Current and proposed emissions trading schemes

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This map is without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries, and to the name of any territory, city or area ---- Carbon markets – fixing an energy market failure? ---- Emissions trading schemes have recently begun operation in Australia, California,Quebec and kazakhstan, expanding the coverage of carbon pricing to around 2.5 Gt of emissions (Figure 1.6). An emissions trading scheme is being rolled out in South Korea, as are pilot systems in cities and provinces in China, which collectively account for more than one-quarter of national GDP and a population of around 250 million. The pilot schemes are seen as informing the potential implementation of a nation-wide schemeafer 2015. The World Bank's Partnership for Market Readiness is helping sixteen developing and emerging economies develop their policy readiness and carbon markets. Some of these schemes have plans to be linked: California and Quebec in January 2014, and Australia and the European Union by 2018. But it is also a time of significant challenge for carbon markets. The most long-standing emissions trading markets- the EU ETS and the US-based Regional Greenhouse Gas Initiative (RGGI) are working toward reform. RGGI has announced that the carbon budget will be cut by 45% to refflect lower actual emissions due to economic conditions and the availability of low cost shale gas. The EU ETS covers around 45% of EU greenhouse-gas emissions and is a key instrument to deliver the European Union's 20% emissions reduction target in 2020. But its carbon prices have declined from over "20" tonne in early 2008 to around "3.5" tonne in May 2013, a level unlikely to attract sufficient investment in low-carbon technologies. The European Commission expects there to be a surplus of more than 2 Gt of allowances over the period to 2020, unless changes are made (European Commission, 2012a and 2012b). The excess provision is due to a combination of the effects of the economic crisis and a large influx of international credits. The European Parliament rejected in April 2013 the European Commission proposal to withdraw some allowances from the market. At the time of writing, the proposal was back before the Parliament's Environment Committee forfurther consideration. The Clean Development Mechanism (CDM), which allows Kyoto Protocol countries with targets to undertake some emissions reductions in developing countries, is in crisis. Action is underway to streamline CDM project approvals, but a serious mismatch between the supply of credits and demand had driven prices down to "0.3"tonne in March 2013. The effect of this has been a dramatic fall-off in CDM project development with, for example, China approving only eleven projects in the frst two months of 2013, compared to more than 100 per month during 2012 (Point Carbon, 2013). As part of UNFCCC negotiations, work is underway to develop a new market mechanism that targets emissions reductions across broad segments of the economy rather than being project-based. It is hoped that it will be in place to support the new 2015 agreement and that this will simulate more demand for international market units of emissions reductions. International negotiations are also progressing on a framework to determine how emissions reduction units from linked ETS can be counted towards national targets under the UNFCCC. This will be an important step in supportting such linking and reshaping the global carbon map.
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