China's ETS: A vote of confidence in carbon markets ahead of Paris. CEPS Commentary, 12 October 2015

In this CEPS commentary, Andrei Marcu welcomes the recent announcement by President Xi Jinping that China will start a national emissions trading scheme in 2017. Calling it a "genuine game changer" in the global climate talks, Marcu describes the decision as giving a much-needed boost to carbon markets and cap-and-trade as the preferred way forward for those economies that have the capacity, the depth and the breadth for a liquid carbon market.

Estimating Global “Blue Carbon” Emissions from Conversion and Degradation of Vegetated Coastal Ecosystems

Recent attention has focused on the high rates of annual carbon sequestration in vegetated coastal ecosystems—marshes, mangroves, and seagrasses—that may be lost with habitat destruction (‘conversion’). Relatively unappreciated, however, is that conversion of these coastal ecosystems also impacts very large pools of previously-sequestered carbon. Residing mostly in sediments, this ‘blue carbon’ can be released to the atmosphere when these ecosystems are converted or degraded. Here we provide the first global estimates of this impact and evaluate its economic implications. Combining the best available data on global area, land-use conversion rates, and near-surface carbon stocks in each of the three ecosystems, using an uncertainty-propagation approach, we estimate that 0.15–1.02 Pg (billion tons) of carbon dioxide are being released annually, several times higher than previous estimates that account only for lost sequestration. These emissions are equivalent to 3–19% of those from deforestation globally, and result in economic damages of $US 6–42 billion annually. The largest sources of uncertainty in these estimates stems from limited certitude in global area and rates of land-use conversion, but research is also needed on the fates of ecosystem carbon upon conversion. Currently, carbon emissions from the conversion of vegetated coastal ecosystems are not included in emissions accounting or carbon market protocols, but this analysis suggests they may be disproportionally important to both. Although the relevant science supporting these initial estimates will need to be refined in coming years, it is clear that policies encouraging the sustainable management of coastal ecosystems could significantly reduce carbon emissions from the land-use sector, in addition to sustaining the well-recognized ecosystem services of coastal habitats.

The international regulation of sustainable forest management : doctrinal concepts, governing institutions and implementation

The overarching objective of the research was to identify the existence and nature of international legal principles governing sustainable forest use and management. This research intended to uncover a set of forest legal considerations that are relevant for consideration across the globe. The purpose behind this, is to create a theoretical base of international forest law literature which be drawn upon to inform future international forestry research. This research will be of relevance to those undertaking examination of a particular forest issue or those focusing on forests in a particular region. The thesis explains the underlying legal issues in forest regulation, the dominant international regulatory approaches and makes suggestions as to how international and national forest policy could be improved.

Re-conceiving the good life : the key to sustainable globalisation

Resource-intensive, high-carbon, Western lifestyles are frequently criticised as unsustainable and deeply unsatisfying. However, these lifestyles are still attractive to the majority of Westerners and to a high proportion of the developing world’s middle classes. This paper argues that the imminent threat of catastrophic climate change constitutes an immediate political, economic and ethical challenge for citizens of the developed world that cannot be tackled by appeals to asceticism or restraint. There can be no solution to climate change until sustainable conceptions of the good life are developed that those in the west want to live and which others might want to live. While the ultimate solution to climate change is the development of low carbon lifestyles, it is important that government initiatives, governance arrangements and economic incentives support rather than undermine that search. Like the global financial crisis, the climate change crisis also demonstrates what happens when weaknesses in national, corporate and professional governance are exacerbated by weaknesses in global governance. In tackling the latter, it is critical the mistakes now evidenced in the former are avoided – including a rethinking of carbon market and carbon tax alternatives. It is also critical that individuals must take responsibility for their actions as consumers, voters and investors.

Reconceiving the good life : the key to sustainable globalisation

Resource-intensive, high-carbon, Western lifestyles are frequently criticised as unsustainable and deeply unsatisfying. However, these lifestyles are still attractive to the majority of Westerners and to a high proportion of the developing world’s middle classes. This paper argues that the imminent threat of catastrophic climate change constitutes an immediate political, economic and ethical challenge for citizens of the developed world that cannot be tackled by appeals to asceticism or restraint. There can be no solution to climate change until sustainable conceptions of the good life are developed that those in the west want to live and which others might want to live. While the ultimate solution to climate change is the development of low carbon lifestyles, it is important that government initiatives, governance arrangements and economic incentives support rather than undermine that search. Like the global financial crisis, the climate change crisis also demonstrates what happens when weaknesses in national, corporate and professional governance are exacerbated by weaknesses in global governance. In tackling the latter, it is critical the mistakes now evidenced in the former are avoided – including a rethinking of carbon market and carbon tax alternatives. It is also critical that individuals must take responsibility for their actions as consumers, voters and investors.

Opportunities for forest finance under the International climate change regime

The international climate change regime has the potential to increase revenue available for forest restoration projects in Commonwealth nations. There are three mechanisms which could be used to fund forest projects aimed at forest conservation, forest restoration and sustainable forest management. The first forest funding opportunity arises under the clean development mechanism, a flexibility mechanism of the Kyoto Protocol. The clean development mechanism allows Annex I parties (industrialised nations) to invest in emission reduction activities in non-Annex 1 (developing countries) and the establishment of forest sinks is an eligible clean development mechanism activity. Secondly, parties to the Kyoto Protocol are able to include sustainable forest management activities in their national carbon accounting. The international rules concerning this are called the Land-Use, Land-Use Change and Forestry Guidelines. Thirdly, it is anticipated that at the upcoming Copenhagen negotiations that a Reduced Emissions from Deforestation and Degradation (REDD) instrument will be created. This will provide a direct funding mechanism for those developing countries with tropical forests. Payments made under a REDD arrangement will be based upon the developing country with tropical forest cover agreeing to protect and conserve a designated forest estate. These three funding options available under the international climate change regime demonstrate that there is potential for forest finance within the regime. These opportunities are however hindered by a number of technical and policy barriers which prevent the ability of the regime to significantly increase funding for forest projects. There are two types of carbon markets, compliance carbon markets (Kyoto based) and voluntary carbon markets. Voluntary carbon markets are more flexible then compliance markets and as such offer potential to increase revenue available for sustainable forest projects.

Modern energy access to all in rural India: An integrated implementation strategy

Expanding energy access to the rural population of India presents a critical challenge for its government. The presence of 364 million people without access to electricity and 726 million who rely on biomass for cooking indicate both the failure of past policies and programs, and the need for a radical redesign of the current system. We propose an integrated implementation framework with recommendations for adopting business principles with innovative institutional, regulatory, financing and delivery mechanisms. The framework entails establishment of rural energy access authorities and energy access funds, both at the national and regional levels, to be empowered with enabling regulatory policies, capital resources and the support of multi-stakeholder partnership. These institutions are expected to design, lead, manage and monitor the rural energy interventions. At the other end, trained entrepreneurs would be expected to establish bioenergy-based micro-enterprises that will produce and distribute energy carriers to rural households at an affordable cost. The ESCOs will function as intermediaries between these enterprises and the international carbon market both in aggregating carbon credits and in trading them under CDM. If implemented, such a program could address the challenges of rural energy empowerment by creating access to modern energy carriers and climate change mitigation. (C) 2011 Elsevier Ltd. All rights reserved.

The long road of climate negotiations: From Kyoto to Paris stopping over in Doha

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Investment incentives and valuation of power sector infrastructure assets with increasing interconnection, intermittency and decarbonisation

This dissertation applies a variety of quantitative methods to electricity and carbon market data, utility company accounts data, capital and operating costs to analyse some of the challenges associated with investment in energy assets. In particular, three distinct research topics are analysed within this general theme: the efficiency of interconnector trading, the optimal sizing of intermittent wind facilities and the impact of carbon pricing on the cost of capital for investors are researched in successive sections.

Effects of a green tax reform in Portugal: a general equilibrium analysis

Do ponto de vista da política económica, existe a possibilidade de utilizar a receita dos impostos ambientais para baixar os impostos sobre o trabalho, promovendo assim o emprego. Esta oportunidade surge na literatura como forma dos países industrializados responderem a um duplo desafio: um crescente nível de poluição e um decrescente nível de emprego. Alguns países tomaram já decisões no sentido de alcançar o “duplo dividendo”: melhorias ambientais e diminuição do desemprego. Os resultados teóricos, na sua maioria cépticos em relação à verificação do segundo dividendo, são substancialmente contrariados por uma série de estudos que utilizam modelos de equilíbrio geral. Pretendese com este trabalho fazer uma simulação para a economia portuguesa de uma reforma fiscal ambiental com as características referidas e a verificação da existência do “duplo dividendo”, através de um modelo computacional de equilíbrio geral. Para além disso, é feita uma análise dos impactos do Mercado Europeu de Licenças de Emissão, ao nível sectorial e regional, em Portugal, utilizando dados microeconómicos, com o objectivo de estudar as consequências ao nível das trasacções entre sectores e efeitos distributivos entre regiões.

Les produits dérivés des marchés européens du carbone

L'analyse statistique des données a été effectuée avec le logiciel R.

Vers un marché du carbone au Québec : éléments de réflexion à la lumière de l'analyse économique du droit

Dans le cadre de la Western Climate Iniative, le Québec a déployé en 2012, un système de plafonnement et d’échange de droits d’émission de gaz à effet de serre (SPEDE). Il s’agit de l’un des premiers régimes de ce type en Amérique du Nord et celui-ci pourrait à terme, constituer l'un des maillons d’un marché commun du carbone à l’échelle du continent. Toutefois, le SPEDE appartient à une catégorie d’instruments économiques de protection de l’environnement encore peu connue des juristes. Il s’inscrit en effet dans la régulation économique de l’environnement et repose sur des notions tirées de la théorie économique, dont la rareté, la propriété et le marché. La thèse s’insère donc dans le dialogue entre juristes et économistes autour de la conception et de la mise en œuvre de ce type d’instrument. Afin d’explorer son architecture et de révéler les enjeux juridiques qui le traversent, nous avons eu recours à la méthode de l’analyse économique du droit. Celle-ci permet notamment de montrer les dynamiques d'incitation et d’efficacité qui sont à l'œuvre dans les règles qui encadrent le SPEDE. Elle permet également à donner un aperçu du rôle décisif joué par la formulation des règles de droit dans l’opérationnalisation des hypothèses économiques sous-jacentes à cette catégorie d’instrument. L’exploration est menée par l’entremise d’une modélisation progressive de l’échange de droits d’émission qui prend en compte les coûts de transaction. Le modèle proposé dans la thèse met ainsi en lumière, de manière générale, les points de friction qui sont susceptibles de survenir aux différentes étapes de l'échange de droits d'émission et qui peuvent faire obstacle à son efficacité économique. L’application du modèle aux règles du SPEDE a permis de contribuer à l’avancement des connaissances en donnant aux juristes un outil permettant de donner une cohérence et une intelligibilité à l’analyse des règles de l’échange. Elle a ainsi fourni une nomenclature des règles encadrant l’échange de droits d’émission. Cette nomenclature fait ressortir les stratégies de diversification de l’échange, d’institutionnalisation de ses modalités ainsi que les enjeux de la surveillance des marchés, dont celui des instruments dérivés adossés aux droits d’émission, dans un contexte de fragmentation des autorités de tutelle.

Incidencia de la estrategia colombiana de desarrollo bajo en carbono en el mercado de bonos de carbono en Colombia

La presente investigación tiene como objetivo principal determinar el papel de la estrategia colombiana de desarrollo bajo en carbono en el mercado de bonos de carbono en Colombia. Esto con el fin de demostrar que las acciones nacionalmente apropiadas de mitigación NAMAS son un mecanismo de mitigación y puede no tener una incidencia en la oferta ni tampoco en la demanda del mercado de bonos de carbono en Colombia. Esta investigación se llevará a cabo por medio de un estudio de caso con un enfoque institucionalista. Se utilizará el método de investigación cualitativo, ya que se intenta medir las cualidades de la estrategia colombiana de desarrollo bajo en carbono mediante un análisis documental, teniendo como referencia las fuentes primarias; el Conpes 3700 de 2011, entrevistas a expertos del Ministerio de Ambiente y Desarrollo Sostenible, Fundación Natura, ConTREEbute, Área Metropolitana del Valle de Aburra, y fuentes secundarias, entre otras.

A Framework for Various Approaches under the UNFCCC: Necessity or luxury? CEPS Special Report No. 70, 20 November 2012

In recognition that the world is moving towards a new climate change regime that in many ways will be very different from the world in which the Kyoto Protocol has been operating, climate negotiators and other specialists have begun to focus their attention on developing a “framework for variable approaches” (FVA). It is hoped that this new framework will prove more adaptable to national circumstances and more capable of catalysing new ideas, at the regional, national or sub-national level. This paper examines the assumptions, objectives, scope, components and functions of an FVA, with a view to creating the right conditions in which a well-functioning global carbon market can emerge.

The Future of the Clean Development Mechanism. Note on the report “A Call to Action” of the High-Level Panel on CDM Policy Dialogue. CEPS Special Report No. 71, 20 November 2012

The clean development mechanism (CDM) has been through a long and complex growing process since it was approved as part of the Kyoto Protocol. It was designed within the framework of the UNFCCC and the Kyoto Protocol, and reflected the political and economic realities of that time. To ensure its continued effectiveness in contributing to future global climate action and to reflect on how best to position the CDM to respond to future challenges, a high-level panel (HLP) was formed at the Durban climate change conference in 2011. Following extensive consultations, the panel published its report in September 2012. Through this Special Report, the CEPS Carbon Market Forum offers its reflections on findings and recommendations of the HLP, as well as, by extension, its own views on the future of the CDM. In the context of the latter, it explores the following questions: Is there a need for an instrument such as the CDM in the future? What ‘demand’ can it fill? In the roles identified under the first question, what can be done to adapt it and also continue to increase its efficacy?