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What would an ideal system look like?

EMISSIONS TRADING. What would an ideal system look like?. Mike Young University of Adelaide. Global warming potentials. CO2-e for Australia. Þ CO 2 + CH 4 + N 2 O (99.7%). Negotiated December 1997 Needs 55 country or 55% ratification 6 gases 1990 benchmark

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What would an ideal system look like?

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  1. EMISSIONS TRADING What would an ideal system look like? Mike YoungUniversity of Adelaide

  2. Global warming potentials

  3. CO2-e for Australia Þ CO2 + CH4 + N2O (99.7%)

  4. Negotiated December 1997 Needs 55 country or 55% ratification 6 gases 1990 benchmark 1st commitment period 2008-2012 CDM’s from 2000 KYOTO PROTOCOL

  5. { 1st Commitment Period “Emissions cap” Cap set for 2nd Commitment Period } CDM credits 2000-12 108 106 Assigned amount 100 Australian CDMs with non-Annex 1 countries 1990 1995 2000 2005 2008 2012 Years

  6. { 1st Commitment Period “Emissions cap” Cap set for 2nd Commitment Period } CDM credits 2000-12 108 106 Assigned amount 1995 Inventory (excluding land clearing) 100 97 Australian CDMs with non-Annex 1 countries 1995 Inventory (including land clearing) 1990 1995 2000 2005 2008 2012 Years

  7. Design Principles • Adaptive Framework • Clear rights, entitlements and obligations • Low transaction costs • Minimum legal risk • Equity among all sources and sinks

  8. SUCCESSFUL EMISSION RIGHTS SYSTEMS • Cap emissions • Are designed for adaptation • Allocate equitably- via permit auction- via shares- combination of two • Are pragmatic • Clear rights, entitlements, obligations • Minimal legal risks

  9. Emissions Trading • Shares of Tradeable Amount • Permits • Permit accounts

  10. SHARES AND PERMITS • Initially, shares in each gas • Shares have renewal guarantee • Fixed share of assigned amount based on inventory • CO2 - e Permits last until acquitted • Reductions shared pro-rata • Windfall gains to Crown

  11. SHARE REGISTER • Record ownership • Electronic • Minimum Trade: 1 share • Could be mortgaged

  12. Emissions Permit Account

  13. A Permit Cheque Greenhouse Date ____________ Pay ____________________________________________ __________t The sum of ________________________________ tonnes CO2-e Emissions Trading Australia Signature______________________ 807512 085 249:0223 7851

  14. AUSTRALAN GREENHOUSE GAS EMISSIONS - 1995

  15. WHAT TO TRADE? • Sufficient emissions • Sufficient firms • Low cost monitoring

  16. PERMIT ACCOUNTS • All in C02 - e • No charge for trading in Phase 1 • Account Fee • Full permit trading • Penalty - 3 times value after 1 month grace period

  17. HIGH LEVEL ISSUES • Windfall gains - 5% return to community • Legislation – Parallel in each state • Where to acquit – upstream v’s downstream? • How to allocate shares

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