Korea Carbon Forum 2019 Part 2 Seminar 1: International Carbon … · 2017-12-19 · e. For some member states, the auctioning revenue generated during this period was substantial

Global landscape and a closer look at the EU ETS, China, and Korea

Project ManagerInternational Carbon Action Partnership (ICAP) and adelphi

Chris Kardish

Seminar 1: International Carbon MarketsKorea Carbon Forum 2019 Part 2

About ICAP

• Share best practice and learn from each others’ experiences

• Facilitate future linking of trading programs; and

• Highlight the role of cap and trade as an effective climate policy

Capacity Building

Technical Dialogue

Knowledge Sharing

The International Carbon Action Partnership (ICAP) is an international forum of 36 national + subnational governments to exchange knowledge and experiences on emissions trading systems (ETS). Based in Berlin

ICAP ETS MapETS state of play worldwide

(3-monthly updates)

InfographicsVisualization of key ETS

trends

ETS briefs/publicationsIntro to the basics in 6 languages and

reports on ETS design/operations

News Objective coverage on all regulatory

ETS developments as they occur

Coming up: ETS Library Reference database for key ETS

literature

Allowance Price Explorer Historical and current carbon prices

worldwide

ICAP Knowledge Products

ICAP flagship publications

ETS handbook: consolidating a decade of experience on

ETS design & implementation

ICAP Status Report: annual overview on the state of play

on ETS worldwide

About me

• Project Manager with ICAP Secretariat and adelphi, a consultancy focused on sustainability issues that manages ICAP with the financial support of the German Federal Environment Ministry

• Main responsibilities:

• Contributing to knowledge sharing products and technicaldialogue across a range of ETS issues, including allocation ofallowances, competitiveness of industry, and the strategicuse of auction revenue

• Tracking developments in various North American carbonmarkets

• Overseeing the ETS Library tool

• External communications for the ICAP Secretariat

Structure of this seminar

• Global landscape, ongoing challenges, and future prospects –ICAP / Chris Kardish

• Status of Korea ETS, offset market, and current/future prospects of CDM – KRIC / Kyu-uk Lee

• EU ETS re-strengthened: a German perspective – German Emissions Trading Office (DEHSt) / Christoph Kühleis

• Emission Trading System in China: progress and lessons learned – SinoCarbon Innovation & Investment / Qian Guoqiang

• Discussion/Q&A

Global landscape, ongoing challenges, and outlook

Project ManagerInternational Carbon Action Partnership (ICAP) and adelphi

Chris Kardish

Trends & Status of Global Carbon Market국제탄소시장의현황및전망

국제탄소시장의배출권거래제 동향: 규모, 지속적인도전및향후전망

CONTENTS

- Global overview and key figures

- Region by region and comparative view: Europe,

North America, Latin America, Asia-Pacific

- Common trends in reforms across systems

- Growing regional cooperation

- Outlook for 2019 and beyond

Carbon markets on the rise: global spread of ETS as of 2019

• 20 ETS worldwide regulating emissions from 4.5 billion tons CO2e

• 6 ETS planned and 12 under consideration

ETS in force

ETS scheduled

ETS considered

Global emissions coverage to continue climbing

2005: 2.1 GtCO₂e ≈ 5% of global emissions

2019: 4.5 GtCO₂e ≈ 8% of global emissions

2020: 7.5 GtCO₂e ≈ 14% ofglobal emissions (China!)

Key statistics on emissions trading 2019

8% of global GHG emissions

are covered by an ETS.

37%of global GDP are using emissions trading.

Jurisdictions making up

1/8 of the global population livesunder an ETS in force.

Europe: over ten years of experience with emissions trading

EU Switzerland

Kazakhstan

Turkey

Ukraine

Implemented Scheduled

Under consideration

Russia

North America: new systems and other potential expansions at sub-national level

Nova Scotia

Québec

Regional Greenhouse Gas Initiative (RGGI)

New JerseyVirginia Massachusetts

California

Oregon

New Mexico

Latin America: a new wave of ETS with new opportunities andchallenges

Mexico

• ETS simulation completed 2018

• Pilot ETS scheduled for 2020

• Operational ETS would start 2023

Three systems under consideration

Asia-Pacific: the most active region globally

• 12 operating ETS• 2 scheduled ETS• 4 additional systems

under consideration

DIFFERENT SHAPES OF CAP-AND-TRADEA comparative look at key metrics from carbon markets

EU ETS European Emissions Trading System

KETS Korean Emissions Trading System

RGGI Regional Greenhouse Gas Initiative

NZ ETS New Zealand Emissions Trading Scheme

WCI Western Climate Initiative

4%

CAP TRAJECTORY (in%)

SHARE OF ALLOWANCES NOT ALLOCATED FOR FREE (in%)

100% 100%

COVERAGE (in%)

CARBON PRICE (in USD)

25 $

SECTOR COVERAGE

Sectors included in emissions trading across systems

Power

Industry

Domestic Aviation

Transport

Buildings

Waste

Forestry

* sector covered upstream

Key reforms in established systems in preparation for the 2020’s

1. Increases in ambition – increasing rate at which cap reduces in size (“cap decline factor”)

2. Allocation – increasing auctioning and better targeting free allocation to those sectors that need it most

3. Market Stability – introduction of new instruments to manage either allowance quantity or price, reflecting the experience of the past (leading toward “hybrid instruments”)

4. Offsets – increasing the emphasis on domestic abatement –at least in the short-term.

Growing stability: the spread and diversification of marketstability instruments

MARKET STABILIZATION AT THE UPPER BOUND

MARKET STABILIZATION AT THE LOWER BOUND

Stability mechanisms in practice (RGGI)

Reserve price binds(a “bank” of allowances

builds up)

Containment reserve exhausted

(15m allowances added)

Growing levels of auctioning in ETSs across the world

Notes: * Auctioning is the only RGGI-wide allocation approach, but the actual percentage is less than 100% because some states have small dedicated “set-aside” accounts.** While entities in the Korea Emissions Trading Scheme are generally required to purchase 3% of their allowances at auction, sub-sectors that are considered vulnerable to international competitiveness and carbon leakage are exempted. This means auctioning system-wide is currently below 3%. *** Mexico is yet to launch its pilot ETS.

Sources: ICAP Status Report (2019) and EHR.

Auctioning: a strong source of revenue

Notes: ***Eight EU member states held auctions during phase 2 of the EU ETS (2008-2012), but there is no consolidated and comprehensive source of data available. For some member states, the auctioning revenue generated during this period was substantial. Germany for instance raised about €3.2 billion, according to the German Emissions Trading Authority (DEHSt). Sources: Own calculation with figures from the EC, CARB, MELCC, RGGI, EXX, ICE, and EHR

42.55

0.03

9.47

2.24 3.08

Carbon Pricing in the Americas

WCIRGGI

Asia Pacific Carbon MarketsRoundtable

West African Alliance on Carbon Markets and Carbon Finance

Carbon Pricing Forum CHN, JP, KOR

Pacific Alliance

ICAP-ADB ETS Knowledge Sharing Platform

ASEAN ClimateChange Working Group

Cooperation is increasing: carbon pricing in the Americas

Jurisdictions:Canada, Chile, Colombia, Costa Rica, México, the Governors of California and Washington in the US, and the Premiers of Alberta, British Columbia, Nova Scotia, Ontario and Quebec in Canada and Sonora in Mexico.

Objectives:Strengthen MRV, Share Best Practice, build capacities, and engage stakeholders.

Cooperation is increasing: Korea – China – Japan CooperationForum

• Korea – China – Japan Cooperation Forum

• A platform for information exchange on ETS and ETS linkage

• ASEAN Climate Change Working

• Singapore chairmanship of climate working group

• Working with UNFCCC-CIACA and Japan (and EU)

• Focus on MRV in the region

ETS – overarching trends and challenges

• ETS is spreading; growing interest also in emerging economies

• Practical experience accumulating with different design options-> solid base for new systems to build on

• Trend toward hybrid instruments (ETS with price floor/ceiling)

• Challenges in emerging economies: cap-setting in a dynamicallygrowing economy, electricity sector regulation

• Linking markets remains relevant but challenging (lots ofdemands e.g. alignment/coordination with less room formarket intervention)

Summary: outlook for ETS for 2019 and beyond

• Key post-2020 ETS reforms nearly completed in major “mature” systems: California/Québec, EU, New Zealand, and RGGI

• Strong interest in the instrument in Latin America: draft regulation in Mexico; Colombia and Chile considering introduction

• China as the largest prospective carbon market: planned 2020 market launch for electricity sector, phasing in of other sectors until 2025

• Continuing push for carbon pricing at subnational level in North America; carbon pricing backlash in Canada

• Strong interest in the instrument in Latin America: piloting in Mexico starting 2020; Colombia and Chile considering introduction

THANK YOU!

Status of Korea ETS, offset market, and current + prospects of CDM

Senior ResearcherKorea Research Institute on Climate Change (KRIC)

Kyu-uk Lee

Trend & Status of Global Carbon Market국제 탄소시장의 현황 및 전망

한국의 배출권거래제 및 상쇄제도 그리고 CDM의 현황과 전망

CONTENTS

1. Status of Korea Carbon Market(ETS, Offset and CDM)

2. Prospect & Consideration of Korea Carbon Market

April. 14. 2010

May. 14. 2012 ACT ON THE ALLOCATION AND TRADING OF GREENHOUSE-GAS EMISSION PERMITS

FRAMEWORK ACT ON LOW CARBON, GREEN GROWTH

Reference : I4C workshop, Raising Market in Asia “Korea ETS & Offset Program, Result & Prospects”

1. Status of Korea Carbon Market - ETS, Offset & CDM

5W1H on Korea Carbon Market

The1“ st”

Nationwide ETS in East Asia,

Reference : K-ETS Summary Report for Phase 1(2015-2017)


What are the detail on K-ETS

Korea“ ”Emission

TradingScheme


Trading Period by Credits in the Exchange




Result of 1Phase K-ETS

< KAU transaction volume & price – 1 phase >

< KAU volume by transaction type – 1 phase > < KAU Average volume of transaction type – 1 phase >


Result of 1Phase K-ETS → KAU

Reference : 제1차 계획기간 배출권거래제 운영결과보고서

< KCU transaction volume & price – 1 phase >

< KCU volume by transaction type – 1 phase > < KCU Average volume of transaction type – 1 phase >


Result of 1Phase K-ETS → KCU


< KOU transaction volume & price – 1 phase >

< KOU volume by transaction type – 1 phase > < KOU Average volume of transaction type – 1 phase >


Result of 1Phase K-ETS → KOC



Price & Volume of Korea Carbon Market since 2015


Type of Emission Trading since 2015


Korea Offset Market - Korean Offset Program a.k.a KOP


Korea Offset Market – CDM Current! Future?


If, CDM (→) 6.2 ? 6.4 ?KP PA

Which and What? Project of 6.2? 6.4?

Korea CDM CERsCurrent

KOP KOCsCancellation then

Convert/re-issued

26,061,715 KOC

25,959,979 KOC

101,736 KOC

99.61 25,959,979 KOC%of KOC is from CDM CERs

0.39%of KOC is from domestic KOP projects

101,736 KOC

Issued

Also, CDM + CDMDomestic Oversea

Korea CDM projects+Oversea CDM projects

KOP KOCs

Cancellation then

Convert/re-issued

CDM projectsin Korea

How about the rest of theKorea CDM projects ??+Oversea CDM projects ??


Readiness with Consideration on Korea Carbon Market


Prospect of Korea Carbon Market

Trend & Status of Global Carbon Market

THANK YOU!

EU ETS re-strengthened - a German perspective

Head of section on “Economic Aspects of Emissions Trading, Monitoring, Evaluation”German Emissions Trading Authority (DEHSt) at the German Environment Agency (UBA)

Christoph Kühleis

Trend & Status of Global Carbon Market국제탄소시장의현황및전망

유럽배출권거래제의개정에따른도전그리고기회

CONTENTS

• EU ETS in spotlight: Facts and figures• What has been achieved so far• Balancing supply and demand –

structural reform of EU ETS• Overview on phase 4 of the EU ETS • Coal phase out in Germany and

other European Member states

EU ETS in spotlight: Facts and figures

4

~ 40 per cent of all greenhouse gases in EU

28 EU member states plus Norway, Iceland and Liechtenstein

~ 11,000 installations (power plants, refineries, steel mills, etc.)

~ 1.68 bln t CO2e in 2018 (stationary), 68 mln t CO2e (aviation)

~ 2/3 of all GHG emissions from power and heat generation

EU ETS in numbers

1.68

40%

11,000

5

Structure of the EU ETS 2018

Share of emissions by EU Member States

Source: DEHSt calculations based on data from the European Environmental Agency (As of: 25/07/2019)

100 % = 1.68 Gt CO2-eq.

▪ 4 MS responsible for more

than 50% of emissions:

DE, PL, IT, UK

▪ + 4 more MS => 76 % of

emissions

6

Structure of the EU ETS 2018

Share of emissions by ETS sectors

Source: DEHSt calculations based on data from the European Environmental Agency (As of: 25/07/2019).

▪ 2/3 of emissions (66%)

from combustion

installations, mainly

electricity & heat

▪ 3 main industries:

cement (10%), iron and

steel (9%), refineries

(7%)

▪ aviation since 2012

(intra-EU only),

not shown here,

EU: 67 mln.; GE 9,4 mln.

7

Source: European Commission, 04/2019

European Energy and Climate Framework

Agreed Targets for 2020 and 2030

40%

-10% -30%

2020 2030

Compared to 2005

60%Non - ETS sectors

2020 2030

Share of

emissions

-21% -43%

ETS sectors

Compared to 2005

Compared to 1990

8

European Climate Change Mitigation Targets

Emission reductions compared to 1990

-22%

-20%

minimum - 40%

- 60%

- 80 to – 95%

As of 2017*

EU Climate Package 2020

EU Climate Package 2030

EU Climate Roadmap (2011)

2030

2020

2050

2040

199030

ye

ars

30

ye

ars

Decision of the European Council (2009)

*preliminary estimates

COM proposal

11/2018:

Long-Term

Vision for

GHG neutral

economy by

2050

What has been achieved so far: 2005 - 2018

10

Emission Reductions in EU ETS since 2005

EU 31 and Germany

Source: DEHSt calculations based on data from the European Environmental Agency (As of: 25/07/2019). Emissions between 2005 and 2012 include an estimation of historical emissions for the scope of the third trading period.

-18 %

-29 %

▪ ETS reduction target

– 21% (2020 vs 2005)

already exceeded

11

Emission Reductions in EU ETS by 2018

Comparing the biggest emitters

Source: DEHSt calculations based on data from the European Environmental Agency (As of: 25/07/2019). Emissions between 2005 and 2012 include an estimation of historical emissions for the scope of the third trading period.

~ 1.68 Gt

~ 2.4 Gt

▪ clear differences

between MS

▪ UK: more than -50%

compared to 2005,

reduction mainly

since 2013

▪ IT, ES: reduction

especially 2008-2013

12

Source: DEHSt calculations based on data from the European Environmental Agency. As of: 25/07/2019

Emission Reductions in EU ETS since 2013(EU 30/EU 31 and Germany)

-12 %

-8 %

▪ Achieved reduction

mostly driven by

the energy sector

▪ Performance of

EU ETS total would

decrease without

UK

13

Source: DEHSt calculations based on data from the European Environmental Agency (EU 25) (As of: 25/07/2019)

Emission trends within industrial ETS sectors

▪ No significant

emission reduction

in industry sector

since the

economic crisis

▪ Price signal alone

not sufficient to

initiate mitigation

measures and

low carbon

investments.

14

Source: Own calculations based on data from Refinitiv Eikon, ICE, EU COM (As of: 25/07/2019).

EUA-price development in the EU-ETS since 2013

▪ Impact of high

EUA price to

Energy Sector

▪ Market driven fuel

switch: economic

advantage for gas

fired power plants

▪ EU: coal-fired

electricity

production fell by

19 % in the first

half of 2019

Balancing supply and demand –

structural reform of EU ETS

16

Structural Imbalance of Cap and Emissions in EU ETS

Structural surplus

end of 2018:

~ 3.5 bln. EUA

Causes:

▪ Economic crisis

▪ Non-ambitious caps

▪ High inflow of credits

▪ Lack of policy coordination

Actual market surplus is much

lower (~ 1.6 bln) thanks to

structural reform

Source: DEHSt calculation based on data from the European Environmental Agency (EEA), the European Commission, Member States projections WEM = with existing measures (EEA 2017), Sandbag (2016)

17

▪ Backloading 2014-2016: 900 million EUA were taken out of the market

▪ Goals of MSR: To deal with the current oversupply and stabilize the market balance

▪ Rule based mechanism for adjusting annual auction volumes depending on size of market surplus (volume based supply management)

▪ No intervention if surplus is between 400 and 833 million EUA

▪ Reduction of auction volume by 24% of the surplus if the surplus > 833 million EUA (MSR inflow)

▪ Increase of auction volume by 200 million EUA if the surplus is < 400 million EUA (MSR outflow)

Structural reform of the EU ETS: cutting auctioning volumes

Quick fix: Backloading 2014-2016; Market Stability Reserve from 2019 on

18

833

400

Allowances in circulation (mln

EUA)

MSR

24% of

TNAC

200 million

Functionality of the MSR (as from 2019 on)

+ Transfer of backloading amounts

into MSR (900 mln)

+ Transfer of unallocated EUA

from TP3 (500-800 mln)

MSR intake in 2019: approx. 400 mln EUA

auction volume before MSR: approx. 1.06 bln EUAafter MSR: approx. 660 mln EUA

Cancellation from 2023 on: if allowances in MSR are higher than auction volume in previous year, they will be cancelled

19

Source: Own calculations based on data from Thomson Reuters Eikon, ICE, EU COM. As of: December 2018

EUA-price and market surplus development in the EU-ETS

▪ low CO2-price during almost 10 years ➔ poor incentives for investments in mitigation measures

▪ Price increase of more than 300 % since 2017➔ reform of EU ETS Directive brings back confidence

▪ MSR will have reduced market surplus by about 800 million EUA by the end of 2020.

20

▪ MSR reduces only market surplus, it does not prevent decreasing prices due to less demand(=> waterbed effect: higher emissions elsewhere)

▪ MSR cannot fully compensate for emissions decreasing faster than the cap over a long time (it withdraws only part of the surplus)

▪ MSR does not help to align cap with long-term target of net-zero emissions

➔ Voluntary cancellation: From 2021 on, Member States may cancel part of their national auctioning volume in order to compensate for closure of fossil power plants

➔ Mid- to long-term: MSR and voluntary cancellation cannot substitute a more ambitious cap that takes into account the mitigation impact of complementary instruments

MSR = no substitute for more ambitious cap

MSR can only mitigate, but not prevent waterbed effect

Overview on phase 4 of the EU ETS

22

✔ Domestic action: no more credits on top of the Cap

✔ Strengthening of MSR (24% instead of 12% intake rate)

✔ Cancellation of allowances from the MSR (approx. 2.3 – 2.7 bln EUA)

✔ Introduction of Innovation Fund for promoting „breakthrough“ technologies

− Cap Linear Reduction Factor 2.2% ≠ long-term decarbonisation goal:

greenhouse gas neutrality by 2050 (economy wide)

− Interactions with other energy and climate policies (RE, EE, coal phase out) not

adequately assessed

ETS phase IV (2021-2030)

23

Overview on phase 4 of the EU ETS

Strengthening EU ETSExtensive protection against

Carbon Leakage (CL)

Solidarity, Innovation and

Modernisation

Cap reduction: Increased linear

reduction factor (from 1.74 to 2.2%; 38

to 48 m EUA p.a.).

Maintaining free allocation (and

compensation for indirect cost) and

reflection of increased production.

Innovation Fund (up to 500 m EUA)

for promoting „breakthrough“

technologies in the energy and

industry sectors.

Reduction of surplus: MSR intake

rate is doubled to 24%; EUA from the

MSR are canceled from 2023 onwards

(delta between MSR and auctioning

volume t-1).

100% of Benchmark allocation for

products on the Carbon Leakage list;

30% for non-CL until 2025, from 2026

on phase out to 0% in 2030.

Modernisation Fund (up to 390 m

EUA) for modernisation of the energy

sectors and for increasing energy

efficiency in MS with GDP<60% of EU-

average.

Compatibility with interacting

policies: Optional compensation of

national power plant closures via

cancelations from the national auction

budget.

Up to 3% of the Cap as additional

allocation budget for avoiding a cross

sectoral correction factor (cscf)

Maintaining transitional free allocation

for electricity producers for

modernisation of the energy sectors in

MS with GDP<60% of EU-average

(up to 60% of auctioning budgets)

Review of the Cap and the CL rules in the light of the Paris agreement. 10% of auctioning budget for MS with

GDP<90% of EU-average

24

• EU ETS functions well– Given reduction target for 2020 (- 21% in relation to 2005) will be reached

– Liquid market, well performing auctions

– Compliance circle also well known and accepted

• EU ETS does not tap the full potential– low CO2-price during almost 10 years poor incentives for investments in mitigation measures

– Not in line with long term reduction target 2050 necessary investments postponed investments are getting more expensive in the future

• Reform of EU ETS Directive brings back confidence – Price increase of more than 300 percent since 2017

• Further efforts required– Target sharpening for the ETS sector and thus the Cap reduction path

must be brought in line with the 1.5 degree target for 2050.

Conclusion

25

Occasions to Increase Climate Ambition

2020

2019

20212022

20232024 2025

20./21.6. EU Summit:

Discussion on LTS

30.6. Comments on

Draft NECPs

23.09.: Climate Action

Summit, NY

31.12.: Submission of

final NECPs,

German Climate Law,

Law on Coal Phase-

out

possibly: adjustment of ETS/CAR and

Submission of NDC Update

Adoption and Submission of

EU LTS

Start of first

MSR review

considering

carbon leakage

risk

Discussion on

MSR reform

on the basis of

review results

First phase

German coal

phase-out:

capacity

reduction

down to 30

GW

Global Stocktake

Submission of NECP-

Update

Possibly: review of

coal phase-out

Discussion

of global

stocktake

results

Discussion

on

adjustments

of ETS/CAR

Submission

of NDC

Update 2030

Coal phase out in Germany and

other European Member states

27

Energy transition in Germany: - 55% emission reduction by 2030

High dependency on coal/nuclear energy and big energy intensive industry

➔ phase out of nuclear energy without increase

of CO2 emissions

➔ Next step: phase out of coal by 2038

(commission proposal, not adopted yet)

Expansion of renewable energy

Sources: BMWi, BDEWSource: AGEB

Sources: BMWi, BNetz, WSB

Phase out of nuclear energy by 2022

Phase out of coal power by 2030 at the latest

28

> 60 % of coal power is produced in MS with targeted coal reduction policies

Coal phase out in EU

Source: Own illustration based on data from the EU Commission and EUROSTAT

Germany: Lignite reserve since 2016; coal phase out planned

for 2038

UK: CPF since 2013; coal phase out by 2025

Spain: Coal power production reduced by 50% since 2005

(phase out by 2030)

Italy: Partial or complete coal phase out by 2025

NL: Coal phase out by 2030; CPF from 2020 on

France, Portugal, Sweden, Denmark, Austria, Ireland and

Finland also set dates for coal phase out.

Power generation from solid fuels in EU 2017

(~ 677 TWh, approx 25% of power generation)

감사합니다.

THANK YOU!

Emission Trading System in China - Progress and Lessons Learned

Deputy General ManagerSinoCarbon Innovation and Investment Co. Ltd,

Qian Guoqiang

Trend & Status of Global Carbon Market국제탄소시장의현황및전망

중국의배출권거래제의 추진과경험

CONTENTS

- ETS in CHina

- From Pilots to National ETS

- Lessons Learned

Top-down and bottom-up approach of China ETS

2013

Shenzhen, Shanghai, Beijing, Guangdong,

Tianjin

2016

Fujian

2017.05

Draft allocation plans for power, cement

and aluminum

2011.10

Notice to startpilots

2013~2015

Reporting guidelines for

24 sectors

2016.02~2017.05

Historical datareporting and verification

2017.12

National ETS Action Plan

Lessons

National

Pilots

Trading price ranges from 3 to 90 CNY/ton

• The prices were volatile in the starting period, then became more stable. Pilots prices vary considerably, ranging from 3 to 90 CNY/tCO2 in 2019. The average price is 28 CNY/ tCO2 .

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

Ave

rage

Pri

ce（

CN

Y/to

n）

Shenzhen Shanghai Beijing Guangdong Tianjin Hubei Chongqing Fujian

341 million allowances traded, value 7.4 billion CNY

• Up to July 2019, accumulated trading volume in the pilots reached 341 millions tons,representing value of 7.4 billion CNY. (Spot market only)

12.29 13.06 11.77

37.61

0.42

52.92

8.47 7.52

32.00 23.19 20.71

78.25

6.59

12.78

2.48

0.07 0.35

17.16

2.00


Cumulative Trading Volume in the 8 Pilots(Million tons, Jun 18, 2013 - Jul 31, 2019)

On-line Trading OTC Auction

435.61 350.05 660.17 661.81

10.17

1,101.38

28.53 170.50

736.08

380.59

591.52

1,122.34

82.33

150.55 2.66

14.65

804.18

40.00


Cumulative Value in the 8 Pilots(Million CNY, Jun 18, 2013 - Jul 31, 2019)

On-line Trading OTC Auction

Roadmap of China National ETS

• Trading system

• Registry

• Reporting system

• Regulatory

Framework

• Capacity Building

• Testing within power

sector

• Risk management

• Improving the infrast

ructure and design

• Spot Allowance Trad

ing in Power Sector

• Expand coverage

• Enrich products

• CCER

2017.12.19

Launch

About 1 Year

InfrastructurePhase

TestingPeriod

Deepen & Improving

About 1year After

• Technical guidelines • Third party verification guideline (temp)• Monitoring Plans• ETS help desk

Scope

Allocation

TradingMRV

Legislation

1+3 legal package :1 basic law: National ETS Regulation3 supporting technical regulation: • Regulation on reporting • Regulation on third-party verificat

ion agency • Regulation on trading

• Unified trading platform • Unified registry system• Spot market • Gradually carbon finance instruments

• National allocation plan• Allocation mainly based on ben

chmarking• Gradually auctioning

• Phase I：Power• Phase II：potentially expand to all 8 reporting

sectors

A glimpse of the emerging national carbon market

Scope: start with power generation

Sectors Sub-sectors

Power Generation /Cogeneration /Grid

Petrochemical Crude processing /Ethylene production

ChemicalChemical raw material /Fertilizer/ Pesticide Production /Sy

nthetic material

Building Material Cement clinker production /Plate glass production

Iron and Steel Crude steel production /Steel rolling

Nonferrous Metal Electrolytic aluminum /Copper smelting

Paper making Pulp production /Paper making

Aviation Passenger air transport /Air cargo transport /Airports

◆Only CO2 covered, no other gases.◆Both direct and indirect emission covered.◆Threshold: Enterprises whose annual CO2 emissions exceeds 26,000 tons.

MRV: policy framework is basically established

Technical guideline

• Calculation and reporting guideline: 24 sectors• Monitoring plan (start from 2016)• Verification guidance (temp)• Reference qualifications of third-party verifiers

ETS Help desk

• Official platform for MRV Q&A• Answers are posted on website• Ensuring consistency of MRV rules

Reporting progress

• 37 provinces/cities with more than 8000 covered entities in 8 sectors are requested to report data

• Data of 2013~2017 has been collected• Data collection of 2018 is ongoing

MRV: general procedure of reporting and verification

report

entities Localauthority National a

uthority

verifier

review institute

hire

hire

verify

review

report

ETS Help Desk plays a critical role

The most valuable lesson: learning-by doing

Solid Legal Foundation Robust Data Basis Effective Allocation Active market

Although there is lessons globally, national conditions are basis

Learning-by-doing is the only option to approach “perfect”

Capacity building

Review and improvi

ng

Legislation: cornerstone of ETS

ETS authority Other government departments

Covered entities, investors, public

consensus

Legislation is the legal basis for monitoring, verification, compliance etc.

A major challenge of legislation is to reach consensus among the stakeholders

MRV: rigorously review and improve in early stages

Rule complexity

• Limited capacity of the authority, entities and verifiers in early stages

• Avoid excessively complicated rules and high qualification requirement of verifiers

Rule unity

• 37 provinces/cities, with more than 8000 covered entities

• Ensure they have identical understanding of the rules

Data quality

• Sequencing key elements• Data for what? (historical & benchmark allocation)• Monitoring Plan (effective enforcement is key)• Periodically evaluating and improving

Financial authorities should be appropriately engaged

ETS authority

Financial Authority

legislation

MRV

Allocation

Offset scheme

Supporting systems systems

Marketaccess

Tradingbehavior

Derivativeinstrument

Informationdisclosure

Step in at early stage

Construction of policy fram

ework

Financial regulation

Futures are the evolution results of ETS, and an indispensable instrument to guarantee the effectiveness of ETS

Financial regulation is essential, but avoid overregulation

THANK YOU!

Documents

Korea Carbon Forum 2019 Part 2 Seminar 1: International Carbon … · 2017-12-19 · e. For some member states, the auctioning revenue generated during this period was substantial