Author: WM

Race to the Bottom: Canada ranks 58 out of 61 in new Climate Change Performance Index 2013

 

In the newly released Climate Change Performance Index (CCPI) 2013, Canada is ranked fourth from the bottom and slips behind USA, China and Russia.  In last year’s ranking, Canada was in 54th place before Russia and China.  The CCPI found that Canada still shows no intention of moving forward on climate policy, thereby leaving it as the worst performer of all western countries.  This is no surprise to those familiar with Canada’s federal government’s deliberate inaction on the issue of climate change, however Canada’s policy stand continues to perplex many.  The bottom three countries are Saudi Arabia, Iran and Kazakhstan, all of whom are highly dependent on oil and gas exports.

The eighth edition of the annual CCPI, which was published at the Doha climate talks on December 3, 2012 by the Climate Action Network (CAN) Europe and Germanwatch, ranks the climate protection performance of the 58 highest emitters worldwide.  The first three ranks are actually empty, because no country on the list is pursuing a path that would achieve the goal of keeping the global temperature increase below 2 degree Celsius.  The CCPI names Saudi Arabia, Australia, Canada and the US as the world‘s worst climate polluters; the same as in previous editions. The best international climate policy is credited to Mexico, Denmark, Switzerland and Norway, while Turkey, Japan, Canada and Iran hold the lowest places in this category.

For the first time, the index used deforestation data, which resulted in a rankings drop of countries with high forest emissions such as Brazil and Indonesia.  The two biggest emitters, US and China, still rank comparably low. The US climbed up in this year’s CCPI, but partly due to decreased emissions resulting from the economic crisis and its massive exploration of shale gas. The indirect emissions of shale gas are not taken into account in the CCPI, as only energy and forest emissions are included. With a shift towards renewables and greater efficiency, the US could climb up even more.  Jan Burck, one of CCPI’s authors, notes that China’s emissions levels has risen, but as its massive investments in renewable energies are expected to show an effect shortly, China’s emissions trend could slow down in the near future and lead to better results. The Climate Change Performance Index 2013 country table can be found here.

 




	


	





	

		
		
California Holds Successful First Auction of Carbon Allowances
	


	
	
	

		
 

The California Air Resources Board (CARB) held its first auction on November 14, 2012 for the purchase and sale of carbon allowances for its planned cap-and-trade regime. Mary Nichols, chairman of CARB, declared the auction a success:


“The auction was a success and an important milestone for California as a leader in the global clean tech market. By putting a price on carbon, we can break our unhealthy dependence on fossil fuels and move at full speed toward a clean energy future.  That means new jobs, cleaner water and air – and a working model for other states, and the nation, to use as we gear up to fight climate change and make our economy more competitive and resilient.”


The auction results were released to the public on November 19th (available online) .  A tonne of carbon for the 2013 vintage year sold for $10.09, which is slightly above the $10.00 price floor set by CARB. The highest bid was a whopping $91.13.  Also, there was three times the number of bidders at the auction than actual buyers, indicating a healthy and competitive market. Furthermore, 97% of allowances were purchased by regulated entities indicating that prices were not influenced by speculative buyers. Instead, it seems to indicate that regulated entities are looking to retire allowances for compliance purposes.  Perhaps most importantly, the auction sold out with all 23,126,110 2013 vintage year allowances being purchased, raising approximately US$233 million. This auction kicks off the largest carbon market in North America and the second largest in the world, behind the European Union Emissions Trading Scheme.


California’s partners in the Western Climate Initiative (WCI) – including British Columbia, Manitoba, Ontario, and Québec – are no doubt paying close attention.  Apart from Québec, which will launch its emissions trading system on January 1, 2013 with California, the success of California’s cap-and-trade program may spur the other WCI partners into action to implement a similar scheme.


 





	


	









	

		
		
HHI
	


	
	
	

		
 

HHI is the acronym widely used to refer to the Herfindahl-Hirschman Index, a measure of market concentration. HHI index ranges from close to zero (a competitive marketplace) to 10,000 ( domination of a market by a single entity, a monopoly) .It is calculated by squaring the market share of each firm competing in a market, and then summing the resulting numbers.



	


	









	

		
		
California to hold First Auction of GHG Emission Allowances on November 14, 2012
	


	
	
	

		
 

Bill AB 32 requires California to reduce greenhouse gas emissions to 1990 levels by 2020. The cap and trade regulation (“Regulation”) is a key element of California’s climate plan. The Regulation is designed to provide regulated entities with the flexibility to seek out and implement the lowest cost options to reduce emissions.  California’s cap and trade program will be second in size only to the European Union’s Emissions Trading System based on the amount of emissions covered. In addition to driving emission cuts in the ninth largest economy in the world, California’s program will provide critical experience in how an economy-wide cap and- trade system can function in the United States.


It is anticipated that California’s emissions trading system will reduce greenhouse gas emissions from regulated entities by more than 16% between 2013 and 2020. Starting on January 1, 2013, the Regulation will apply to large electric power plants and large industrial plants. In 2015, it will extend to fuel distributors (including distributors of heating and transportation fuels). At that stage, the program will encompass around 360 businesses throughout California and nearly 85% of the state’s total greenhouse gas emissions.


Under a cap and trade system, companies must hold enough emission allowances to cover their emissions, and are free to buy and sell allowances on the open market.  As part of the cap and trade program, the California Air Resources Board (ARB) will hold allowance auctions to allow market participants to acquire allowances directly from ARB.  ARB will conduct the first auction on November 14, 2012 from 10am to 1pm PST.  ARB will also conduct the first quarterly reserve sale on March 8, 2013. Auction participants will have to apply to participate in an auction, or submit a bid for reserve sales, and meet financial regulatory requirements in order to participate in an auction or reserve sale.


The November 14th auction will mark the beginning of the first greenhouse gas cap and trade program in the United States since the Regional Greenhouse Gas Initiative (RGGI), a cap and trade program for power plants in nine northeastern US states, held its first auction in 2008.


California covered entities, opt-in covered entities, and voluntarily associated entities are eligible to participate in the November 2012 GHG allowance auction. Approved offset registries, verification bodies, and offset verifiers are not eligible to participate in auctions as they are not allowed to hold compliance instruments under the Regulation. Prior to participating in an auction, the Primary Account Representative (PAR) and Alternate Account Representative (AAR) that will be authorized to bid on behalf of entities eligible to participate in the auction must be approved users in the Compliance Instrument Tracking System Service (CITSS) and the entity must have an entity account in the CITSS.


The detailed auction requirements and instructions are available online

 



	


	





	

		
		
EU and Australia Agree to Link Carbon Trading Schemes
	


	
	
	

		
 


On August 28, 2012, the European Union (EU) and Australia announced their agreement to fully link their respective cap-and-trade schemes by 2018.  In addition, Australia announced that it will drop its planned A$15 per tonne carbon credit floor price and it will limit the use of Kyoto Protocol eligible international units under the Australian scheme. Furthermore, Australia will set its price ceiling with reference to the expected 2015-16 price of European allowances.  The combined effect is that cheaper EU carbon credits will be available for Australian emitters.


Under the arrangement, the European Commission will seek a mandate to negotiate a treaty on behalf of the EU by mid-2015 for the full linking of the emission trading systems from July 2018; the Australian Government has an existing mandate to negotiate such a treaty. As an interim arrangement, a partial link will be established to allow Australian businesses to source 50% of their emission allowances from the EU from July 2015. A similar allowance will be available for European emitters once the full link comes into effect no later than July 2018.


This is a welcome development for the EU trading scheme. Oversupply has driven the cost of carbon credits to record lows; currently, EU carbon trades at around US$10 per tonne. The opening of the market to Australian companies should help to alleviate this oversupply and with a carbon tax of A$23 per tonne, Australian emitters are welcoming the integration which will offer them a cheaper alternative.  However, the Australian government continues to project that carbon prices will reach A$29 per tonne by 2015 and 2016.




 



	


	





	

		
		
California Completes Successful Trial Auction for Cap-and-Trade Program
	


	
	
	

		
 


In advance of the November 2012 launch of California’s carbon trading scheme, the state’s Air Resources Board (ARB) completed in August a successful trial of its carbon allowance auction system, where companies pretended to bid for carbon allowances in order to test out the system ahead of its official launch on November 14, 2012.  According to ARB officials, the trial auction ran smoothly, with approximately 150 companies submitting bids during the simulation.


Following the roll out of the platform in November, more than 400 companies will be able to buy and sell carbon credits through quarterly auctions.  From 2013, a statewide cap on carbon emissions will be imposed. This cap will be gradually lowered year-on-year, thus providing companies with a financial incentive to curb their greenhouse gas emissions.


Under the planned scheme, companies will need to hold carbon allowances to cover their own emissions and they will be required to purchase additional allowances if they exceed their cap. In the first year of the scheme, the ARB plans to give away the vast majority of credits and auction only 10% in order to put a price on carbon. However, the amount of free carbon allowances will be reduced each year so that by 2020, 50% of allowances will be auctioned, providing a clear price signal for firms to invest in low emission technologies.