Carbon Emissions Trading tutor2u碳排放交易tutor2u.ppt

* * * * * * * * * * Carbon Emissions Trading EU Environmental Policy This presentation covers Can carbon markets be part of the answer in controlling climate change? What is the basic economics of carbon trading? Is the EU system working? What are the alternatives / complements? Should carbon trading be replaced with a carbon tax? Climate change – the biggest market failure the world has ever seen? The EU-Emissions Trading Scheme EU ETS is a market-based mechanism to incentivise reduction of greenhouse gas emissions in a cost-effective and economically-efficient manner. Similar system trialed in the USA - US acid rain program employed a sulfur emissions cap and trade system and successfully produced a 50 percent cut in emissions The scheme operates through the allocation and trade of CO2 emissions allowances One allowance represents one tonne of carbon dioxide equivalent. Long term goal - de-carbonization of EU economy Carbon trading scheme began in January 2005 Now into 2nd phase – which lasts until end 2012 Pressure to reduce C02 emissions The USA has the highest per capita emissions of carbon but China and India and other Asian countries have huge populations – putting increased pressure on carbon emissions 20-20-20 EU Targets: 20% cut in greenhouse gas emissions by 2020, compared with 1990 levels 20% increase in use of renewable energy by 2020 20% cut in energy consumption through improved energy efficiency by 2020 Trading the right to pollute Market failure can occur with missing markets. In the past there has been no market to trade and enforce environmental property rights. Carbon trading seeks to create incentives to reduce pollution. A cap is set on the emissions allowed The cap creates the scarcity required for the market At the end of each year installations are required to ensure they have enough allowances to account for their installation’s actual emissions. In Phase II increased penalties imposed on any excess emissions rise to €100 per ton of CO