile considering introduction
• China as the largest prospective carbon market: planned 2020 market launch for electricity sector, phasing in of other sectors until 2025
• Continuing push for carbon pricing at subnational level in North America
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Thank you for your attention!
ICAP Status Report 2019: bit.ly/ICAP_SR2019
www.icapcarbonaction.com
@ICAPSecretariat