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Emissions Trading: Difference between revisions
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One result of this was the “legally binding commitment for the reductions of four greenhouse gases” <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 209 </ref> for all member countries. | One result of this was the “legally binding commitment for the reductions of four greenhouse gases” <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 209 </ref> for all member countries. | ||
Another point important point which has been regulated in Kyoto was mechanisms like “Emissions Trading, the Clean Development Mechanism and Joint Implementation” <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 209 </ref> | Another point important point which has been regulated in Kyoto was mechanisms like “Emissions Trading, the Clean Development Mechanism and Joint Implementation” <ref> <br> Singhal, Neeraj and Gupta, Himani. 2011. Carbon Credit Currency for the Future. [book auth.] Walter Leal Filho. The Economic, Social and Political Elements of Climate Change. Berlin, Heidelberg : Springer-Verlag, 2011, p. 209 </ref> | ||
===How does emissions trading work in general?=== | |||
Much information about the emissions trading is available on the website of the Federal Environment Ministry. I found there some interesting information about the emissions Trading process in the European Union and the several periods which are necessary to establish the emissions trading in Europe. | |||
“However, they do not specify who has to reduce how much. This creates a large degree of flexibility for achieving goals and an incentive to search for and implement the most cost-effective reduction. The permitted amount of emissions is reduced after or during each trading period. The first emissions trading period covered the years 2005 to 2007, the second period started in 2008 and continues until 2012. The third trading period begins in 2013; the provisions for this third period have by and large already been specified.” | |||
<ref> The Federal Environment Ministry – Emissions Trading: general Information [Cited: 2011,02,19] http://www.bmu.de/english/emissions_trading/general_information/doc/6940.php</ref> | |||
So we are at the moment in the second period and in two years will start the third period of the trading system with the next serious changes. | |||
“In Germany, the provisions of the National Allocation Plan are implemented through Allocation Acts. In the second trading period, the allowances are no longer allocated 100 percent free of charge; around 10 percent of allowances are auctioned.” <ref> The Federal Environment Ministry – Emissions Trading: general Information [Cited: 2011,02,19] http://www.bmu.de/english/emissions_trading/general_information/doc/6940.php</ref> | |||
So with the second trading period the government begins to auction the first percent of the emission allowances. But already 90 percent of the allowances are allocated free of charge to the companies. But with the start of the third period the European Union has to harmonize the different trading systems in the several member countries to get the same allocation rules in Europe. | |||
“From 2013 emissions trading will be more harmonised in Europe in order to secure uniform competitive conditions within the EU. To this end there will be an EU-wide cap and EU-wide uniform allocation rules. The majority of emission allowances will be auctioned rather than allocated free of charge. For a transitional period there will be free-of-charge allocation for industrial sectors facing tough international competition; this will be in line with stringent benchmarks. These will be based on the average of the EU-wide 10 percent best technologies in a sector.” <ref> The Federal Environment Ministry – Emissions Trading: general Information [Cited: 2011,02,19] http://www.bmu.de/english/emissions_trading/general_information/doc/6940.php</ref> | |||
So the determining of the permissible amount of emissions is a very important, not without controversy, part of the system, because if there are too much permissible emissions in the market we don’t stop the climate change and if there are not enough permissible emissions we cannot sustain our industrial sectors because of the international competition with other industrial regions in the world. | |||
===The participators of the system=== | |||
“Operators of 1665 installations are currently taking part in emissions trading in Germany, in particular all large combustion plants (with more than 20 megawatts of thermal output) and large installations of the energy-intensive industry such as steelworks, refineries and cement works. From 2012 air traffic will also be included in emissions trading. Further areas and greenhouse gases will be incorporated from 2013.” <ref> The Federal Environment Ministry – Emissions Trading: general Information [Cited: 2011,02,19] http://www.bmu.de/english/emissions_trading/general_information/doc/6940.php</ref> | |||
It is a step by step involvement of the several emissions producers in the emission trading system. Each additional step should reduce the emission of greenhouse gases on the level which the European Union and Germany has committed in the Kyoto Protocol. | |||
“In the second emissions trading period from 2008 to 2012, installation operators must cut greenhouse gas emissions by 57 million tonnes annually. Compared with the level of emissions released by installations covered by emissions trading in the first trading period 2005 to 2007, the amount allocated was reduced by more than 7 percent. In the second trading period further types of installations were included in emissions trading, primarily crackers in the chemicals industry, processing installations in the steel industry and installations producing soot.” <ref> The Federal Environment Ministry – Emissions Trading: general Information [Cited: 2011,02,19] http://www.bmu.de/english/emissions_trading/general_information/doc/6940.php</ref> | |||
This is only the German perspective on the allowances because of the, at the moment, not harmonized system in the several member states of the EU. | |||
===“Sale of surplus allowances or purchase of additional allowances”=== | |||
“If a company achieves its required emission reductions through its own cost-effective CO2 reduction measures it can sell surplus allowances on the market. Alternatively, it can purchase allowances on the market if implementing its own reduction measures would be more expensive. Companies covered by emissions trading are obliged to register their emissions annually and to surrender the corresponding amount of allowances to the German Emissions Trading Authority (DEHSt).” <ref> The Federal Environment Ministry – Emissions Trading: general Information [Cited: 2011,02,19] http://www.bmu.de/english/emissions_trading/general_information/doc/6940.php</ref> | |||
On the one Hand should this be an incentive for companies to reduce the personal emissions more than other market participants so that they can sell their surplus allowances. But on the other hand is there the possibility that criminals find ways to take or steal the allowances and sell them on their own account. But we should not only see the disadvantages of the system, because it opens us also advantages and possibilities. | |||
“Everyone benefits from emissions trading. It is an efficient and cost-effective instrument for avoiding greenhouse gas emissions and protecting our climate. With the revenues from emissions trading the German government has been able, since the start of 2008, to promote a wide range of climate protection measures - in industry, local authorities and for consumers.” <ref> The Federal Environment Ministry – Emissions Trading: general Information [Cited: 2011,02,19] http://www.bmu.de/english/emissions_trading/general_information/doc/6940.php</ref> | |||
===Introduction into the Carbon Market=== | ===Introduction into the Carbon Market=== | ||