LONDON, 24 June - The UK referendum result has been a great shock to markets everywhere, including the EU carbon market. IETA respects the decision of the UK electorate. We aim to assist in ensuring that the transition is made in a way that preserves climate ambition and market continuity.

As the UK and European Union embark on the process of unwinding the links between them, IETA hopes that Britain will continue to offer the strong support for market-based responses and ambition to climate change that it has provided for many years.

The Brexit verdict does not mean that the UK cannot continue to play a central role in the carbon market. IETA notes that there are legal precedents for non-EU member countries to participate in the EU ETS.

IETA is happy to work with all stakeholders to ensure that the EU’s carbon market is strengthened and sustained through both the UK/EU negotiations as well as the present Phase 4 review. 

Continuity is vital to maintaining the integrity of the market, and it’s also critical to maintaining the global momentum from the Paris climate talks last December. Climate ambition requires global cooperation, including through the markets and financing where the UK has shown global leadership. We urge the new UK leadership to make it a priority to build on these achievements. 

LONDON, 22 June - The role that carbon funds played in the growth of the carbon market is the subject of the fifth chapter of IETA’s oral history of the carbon market.

This latest chapter of From Kyoto to Paris, available online from today, tells the story of how carbon funds – initiated by the World Bank – helped to shape the international market and what drove emitters and governments to invest in these vehicles.  

“Climate finance is an increasingly important component of international climate policy, and the legacy of the years of investment via carbon funds can help inform future financial vehicles, such as the Green Climate Fund,” says IETA President and CEO Dirk Forrister. 

The overall oral history project, From Kyoto to Paris, charts the path from the 1997 treaty to 2015 and the Paris Agreement. Comprised of both a series of videos and a book, it features interviews with key players in the market’s growth, including negotiators, government officials, project developers, traders and lawyers. 

Chapters already released have looked at markets and the Kyoto Protocol, early experiments with emissions trading, the growth of the EU ETS and the CDM. Forthcoming chapters will look at the changes brought by the Durban climate talks and the Paris Agreement. 

Each week, IETA will release another video chapter of the story on our dedicated web page, www.ieta.org/kyototoparis. In early July, the book will be released via Amazon; please email oralhistory@ieta.org to ensure you don’t miss out!

LONDON, 16 June - As the UK prepares to vote in a referendum on EU membership, IETA warns against the negative consequences a "leave" vote would have on the reforms of the EU ETS and the EU’s international leadership on climate policy.

The UK has a long history of supporting and leading efforts on emissions trading within the EU, dating back to the introduction of the UK ETS in 2001 and the adoption of the EU Emissions Trading Directive in 2005. Without the early support and leadership of the UK on emissions trading, Europe would not be recognised as  a world leader on climate change policy today.

IETA believes the UK’s position at the EU table is vital during a critical time of policy development on the future of carbon markets in Europe and abroad. As part of the EU, the UK is poised to offer leadership to the legislative process to  improve the EU ETS and to the international carbon market negotiations underway at the UNFCCC.  

IETA highlights three key reasons why the UK should remain in the EU and continue its role in shaping both international and European climate policies.

IETA will respect the result of the 23 June referendum and work with its partners in the UK no matter what the outcome, but we strongly warn against the risks for the EU ETS and EU leadership on climate policy that would come with Brexit.

LONDON, 15 June - The Clean Development Mechanism (CDM) is the subject of the fourth chapter of IETA’s carbon market oral history, released today.

This latest chapter of From Kyoto to Paris, available online, looks at how the development of the CDM, from early projects through to the boom and the challenges the market has endured over the years. Some of the market's earliest investors and project developers are featured in the video, alongside two of the leading lawyers who helped the market take root. 

“The CDM was the world’s first truly international market-based mechanism to tackle climate change and promote sustainable development, directing over hundreds of billions of new and additional climate finance to emissions reduction projects which otherwise would not have happened,” says IETA President and CEO Dirk Forrister. “The lessons and institutional capacity built up over our years of experience with the CDM are crucial as policymakers start turning the Paris Agreement from words into actions.”

The overall oral history project, From Kyoto to Paris, charts the path from the 1997 treaty to 2015 and the Paris Agreement. Comprised of both a series of videos and a book, it features interviews with key players in the market’s growth, including negotiators, government officials, project developers, traders and lawyers. 

Previous chapters looked at markets and the Kyoto Protocol, early trials of emissions trading and the growth of the EU ETS. Forthcoming chapters will look at the role of carbon funds and the Paris Agreement, among other topics. 

Each week, IETA will release another video chapter of the story on our dedicated web page, www.ieta.org/kyototoparis. In early July, the book will be released via Amazon; please email oralhistory@ieta.org to ensure you don’t miss out! 

LONDON, 8 June – The growth of the European carbon market is the focus of the third chapter of IETA’s oral history of the carbon market, which was released today.

Chapter three of From Kyoto to Paris, available online, talks to key players about the early years of the EU ETS, the challenges that they faced and the future of the market.

“As the world’s first cap-and-trade market for greenhouse gas emissions, the EU ETS experience has a lot of valuable lessons for the markets of the future,” says IETA President and CEO Dirk Forrister. “With more reforms to the system coming in the next few years, it’s important to remember how far emissions trading has come in Europe and how much has been achieved already.”

The overall oral history project, From Kyoto to Paris, charts the path from the 1997 treaty to 2015 and the Paris Agreement. Comprised of both a series of videos and a book, it features interviews with key players in the market’s growth, including negotiators, government officials, project developers, traders and lawyers.

The first two video chapters looked at markets and the Kyoto Protocol, and early trials of emissions trading. Subsequent chapters will look at the growth of the CDM, the role of carbon funds and the Paris Agreement, among other topics. 

Each week, IETA will release another video chapter of the story on our dedicated web page, www.ieta.org/kyototoparis. In early July, the book will be released via Amazon; please email oralhistory@ieta.org to ensure you don’t miss out!

TORONTO, 1 June - IETA welcomes the state of Washington's publication of a draft rule for its emissions trading system.

The state today published its revised proposal for an emissions market for public comment, targeting a 1.7% annual reduction in emissions from industrial and electric power installations.

"We're happy to see Washington's commitment to markets and to linking with regional partners, and we congratulate Governor Inslee and the Department of Ecology on their determination to establish Washington's first-ever rule to cap climate pollution," said Katie Sullivan, director of North America. "IETA looks forward to working closely with the Department of Ecology and the governor's office over the coming months."

"We applaud the outward-looking language on linking to other markets, and on the potential acceptance of emissions allowances from other systems for compliance," Sullivan added. "We recognise the hard work that Washington has done to address concerns over competitiveness and carbon leakage through smart market design."

"IETA does have some concerns concerning the lack of clear language enabling traders and intermediaries to participate in the market," Sullivan said. "Market makers and liquidity providers can play an important role in supporting carbon markets, lowering compliance costs and facilitating carbon reduction and we would hope to see the benefits of this role acknowledged in Washington's proposal."

Contact: Katie Sullivan, sullivan@ieta.org

LONDON (June 1) - The second instalment of IETA’s oral history of the carbon market is now available, focusing on early emissions trading trials.

The overall project, From Kyoto to Paris, charts the path from the 1997 treaty to 2015 and the Paris Agreement. Comprised of both a series of videos and a book, it features interviews with key players in the market’s growth, including negotiators, government officials, project developers, traders and lawyers. 

Chapter two of From Kyoto to Paris, available online, focuses on efforts in the UK to build awareness of emissions trading and trading simulations by industry group EURELECTRIC. 

“Even before there were any compliance obligations in Europe, some visionaries led the way and played a role in educating industry and the power sector about what the future could look like,” says IETA President and CEO Dirk Forrister. “The lessons from this era helped inform the shape of the European carbon market – and are of value to those governments developing new markets today.”

Last week, IETA released the first chapter, which looked at how emissions markets came to be in the Kyoto Protocol. Subsequent chapters will look at the development of the EU ETS, the growth of the CDM, the role of carbon funds and the Paris Agreement, among other topics. 

Each week, IETA will release another video chapter of the story on our dedicated web page, www.ieta.org/kyototoparis. In early July, the book will be released via Amazon; please email oralhistory@ieta.org to ensure you don’t miss out!

Contact: Katie Kouchakji, press@ieta.org

COLOGNE, 25 May – An overwhelming majority of respondents to IETA’s annual market sentiment survey expect an expansion of carbon markets, driven by the Paris Agreement.

Over 80% of respondents to this year’s survey, conducted by PwC, said they expect existing carbon markets to expand as a result of the Paris Agreement – compared with 58% last year. This will be driven by developments at both the national and sub-national level, the survey found.

By 2025, new emissions trading systems (ETSs) are seen starting up in Canada, Australia, Brazil, Chile, Japan, Mexico, South Africa and Turkey, said respondents. This is in addition to the national ETS in China that is expected to begin next year, as well as the Ontario market, the legislation for which was passed last week.

“This is the first real test of market sentiment since the Paris Agreement – and the mood is clearly positive,” says IETA President and CEO Dirk Forrister. “The inclusion of markets in the agreement has boosted morale and opens the door for further opportunities for business to engage in carbon markets around the world.”

He adds: “We are particularly interested in the prospects for new markets taking seed in the coming years – especially as more than 90 governments stated that market access is essential to fulfilling their Paris pledges, according to analysis by IETA and Environmental Defense Fund¹.”

The carbon price respondents feel is needed to achieve the Paris Agreement’s objective to limit warming to well below 2°C jumped by a third this year, to €40. This is in stark contrast to their expectations for prices in major carbon markets from now until 2020, ranging from €6 to €15.

“The gap between price expectations for major markets and the price required to achieve the Paris goals reflects the difference between ambition and reality,” says Forrister. “This needs to be addressed urgently if the world’s political aims are to be met.”

“This survey sends a clear message that governments need to get serious about carbon pricing or they won’t hit the Paris targets,” says Jonathan Grant, Director, PwC, who performed analysis on the survey. “IETA members have highlighted the yawning gap between current prices and what’s needed to achieve the Paris objectives.”

He adds: “With such low carbon prices, some will question whether the policy is working and changing business decisions or if it has become just an administrative burden on companies.”

The survey report will be released at a press conference at Carbon Expo in Cologne on 25 May at 9.15am CET. Hard copies will be available at the press conference and it can also be downloaded from the IETA website.

NOTES

Contact Katie Sullivan, sullivan@ieta.org 

TORONTO, 18 May - The Ontario government’s vote today to establish the province’s cap-and-trade system marked a major victory in the fight against climate change. By harnessing the power of the marketplace, the legislation will prompt a new wave of environmental investment and technology deployment while keeping costs in check for consumers. When it links with California and Québec’s existing carbon market, Ontario will gain the benefits of a broader partnership and increase the momentum for carbon pricing across North America.

Today’s vote in Ontario’s legislature sets the legislative foundation for a provincial carbon market to help cut greenhouse gas emissions to 15% below 1990 levels by 2020, 37% by 2030, and 80% by 2050.

In addition to setting near and long-term targets, Ontario’s new Climate Change Mitigation and Low-Carbon Economy Act ensures that all cap-and-trade auction proceeds are channelled into a Greenhouse Gas Reduction Account. The Act also strengthens the transparency and reporting of Ontario’s forthcoming Climate Action Plan and future investments from auction proceeds.

The province will post final cap-and-trade regulations following royal assent of the Act. The province has confirmed that the first Ontario-only auction will be held in March 2017, with the intention of linking to Québec and California’s joint market in late 2017 or 2018.

“Ontario’s decision marks the one of the first concrete actions on carbon markets since the historic Paris Agreement was agreed in December,” says Dirk Forrister, IETA’s CEO and President.  “Given the size and scope of the legislation, it offers an important example for other governments across North America to examine.”

“The establishment of a market in Ontario next year will see four of the five-largest emitting provinces in Canada putting a price on carbon,” says Katie Sullivan, IETA’s Director of The Americas. “We look forward to working with Ontario as it launches its market program and works towards a link to its Québec and California partners.”

Ontario’s program is expected to eventually link to North America’s largest carbon market, jointly operated by California and Quebec through the Western Climate Initiative (WCI). Today, WCI held its seventh joint allowance auction.

“The addition of a third trading partner to the California and Québec is a major development,” says Sullivan. “The move will drive down compliance costs and allow business and investors to embrace efficiencies across a cross-border program with common rules, tools and infrastructure – all while ensuring environmental integrity.”

Contact: Katie Kouchakji, press@ieta.org

LONDON, 10 May – A new paper  by IETA sets out the business group’s vision for the development of the market-based systems outlined in the Paris Agreement.

The paper, released today, has been circulated to policy-makers and thought leaders ahead of the first post-Paris meeting, which begins on Monday in Bonn, Germany. In A Vision For the Market Provisions of the Paris Agreement, IETA notes the long-term durability of the Paris Agreement, making it especially crucial that its implementation incentivises the maximum level of emissions reductions – including via harmonised carbon pricing systems.

This can be achieved through linking systems, which in turn enables the transfer of emissions units between various systems. Such transfers are also encapsulated in the Paris Agreement, with paragraph 2 of article 6 establishing internationally transferable mitigation outcomes (ITMOs) as means of accounting for such linkages between systems.

“Linking systems can help drive costs down even more, and allow for even greater emissions cuts than operating in isolation – and allow governments to go further than proposed ahead of Paris,” says IETA President and CEO Dirk Forrister. “Taking steps to forge these connections now can provide a boost to the formation of rules guiding ITMO exchanges, including on accounting and transparency.”

He adds: “Recent analysis¹ by IETA and Environmental Defense Fund of the plans governments put forward for the Paris Agreement found that 90 of them state that access to markets is essential for their plan to be fulfilled, if not go further. The ITMO provision in the agreement could see carbon market coalitions or clubs form, as governments seek to up their ambitions.”

The paper also highlights the role of the Emissions Mitigation Mechanism (EMM), as established by paragraph 4 of article 6. This mechanism can cut emissions in countries which are currently not in a position to establish a carbon pricing system yet which need the climate finance that the EMM can bring, says IETA. Robust accounting and governance provisions are again crucial to ensuring environmental integrity of any resultant reductions which are counted towards a country’s Paris Agreement goal.

“The EMM has great potential to involve all countries and to target whole sectors, rather than the project-by-project approach previously seen,” says Jeff Swartz, IETA’s director of international policy. “It can also be a catalyst for more carbon pricing systems, if flexibility remains at its core.”

The full paper is available on the IETA website.

NOTES

1 Please see Carbon Pricing: The Paris Agreement's Key Ingredient, released in April 2016