Justin Dargin, Potential Pitfalls Lessons From The Eu Ets-t6670

Business Developing a carbon trading platform does not require GCC states to reinvent the wheel. Much may be learned from the European experience about potential obstacles in the initial creation of a carbon emissions trading platform. Perhaps one of the most important lessons that may be gleaned from the EU ETS is the need for verified and accurate emissions upon which to base carbon caps under a .prehensive MERV system. The lack of verifiable baseline data for the EU ETS Phase One made it extremely difficult for EU regulators to accurately forecast a feasible business as usual scenario that would establish an effective cap. The first phase of the EU ETS (2005-2007) triggered wide castigation for ostensibly granting multibillion dollar windfalls to industry. The EU ETS, launched in 2005, included nearly 11,000 electric power and industrial installations in 25 member states, accounting for nearly half of the EUs collective emissions. Since its launch, it has faced criticism for two early mistakes: over allocation of emission allowances, and the free allowance disbursement to power plants. The EU over-allocated carbon emissions by approximately 100 million tons. Because the overall emissions cap exceeded actual emissions, the market experienced a price collapse in May 2007. This overestimation caused the nascent carbon market to be.e much too liquid. Further, the emissions allowances released in the first tranche of the EU ETS Phase One were notoriously undervalued. Because of these pandemic market imbalances, permit prices fell to zero within two years after the EU initiated the CaT scheme.29 Even though the allowances were freely given to emitters, the utilities continued to pass costs to consumers, reaping billions of dollars in profits in the interim. The most significant factor in the price collapse was the lack of sufficient data to plausibly set the initial carbon cap. In contrast to the US Acid Rain Program, which relied heavily on historical data from coal firing plants, EU regulators used best guess analyses of historical emissions and future projections. The EU regulators estimated the emissions for each emission point, and then set the targets and allocated allowances based on that estimation. This led to an over-allocation of allowances, and placed upward pressure on carbon prices until April 2006, when the first verified -emissions reports began to arrive. The actual emissions were much lower than the cap, which caused the price to collapse soon thereafter. .munication between the carbon emitters and the regulatory agencies is essential. In their absence, either an under- or overestimation of the cap, and an erroneous allocation will be the result. Even with the EU ETS Phase One mistakes, it was hailed in many quarters as a success that quantifiably lowered carbon emissions. Perhaps more importantly, this represented the first time that the costs of carbon became an established factor in European market investment decisions. In short, the ability to reduce carbon emissions became an enterprise, and carbon savings, a .modity. While there were problems, those who view this scheme most optimistically argue that, even with imperfections, the EU ETS should be recognized as a success because it established a regulatory market that will create ever more ambitious future emissions targets. The downside of the EU ETS Phase One, however, presents a more familiar picture. Because Phase One lasted a mere two years, it had a minimal impact on technological development and implementation. Nor did the scheme have sufficient time to substantively impact corporate decision making or to drive investment thinking into clean technology. Finally, the price collapse seemingly overshadowed much that was positive and amplified everything that was not. If Gulf regulators want to encourage the industrial and technological sectors of the mandate to implement low carbon technology and fuel switching, the respective agencies must exercise their rule-making authority to mandate that an appropriate emissions cap framework be formulated. .panies must conclude that the future price of carbon is going to be more expensive; therefore, they should make an effort to reign in emissions as soon as possible. Experience shows that emissions allowances should be granted sparingly, not so much to push the market to be.e illiquid, but enough that emitters feel the need to either actively mitigate carbon emissions or to purchase credits in the lack thereof. Scarcity is the operative concept that drives any carbon emissions trading platform About the Author: 相关的主题文章: