Linking Domestic Emissions Trading Systems

Transcription

1 Linking Domestic Emissions Trading Systems Dr. Leigh Mazany Environment Canada U.S.-Japan Workshop on Local Climate Initiatives 28 March 2005 New York City Environment Canada 1 Canadian political economy context Federal government and provinces/ territories have shared jurisdiction over environmental issues Natural resources are under provincial jurisdiction Provincial differences in resource distribution and manufacturing; for example Oil and gas primarily in Alberta Manufacturing primarily in Ontario and Quebec Provincial differences in fuel sources for electricity generation U.S. is Canada's major trading partner Canada is the only NAFTA signatory with emission reduction obligations under the Kyoto Protocol Environment Canada 2

2 Canada's domestic system November 2002, the federal government released its Climate Change Plan for Canada included development of system for greenhouse gas reductions by Large Final Emitters (LFEs) output-based, or emissions-intensity based, targets to allow for economic growth emissions trading to be part of the system Work on design of system for the past two years Elaboration of system expected in next few weeks Environment Canada 3 Budget 2005 Committed to setting out details of a mandatory emissions reduction regime for LFEs and an emissions trading system emission intensity targets, with targets for new facilities to be based on best-available technology (economically achievable) standards access to domestic and international emissions trading greenhouse gas technology investment fund partnership with provinces and territories Environment Canada 4

3 Canada and the international linkage of emissions trading markets In international negotiations, Canada has been a strong proponent of an open, unrestricted international emissions trading system Fall, 2003, MOU signed with Canadian members of International Emissions Trading Association Committed federal government to "seek to link the domestic emissions trading system to those countries that have ratified the Kyoto Protocol and have also provided open access to their markets." Environment Canada 5 Why linking is important Allows for a deeper and more liquid emissions trading market, and hence better price discovery Provides an enabling environment for multilateral participation in the international carbon market "Promise" of Marrakech for open international system realized Potential stimulus to cooperation and engagement in other areas Environment Canada 6

4 Goals of bilateral linking agreements Develop mechanisms to facilitate international trading by persons, while ensuring compatibility with national obligations. Further institutionalize agreements from Marrakech Minimize associated transactions costs Provide for equitable access to markets Allow Parties flexibility in designing their individual domestic trading systems Environment Canada 7 What is needed for linking? The Kyoto Protocol and its Marrakech Accords provide most of the institutional framework needed for linking: Mutually-agreed national targets and timeframes Defined international units of exchange Requirements for trading eligibility Common standards for data exchange between national registries Common standards for emissions quantification and verification at the national level Compliance regime Environment Canada 8

5 Linking agreements need to fill in the details Any bilateral agreements on linking will need to fill in the details of these national-level rules for example, rules governing international transactions by persons Environment Canada 9 Do differences in domestic emissions trading programs matter to linking? Principle of flexibility in design of national programs is embedded in UNFCCC and Kyoto Protocol Domestic emissions trading programs likely to vary : sectors covered contribution of the domestic emissions trading program to the national target how this contribution is distributed across sectors and companies Differences need not provide impediments to linking, however, as long as quantification and accounting are rigorous. Environment Canada 10