Background and Assumptions October 14th, 2014, Brussels Markets in - - PowerPoint PPT Presentation

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Background and Assumptions October 14th, 2014, Brussels Markets in 2015 Climate Change Agreement Andrei Marcu Centre for European Policy Studies (CEPS) Place du Congrs 1, 1000 Brussels, Belgium 10/20/2014 1 www.ceps.eu Moving beyond

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Background and Assumptions

October 14th, 2014, Brussels Markets in 2015 Climate Change Agreement Andrei Marcu

10/20/2014 1 Centre for European Policy Studies (CEPS) • Place du Congrès 1, 1000 Brussels, Belgium www.ceps.eu

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KP is Cartesian, logic and orderly – a giant cap-and-trade system

– Units with clear compliance value – Tracking through ITL – No double counting possible – Transfers for UNFCCC compliance

World has changed

– Different economic order – Different emissions pattern – Different appetite for global governance – Many domestic market-based approaches to CC mitigation have developed

10/20/20 14 2 Centre for European Policy Studies (CEPS) • Place du Congrès 1, 1000 Brussels, Belgium www.ceps.eu

Moving beyond Kyoto

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Copenhagen tried to duplicate a KP and failed
Hence, demand for an agreement capable of facilitating

a heterogeneous, less-centralised landscape, with ‘various approaches’

Paris agreement unclear but assumptions on the

agreement and the world to 2020 and beyond must be made

All discussions depend on assumptions and scenarios

10/20/20 14 3 Centre for European Policy Studies (CEPS) • Place du Congrès 1, 1000 Brussels, Belgium www.ceps.eu

Moving beyond Kyoto

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New international climate change agreement in Paris
All Parties will have INDCs

– Economy-wide with absolute caps (not dissimilar to KP commitments, but without – AAU budget) – Sub-national level with absolute caps (e.g. sectors of the economy, sub-national – regions) – Without absolute caps

10/20/20 14 4 Centre for European Policy Studies (CEPS) • Place du Congrès 1, 1000 Brussels, Belgium www.ceps.eu

Assumptions

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There will be a desire to transfer mitigation
utcomes/units -- “good for compliance” with their

INDCs.

Different types of mitigation

instruments/approaches/market mechanisms

– Developed, created and operated by the COP (e.g. CDM, JI). New ones may emerge in this category – Created and operated by Parties (or NOT by the COP).

10/20/20 14 5 Centre for European Policy Studies (CEPS) • Place du Congrès 1, 1000 Brussels, Belgium www.ceps.eu

Assumptions

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UNFCCC run market infrastructure was major benefit
Clarity of compliance value and market value. Principle of

‘regulator decides’: the regulator decides what the environmental value of a unit is and how it provides recognition

Unclear objectives & politicization
Carbon leakage: asymmetric CC-provisions lead to

competitiveness pressures from asymmetrical climate change policies

Regulatory and political stability for credibility and long-

term proice signal

10/20/20 14 6 Centre for European Policy Studies (CEPS) • Place du Congrès 1, 1000 Brussels, Belgium www.ceps.eu

Lessons from KP

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Broadly decentralised climate change regime

– Each country can use any international unit for compliance – No global standards: minimalistic market provisions in Agreement

Decentralised regime with minimum standards

– Guidance on minimum environmental standards for compliance, but no approval

Transparency approach: formal minimum standards

– Minimum environmental standards must be observed, but no approval process

Centralised regime: COP as key regulator

– COP defines environmental standards which must be observed – Units, or systems producing units, must be approved by C

10/20/20 14 7 Centre for European Policy Studies (CEPS) • Place du Congrès 1, 1000 Brussels, Belgium www.ceps.eu

Scenarios

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Scenario 1: ‘Mission Impossible’ or ‘Super KP’
Scenario 2: Cartesian scenario: UNFCCC-linked carbon

markets

Scenario 3: Globally Networked Carbon Markets

Main question to be asked here what is the role of the UNFCCC ? Can a “club” replace the UNFCCC?

10/20/20 14 8 Centre for European Policy Studies (CEPS) • Place du Congrès 1, 1000 Brussels, Belgium www.ceps.eu

Market development scenarios

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Thank you for your attention

10/20/20 14 9 Centre for European Policy Studies (CEPS) • Place du Congrès 1, 1000 Brussels, Belgium www.ceps.eu

End of presentation

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10/20/20 14 10 Thinking ahead for Europe • Centre for European Policy Studies (CEPS) • www.ceps.eu

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10/20/20 14 11 Thinking ahead for Europe • Centre for European Policy Studies (CEPS) • www.ceps.eu