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January 31, 2002

March 5, 2002. January 31, 2002. THE GLOBAL IMPERATIVE. Avoiding dangerous warming will require global participation. HOW CAP AND TRADE WORKS. The key policy tool: Cap-and-trade. Cap Hard declining limits on total allowable pollution

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January 31, 2002

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  1. March 5, 2002 January 31, 2002

  2. THE GLOBAL IMPERATIVE Avoiding dangerous warming will require global participation

  3. HOW CAP AND TRADE WORKS The key policy tool: Cap-and-trade Cap • Hard declining limits on total allowable pollution • Govt. creates “allowances,” one for each ton of allowed CO2 • Allowances can be distributed for free to emitters or other stakeholders, or auctioned off cap

  4. HOW CAP AND TRADE WORKS The key policy tool: Cap-and-trade Trade • Firms can trade allowances on a market • Emissions are monitored and recorded • Firms must surrender allowances to cover their emissions during the calendar year trade

  5. Key advantages of carbon markets • Flexibility keeps costs low • Market opportunities attract broad participation • Economic incentives reward innovation 1 2 3

  6. Current geography of carbon markets • JI • CDM (CERs, sCERs) • Voluntary markets • “Carbon markets” include: • EU ETS • RGGI • AAUs

  7. Prices vary across market instruments Source: Project Catalyst

  8. Prices have been volatile but comprehensible Source: David Harrison, NERA

  9. Carbon market is growing strongly

  10. CA vs. US: Per Capita Electricity Use Source: California Energy Commission

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