www.fores.se
www.fores.se
Building a Climate Agreement
www.fores.se
Copenhagen – where dreams met reality
• Failure of the
negotiation process
• Failure of the political ambition of major
emitters
• Failure of concrete problem solving
www.fores.se
New hope for global deal in Paris?
www.fores.se
Reality on the ground
www.fores.se
Global emissions 2013
0 10 20 30 40 50 60 70 80
90 Serie 1
China
The US
EU
India Russia Japan
Canada, Australia, South Korea
Brazil, South Africa, Indonesia, Mexico
Saudia Arabia
www.fores.se
Tokyo, Saitame RGGI
CALIFORNIA
QUEBEC
Beijing Tianjin
Shanghai Chongqing Hubei
Shenzhen Guangdong
Emission Trading Scheme in Progress Existing Emission Trading Schemes
CDM Host Countries as of July 1, 2013 (UNEP Riso Centre, data from the CDMPipeline)
Countries with provincial-only Emission Trading Schemes Linkages
New South Wales GGAS EU ETS
South Korea (2015) Swiss ETS
ALBERTA
Global Carbon Markets
www.fores.se
Linking markets
EU- ETS
US-ETS
China- ETS
Global market
New ETS
New ETS
New ETS
www.fores.se
Linking equalizes prices
Cap Price
Cap Price
www.fores.se
Less costly to reduce emissions
Mitigation policy costs under a 50% emission cut by 2050 in each Annex I region separately, with and without crediting mechanisms (2020)
-7.0 -6.0 -5.0 -4.0 -3.0 -2.0 -1.0 0.0
Canada Australia and
New Zealand Non-EU Eastern European countries(1)
Russia United States Annex 1 Japan EU27+EFTA
Mitigation cost (income equivalent variation relative to baseline, in %)
Without crediting mechanism
With crediting mechanism, 20% cap on use of offset credits With crediting mechanism, 50% cap on use of offset credits
www.fores.se
… but wrong political incentives (regardless of instrument)
Cap Price
Cap Price
www.fores.se
Exchange rate mechanism
• “Equalized cap unit” according to agreement – for example “equal climate space”
• Linking affects prices less in respective markets
• States outside agreement “plug in” on equal terms
• Common secretariat ”World Climate Organisation”?
www.fores.se
Summary
• The top emitters must agree first
• Carbon markets is what works (politically)
• Linking carbon markets creates a global framework
• But linking needs rules and ”exchange rates”
• There is a lack of a common global institution with climate economics expertise
www.fores.se
Further reading
• A Bretton Woods for the Climate (Engström Rutqvist, Ådahl, 2010)
• Facilitating Linkage of Heterogeneous
Regional,National, and Sub-National Climate Policies…(Stavins et al 2014)
• Linkage by degrees (Burtraw et al 2013)
• A balance of bottom-up and top-down in linking climate policies (Sterner et al 2014)
www.fores.se
Thank you
Daniel Engström Stenson, program manager climate and environmental policies, Fores daniel.engstrom@fores.se
