USA's Initiatives On Emission USA's Initiatives On Emission Trading

USA's Initiatives on Emission
Trading
EU-Japan Conference on Climate

Change Policies and Carbon Markets
Bi P
Brian Prusnek,
k Vi
Vice P
President
id t
Climate Change Capital
18 March
March, 2008
Tokyo, Japan
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Climate Change Capital is a Specialist Investment

B ki
Banking G
Group in
i the
th Low-Carbon
L C b E
Economy
A leading
g investment banking
gggroup
p specialising
p g in the commercial opportunities
pp
created by the low carbon economy
Headquartered in London with dedicated teams focusing on China, Spain, North

America, India and Latin America
130 employees
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g Carbon Finance
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advisory CPE: Clean energy private
equity (Europe/US)
Investors include AlpInvest,
Robeco, HSBC and Alliance
Trust
Market Development
Monitor
Anticipate
Influence
2
A
Agenda
d
1 US Overview
2 Proposed Federal Legislation
3 Presidential Candidates
4 Regional and State Activities
5 Conclusions
6 Appendix
3
US O
U.S. Overview
i
In the United States,
there is an Federal Legislation
enormous effort to 13 bills in various stages in US Senate and House of Representatives
develop an
Lieberman-Warner Climate Security Act is the most promising
aggressive
greenhouse gas
vehicle for US climate change legislation – passed key US Senate
reduction program Committee
that will place the House Commerce Committee is working on draft of parallel bills in US
US in a leadership House of Representatives – issuing “discussion
discussion papers”
papers
role
Presidential candidates all support cap and trade programs
US action on climate change is very likely
Regional & State Initiatives
Regional Greenhouse Gas Initiative
California and Western Climate Initiative
Midwestern Greenhouse Gas Reduction Accord
States with no programs
Businesses Increasingly Vocal
27 major US businesses joined leading US environmental groups to
urge swift national action to cut America's
America s global warming pollution
pollution.
http://www.us-cap.org/
4
US P
Policy
li E Evolution:
l ti Relevant
R l t Interactions
I t ti
9A range of
factors will
influence
emissions Post-Kyoto
trading policy in US Federal Negotiations
EU
the US
US. Action
ETS
9These
influences are
occurring in
parallel and may
US Emissions Mid
cause feedback Japan
impact
impact. Trading
g Policy
y est
West
9This leads to a
range of possible
scenarios, and
interdependency
of outcomes on California WCI
some key drivers.
RGGI
5
A
Agenda
d
1 US Overview
5 Conclusions
6 Appendix
6
Comparison of Proposed Federal Legislation
7
C
Comparison
i off Proposed
P d Federal
F d l Legislation
L i l ti
8
M t Likely
Most Lik l US L
Legislative
i l ti Vehicle
V hi l
Lieberman-Warner
Lieberman Warner Climate Security Act
Targets
Emissions would be capped at 4% below 2005 levels in 2012;
19% below 2005 levels in 2020;
37% below 2005 levels in 2030; 55% below 2005 levels in 2040; and
70% below 2005 levels in 2050.
Demand
Approximately 900 Million Tons (Mt) by 2015
Approximately
Appro imatel 1,600
1 600 Mt by
b 2020
Approximately 5,900 Mt by 2050
By C
B Comparison
i
The European Emissions Trading Scheme (EU ETS) is projected to have
demand equal to approximately 400Mt/year by 2015.
9
D i
Design Elements
El t off Lieberman-Warner
Li b W
Design Proposal
Element
Covered All six greenhouse gases (CO2, CH4, N2O, PFC, SF6, HFC).
Gases/Scope 80%-90% of emissions covered by cap-and-trade program
Point of Downstream coverage for coal generation (at installation).

Regulation Upstream coverage for other fossil fuels (e.g. oil refineries, natural
gas processing,
processing LNG terminals)
terminals).
Separate program for HFCs
Allocation Free allocation of allowances to industry using methodology

Method (See rewarding low
low-emitters,
emitters but increased auctioning over time
time.
Appendix 1 26.5% in 2012 is auctioned rising to 69.5% from 2031- 2050
for more Large auction for electricity sector and share increasing to support
detail) investment in low-carbon technology. gy
Price Control Unlimited banking of allowances, limited borrowing from future years.
A price-control mechanism with a safety valve, although this remains
uncertain.
A Carbon Market Efficiency Board that can influence market prices in
the same way as the Federal Reserve can (injecting additional
allowances to lower price).
Offsets Use of domestic offsets (15%) and international allowances (15%)

No Clean Development Mechanism (CDM) projects.
10
D i
Design Elements
El t off Lieberman-Warner
Li b W
Design Element Proposal
Linkage to Other Unilateral linkage via import of international allowances from

Markets other trading programmes, but expected to be limited.
Treatment of State Some state emissions-trading infrastructure retained (e.g.

Programs registries) and caps in excess of federal ones are
allowed/rewarded.
Offset standards likely to be standardized.
Enforcement Compliance is enforced and penalties imposed for late

compliance
11
A
Agenda
d
1 US Overview
5 Conclusions
6 Appendix
12
Wh t do
What d the
th US Presidential
P id ti l Candidates
C did t Support?
S t?
Senator Barack Obama (D) ( )

` Cap and Trade: reduce by 80% below 1990 levels by 2050. Supports 100%
auctioning.
` Invest $150 Billion over 10 Years in Clean Energy - advance next generation
biofuels and infrastructure, accelerate plug-in hybrids, promote development of
renewable energy, invest in low-emissions coal plants
` Clean Technologies Deployment Venture Capital Fund: Invest $10
billion/year for five years
years. Partner with investment funds and National
Laboratories to ensure promising technologies move beyond the lab to
commercialization
` 25%
5% renewable
e e ab e e energy
e gy by 2025
0 5
Senator Hillary Clinton (D)
` Cap and Trade: reduce by 80% below 1990 levels by 2050. Supports 100%
auctioning.
auctioning
` $50 billion Strategic Energy Fund paid for in part by oil companies, to fund
investments in alternative energy. The SEF will finance one-third of the $150
billon ten-year investment in a new energy future contained in her plan
` 25% renewable energy by 2025
Senator John McCain (R)
` Previous co
co-sponsor
sponsor of McCain/Lieberman – a cap and trade program to reduce
20% below 1990 level in 2030, 60% below 1990 level in 2050
13
A
Agenda
d
1 US Overview
5 Conclusions
6 Appendix
14
St t R
State Regional
i l Programs
P Driving
D i i Action
A ti
There are now
3 regional
programs:
9including 21
states
9more than
50% of the US
population
9more than
50% of US
economic
output
937% of US
emissions
15
C lif
California
i LLegislation
i l ti (AB32)
Governor Arnold Schwarzenegger

gg ordered his agencies
g to reduce g
greenhouse g
gas
emissions in the state
To 2000 levels by 2010
To 1990 levels by 2020 (a 25% reduction from current levels)
80% below 1990 levels by 2050
Subsequently, the Governor signed into law Assembly Bill 32, the “California
California
Global Warming Solutions Act of 2006”,
` Provides roadmap to a potential carbon trading market
California Air Resources Board ((CARB)) directed to implement
p ap
program
g to
reduce state greenhouse gas emissions to 1990 levels by 2020
AB32 focuses on technology-based solutions to GHG control with allowance of
“market-based compliance mechanisms to comply with the regulations”
Draft of the program expected in May 2008
16
California AB32 Timeline
Market
Development End of first
Committee target period
convened
Deadline for adoption of a greenhouse gas
reduction plan.
AB32 Early Action
approved by Measures
Governor Defined
September January June January January January January January December

27, 2006 16, 2007 30, 2007 1, 2008 1, 2009 1, 2010 1, 2011 1, 2012 31, 2020
GHG limits and

Adoption of regulations for emission reduction
reporting, verification, monitoring measures become
and enforcement of GHG emissions. operative.
E t bli h
Establishmentt off 1990 b
baseline
li level
l l
of emissions from which will be set. Adoption of GHG emissions limits
and emission reduction measures
to become operative on January 1,
2012. The regulation
g adopted
p mayy
establish a market-based cap-and-
17 trade program.
17
Regional Greenhouse Gas Initiative
Ten Northeast and Mid-Atlantic

Mid Atlantic states (Connecticut, Delaware, Maine,
Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode
Island and Vermont) adopting an emissions reduction program
Starts in 2009 and covers CO2 exclusively from the electric power sector
Stabilize emissions through 2014;
10% Reduction by 2018
13% Below 1990 Levels by 2019
Covers generators of 25 megawatts or more and which burn 50% or more

fossil fuel
Carbon allowances for efficiency and offset projects (including, in limited
cases, from Kyoto jurisdictions) will be increasingly available as prices
increase to pre-determined
pre determined “trigger” values
al es
Regulated producers who do not purchase enough allowances face forfeiture
of 3x allowances in the future as well as a range of potential penalties
RGGI program is significant because it goes live before other compliance
regimes in the U.S.
18
18
A
Agenda
d
1 US Overview
5 Conclusions
6 Appendix
19
Carbon Now Has A Price
Kyoto
y Markets
EU ETS has moved through initial phase and is maturing into a liquid
market
Australia has ratified and is moving towards a cap-and-trade
cap and trade program
New Zealand is beginning implementation of trading program
Japan considering a mandatory trading program
Canada
C d iis iimplementing
l i a ‘K‘Kyoto-like’
lik ’ trading
di program
Investment flows in CDM exceeding US $5 billion to date - creating a
potential “international carbon currency”
Carbon funds under management approaching US $12 billion
Non Kyoto Markets
United States
` U.S. bank “Carbon Principles” – Requirement for more due
diligence to minimize carbon risks
` Regional efforts and presidential race are catalyzing action at
federal level
` Voluntary Markets continue to grow and evolve, trading
approximately 24 Mt/year
20
Implications for Japan
Early action costs less,

less many investments are time-perishable
time perishable
Policy uncertainty delays or sub-optimises investment
Co-benefits
Co benefits of a price for carbon: energy efficiency
efficiency, local air quality
quality, etc
Learning by doing creates commercial opportunities (‘soft’ as well as
‘hard’ technology)
Post-2012 negotiation positioning requires:
` Interest identification: who pays for what?
` Carrots (demand for carbon) and sticks (trade and competitiveness)
` Understanding the complementarity between the carbon market and
technology transfer/deployment (G8 fund discussions)
The EU has moved, the US is moving – will Japan be left behind?
21
A
Agenda
d
1 US Overview
5 Conclusions
6 Appendix
22
Appendix 1 - How Allowances will be Distributed in Lieberman-
Warner
23
C t t Cli
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t Ch
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Capital
it l
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Fax: +44 (0)20 7939 5030
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Please contact me at BPrusnek@c-c-capital.com
24

USA's Initiatives On Emission USA's Initiatives On Emission Trading

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USA's Initiatives on Emission

EU-Japan Conference on Climate

Climate Change Capital is a Specialist Investment

 Headquartered in London with dedicated teams focusing on China, Spain, North

Advisoryy Asset Management

 Corporate finance  Develops and manages funds  Invests in projects and

2 Proposed Federal Legislation

4 Regional and State Activities

2 Proposed Federal Legislation

4 Regional and State Activities

Point of  Downstream coverage for coal generation (at installation).

Allocation  Free allocation of allowances to industry using methodology

Offsets  Use of domestic offsets (15%) and international allowances (15%)

Design Element Proposal

Linkage to Other  Unilateral linkage via import of international allowances from

Treatment of State  Some state emissions-trading infrastructure retained (e.g.

Enforcement  Compliance is enforced and penalties imposed for late

2 Proposed Federal Legislation

4 Regional and State Activities

Senator Barack Obama (D) ( )

2 Proposed Federal Legislation

4 Regional and State Activities

Governor Arnold Schwarzenegger

September January June January January January January January December

GHG limits and

Regional Greenhouse Gas Initiative

Ten Northeast and Mid-Atlantic

 Covers generators of 25 megawatts or more and which burn 50% or more

2 Proposed Federal Legislation

4 Regional and State Activities

Carbon Now Has A Price

 Early action costs less,

 The EU has moved, the US is moving – will Japan be left behind?

2 Proposed Federal Legislation

4 Regional and State Activities

CCC Head Office

Please contact me at BPrusnek@c-c-capital.com

Vous aimerez peut-être aussi

Headquartered in London with dedicated teams focusing on China, Spain, North

Corporate finance Develops and manages funds Invests in projects and

Point of Downstream coverage for coal generation (at installation).

Allocation Free allocation of allowances to industry using methodology

Offsets Use of domestic offsets (15%) and international allowances (15%)

Linkage to Other Unilateral linkage via import of international allowances from

Treatment of State Some state emissions-trading infrastructure retained (e.g.

Enforcement Compliance is enforced and penalties imposed for late

Covers generators of 25 megawatts or more and which burn 50% or more

Early action costs less,

The EU has moved, the US is moving – will Japan be left behind?