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The EU and the Kyoto mechanisms market: Implications for Russia Moscow, 26-27 April 2007

The EU and the Kyoto mechanisms market: Implications for Russia Moscow, 26-27 April 2007. Jean-Louis Lavroff Jürgen Salay European Commission Jürgen.Salay@ec.europa.eu. Why is the EU ETS so important?.

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The EU and the Kyoto mechanisms market: Implications for Russia Moscow, 26-27 April 2007

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  1. The EU and the Kyoto mechanisms market: Implications for RussiaMoscow, 26-27 April 2007 Jean-Louis Lavroff Jürgen Salay European Commission Jürgen.Salay@ec.europa.eu

  2. Why is the EU ETS so important? • The cornerstone of the EU’s market-based strategy to reduce greenhouse gas (GHG) emissions cost-effectively • The main driver for the global carbon market currently involving 168 countries • An essential structural element for long-term global strategies to avoid climate change

  3. The EU Emissions Trading Scheme • Started 1 January 2005, covers 27 EU countries • Mandatory cap on absolute emissions across more than 10,000 energy-intensive installations across the continent • Covers around 2 billion tonnes of CO2 emissions, half of EU total • Simple and cost-effective approach to reducing emissions, with single market for trading allowances • Linking foreseen with other emissions trading schemes • Credits from emission-reducing projects in 168 countries useable by companies for meeting objective (JI/CDM) • Market volume in 2006: 18bn Euro

  4. Stages of development of EU ETS • 2005-7: Start-up period • Allowances mostly allocated for free (auctioning limited to 5%) • Robust emissions monitoring and verification • Well-performing electronic registry system • Sound market development • However, insufficiently ambitious levels for emission reductions • 2008-12: First commitment period of Kyoto Protocol • Auctioning possible up to 10% • Commission approval given to 19 plans by mid-April 2007 • Extension of the EU ETS by “opt-in” of other greenhouse gases • EU 2008 allowances currently trading at ~ €16

  5. EU ETS - the wider context • Europe on track to meet its commitments under Kyoto Protocol, through EU ETS, other domestic policies, use of JI and CDM • EU countries investing some €2.7 billion in emission reducing projects, Joint Implementation (JI) and Clean Development Mechanism (CDM), to achieve national GHG reduction commitments • EU ETS providing expected market for JI and CDM of up to 1.3 billion tonnes in 2008-12, in addition to government demand • Emission reductions made globally and cost-effectively

  6. EU Member States invest in emission reductionprojects abroad, 2008-2012 > 540 Million tonnes of CO2eq (2008-2012) ~ €2.7 billion excluding demand from companies in the EU-ETS (in red: NAP2 decisions up to present)

  7. Lessons to be learnt from EU ETS • Keep overall objective in mind of tackling global climate change • Emissions trading systems should link up for maximum global effectiveness • Consideration should be given to ensure compatibility of systems • Significant reductions in emissions are needed through mandatory legislative action • Focus should on direct, absolute emissions from across economy • Keep emissions trading simple • Let the market develop without interference (no safety valve/ price cap) • Use private sector for verification • Use of verified data as basis for allocation • Sound electronic registry software in place for emissions trading

  8. Implications for Russia: Joint Implementation (JI) • Strong interest from EU in JI: EU investors already preparing Russian projects • EU ETS gives strong boost to demand for JI from European industry • Russia may target JI investments to different regions and sectors • Russia has great potential for cost-efficient energy savings measures through JI

  9. Concluding thoughts • The EU ETS is the first step towards a global carbon market • EU ETS has made Member States focus on how they are actually going to meet their Kyoto targets obligations and use the Kyoto mechanisms • Climate policy is already influencing EU companies’ decision making, especially in the energy sector • Russia and the EU have strong common interests in future climate and energy co-operation • Kyoto mechanisms can be an important tool in unlocking the energy efficiency potential in Russia

  10. More information on EU climate change policy http://europa.eu.int/comm/environment/climat/home_en.htm

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