"Act Locally, Trade Globally" - Emissions Trading for Climate Policy
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24/11/2005 Paris --- This morning, four days before the United Nations climate
change conference in Montréal, Canada, the International Energy Agency (IEA)
has launched a new publication: Act Locally, Trade Globally - Emissions Trading
for Climate Policy. Rising CO2 emissions confirm the need to act. Under current
energy policies, CO2 emissions will increase by about 50% by 2030. In
addressing the emissions responsible for climate change, notably carbon dioxide
from fossil fuel combustion, the study reviews the current and future role of
emissions trading.
"It's our role to deliver analyses and suggestions to the climate negotiators
when they start considering the future beyond Kyoto", said Claude Mandil,
Executive Director of the IEA today in Paris. The current Kyoto Protocol only
addresses about one-third of global emissions, and existing domestic emissions
trading regimes only about 10%. "However, we believe that emissions trading
will remain at the core of any future international agreement to combat climate
change. Emissions trading allows reducing emissions at least-cost, and helps
governments to achieve acceptability through allocation processes, domestically
and internationally", Mandil added.
The study, conducted by Richard Baron and Cédric Philibert, two economists at
the IEA, foresees a yearly demand of roughly 1 billion tonnes of CO2-equivalent
from industrialised Kyoto parties, unless climate policies are strengthened.
Among the Kyoto Protocol trading mechanisms, the Clean Development Mechanism
(CDM) could fulfil 10% of this demand with reductions from projects in
developing countries. Economies in transition, notably Russia and Ukraine,
should hold enough emission allowances to provide the rest, but ability to sell
and willingness to buy remain to be confirmed.
The publication also reviews emissions trading systems currently under
development, with a focus on the EU Emissions Trading Scheme (ETS). Starting
January 2005, this mechanism already covers CO2 emissions from 11 500
electricity and heavy-industry facilities and allows them to trade allowances
and reach emission objectives cost-effectively. The IEA recognises the
pioneering role of the EU ETS. However this publication analyses the scheme's
short-term emission objectives and various implementation features, notably the
treatment of plant closures and new entrants, as these may hinder its economic
effectiveness.
How could emissions trading systems be expanded, both to other sectors in Kyoto
Protocol's industrialised countries and to new countries?
Among the original proposals examined in this study are the allocations of
liability for emissions to fossil fuels importers and producers or to
carmakers. Emissions trading could also be broadened to include the rapidly
growing emissions of international aviation.
Uncertain future costs of CO2 reductions and economic growth concerns hamper
the adoption of CO2 policies especially by developing countries. Consequently,
this book suggests growth-indexed targets, "non-binding" emission targets and
price caps as options for future international emissions trading. Sectoral
targets are also considered in some details as pragmatic first steps.
Public Information Office: (+33) 1 40 57 65 50 ; e-mail [EMAIL PROTECTED]
<mailto:[EMAIL PROTECTED]>
Cédric Philibert
Principal Administrator
Energy Efficiency and Environment Division
International Energy Agency
+33 1 40 57 67 47 fax +33 7 40 57 67 39
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