Climate 411

Western Climate Initiative auction results show resilience of cap and trade and benefit of long-term climate investment strategy

Yosemite National Park, California. iStock.

The results of the latest joint California-Quebec cap-and-trade auction were released today. As expected, the auction was significantly undersubscribed, something not seen since February 2017. The low revenue from this auction points to a need for California to develop a diversified, long-term strategy to fund critical climate programs, even as the state works to balance many important fiscal priorities. At the same time, the resilience of the cap and trade program even during periods of instability provides a critical backstop, ensuring California’s targets for reductions in climate pollution are achieved.

Here’s a quick recap of the results:

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CORSIA: Industry-sought rule change threatens aviation climate program

https://www.pexels.com/photo/silhouette-of-airplane-during-sunset-99567/

Silhouette of Airplane during Sunset. Pixels.com

The coronavirus pandemic has created a global health and economic crisis that has affected families all over the world and nearly all industries, with aviation taking a particularly steep toll.

Airlines may feel under pressure to save money at any cost, but hastily rewriting the fundamental structure of the industry’s flagship market-based program to address airline carbon emissions would be penny-wise and future-foolish.

In a new analysis by Environmental Defense Fund, we look at the implications of a rule rewrite sought by the International Air Transport Association (IATA) to the Carbon Offsetting and Reduction Scheme for International Aviation, or CORSIA.

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Also posted in Aviation, International, United Nations / Comments are closed

What the Coronavirus pandemic means for China’s national carbon market

This post is written by Hongming Liu, Project Manager for Carbon Pricing, and Xiaolu Zhao, Project Manager, both from EDF’s China program

Photo by form PxHere

Electricity transmission towers in China. Photo from PxHere.

COVID-19 pandemic has upended the global economy and peoples’ lives. The crisis has caused China’s central government to shift policy priorities to better address the health and economic fallout of the epidemic. It’s the right move and expected.

Prior to tragic spread of the coronavirus epidemic, China was preparing to roll out its national emission trading system (ETS) this year, according to The National Carbon Emission Trading Market Establishment Work plan (Power Generation Industry). Although initially covering only the power sector, which includes around 1,700 companies, the ETS will be the world’s largest carbon market. It will eventually cover 7,000 companies from heavy industries, like cement and steel. Its successful operation is key to China meeting its commitment under the Paris Agreement.

The pandemic will clearly have an impact on the pace and timing of the rollout, but the strong work done before the country shut down has put the ETS in a good position to avoid a prolonged delay.

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Also posted in International / Comments are closed

California’s experience with buyer liability shows how aviation can help ensure environmental integrity

https://www.flickr.com/photos/140970794@N06/30345941512

Airplane flying at sunset. Adam Clark, Flickr

The International Civil Aviation Organization is preparing to stand up its market-based emissions reduction program, the Carbon Offsetting and Reduction Scheme for International Aviation, or CORSIA. As it does so, ICAO must maintain CORSIA’s environmental integrity.

To that end, airlines should not be allowed to count, for CORSIA compliance, carbon credits that have been found to be invalid, e.g., fraudulently issued or otherwise not meeting CORSIA’s standards for credit quality. To ensure that all credits represent actual emission reductions, such substandard credits should be invalidated – even if the fraud isn’t exposed until after airlines have canceled the credits in CORSIA. The emissions for which the credits had been tendered have occurred, and still need to be covered by valid reductions in order to meet CORSIA’s promise of “carbon neutral growth.”

California offers one approach to how CORSIA can do this. In its market-based climate program, California has developed a way to cover the emissions from invalidated credits to uphold the integrity of its program and encourage emitters to invest only in high-integrity offsets. It’s known as “buyer liability,” which means that if the California Air Resources Board (CARB), the regulatory body, invalidates offset credits, then those who purchased the credits for compliance with California’s emissions limit must replace the invalidated credits. This ensures that emitters meet their full compliance obligations and that they are more diligent in selecting offsets.

Early on, California’s buyer liability approach caused some uncertainty among offset project developers. But seven years of experience demonstrates that buyer liability has worked in California’s carbon market. Here’s how we know:

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Also posted in Aviation, California / Comments are closed

California-Quebec carbon auction kicks off 2020 with record allowance price

Keywords: Perazzo Meadows, Truckee, CA, California. Natural and working lands are part of California’s climate strategy. EDF/Mathew Grimm

The results of February’s joint California-Quebec auction are in, and 2020 is off to a strong start in the Western Climate Initiative. Fewer allowances were available in this auction than in the past, which could help explain the record high settlement price.

Highs and lows of the February 2020 auction:

  • All 57,090,077 current allowances sold. Notably, this amount is over 10 million fewer allowances than what was offered at the last auction in November 2019. It is also the lowest volume of offered allowances since the very first joint auction in November 2014.
  • Current allowances cleared at $17.87, which is $1.19 above the price floor of $16.68. This is 87 cents higher than the November 2019 clearing price of $17.00 and 42 cents higher than the previous record-high price of $17.45 from the May, 2019 auction.
  • 8,672,250 future vintage allowances were offered for sale, and all of them sold as well. With over 350,000 fewer future allowances than the November 2019 auction, this was the smallest volume of future allowances ever offered.
  • The future allowances cleared at $18.00, $1.32 above the floor. These allowances cannot be used for compliance until 2023.
  • The auction raised approximately $600 million USD for the Greenhouse Gas Reduction Fund, which California will use for programs that further reduce climate and local air pollution and advance environmental equity.
  • Quebec raised over $240 million CAD (approximately $185 million USD) to support climate action in the province.

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Also posted in California / Comments are closed

COP 25: The mess in Madrid – and how international carbon markets can still drive ambition despite it

Midnight COP 25 plenary on Dec. 14 in Madrid. UNclimatechange via Flickr.

At just before 2:00 pm Sunday afternoon in Madrid, at a sprawling conference center on the outskirts of the city, a new record was set — and not an enviable one. That’s when the gavel finally fell on COP 25 — the 25th meeting of the Conference of the Parties to the UN Framework Convention on Climate Change — making it the longest COP in history, as it extended nearly 44 hours past its scheduled end.

Even with all that extra time, however, negotiators from 197 Parties were unable to reach agreement on virtually anything of real consequence, including one of the issues that topped the conference agenda: guidance for promoting the integrity of international carbon markets, in particular by ensuring consistent and robust accounting of emissions reductions transferred among countries.

While that failure is widely recognized, the outcome also offers three key implications for how markets can move forward.

  • First, negotiators came surprisingly close to a good deal. That provides a foundation for negotiators to build on next year – although it’s not at all clear that having failed two years in a row, the third time will be the charm.
  • Second, countries that are serious about markets don’t need to wait for the UN to provide guidance: they can and should move ahead to set their own rules.
  • Third, the failure to reach agreement puts the Kyoto Protocol’s offset program (known as the Clean Development Mechanism) on shaky legal ground – something that decision makers at the UN’s aviation agency, ICAO, should heed.

How markets can help drive ambition

Markets may seem like a surprising headline topic for an international climate negotiation. But they are a central, if underappreciated, tool to make faster, deeper cuts in climate pollution — which is desperately needed, given the growing gap between the world’s current emissions trajectory and where we must go to meet the Paris Agreement’s objective of limiting warming to well below 2 degrees Celsius.

The Paris Agreement expressly recognizes, in its Article 6, that carbon markets provide a critical tool to enhance ambition. Market-based international cooperation enables countries to do more together than they could on their own. Economic analysis by EDF shows that carbon markets could achieve nearly double the emissions reductions relative to current Paris Agreement commitments, at no extra cost. The current nationally determined commitments (NDCs) are nowhere near ambitious enough to meet the objectives of the Paris Agreement, and we need all the tools in the box to avoid climate catastrophe.

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Also posted in COP 25, Paris Agreement, United Nations / Comments are closed