LONDON (Reuters) - Companies and governments around the world are turning to emissions trading as a weapon to fight climate change and join a global carbon market worth $144 billion last year.
Under cap-and-trade schemes, companies or countries face a carbon limit. If they exceed the limit they can buy allowances from others. They can also buy carbon offsets from outside projects which avoid greenhouse gas emissions, often from developing countries.
Following is a list of established and proposed schemes:
1. Kyoto Protocol: Mandatory for 37 developed nations, excluding the United States which never ratified the pact.
Covers: All six main greenhouse gases.
Target: 5 percent average cut in 1990 emissions in 2008-2012 first phase.
How it works: Rich countries cut greenhouse gases at home or buy emissions rights from one other -- if one country stays within its target it can sell the difference to another emitting too much. Or they can buy carbon offsets from projects in developing countries under Kyoto’s clean development mechanism.
The present round of the Kyoto Protocol expires in 2012 and U.N. climate talks in Mexico last week put off decisions on cutting emissions to next year.
2. European Union Emissions Trading Scheme:
Covers: Nearly half of all EU carbon emissions. Mandatory for all 27 EU members.
Target: 21 percent cut below 2005 levels by 2020
How it works: Member states allocate a quota of carbon emissions allowances to 11,000 industrial installations. Companies get most permits free now but many electricity generators will have to pay for all these from 2013.
Companies can buy carbon offsets from developing countries if that works out cheaper than cutting their own emissions.
3. New Zealand emissions trading scheme
Launched July 1, 2010. Mandatory.
Covers: Forestry started first. Electricity, industrial process emissions and transport pollution were included from July. Waste to start in 2013. Agriculture to start 2015.
Target: The government has pledged to cut greenhouse gas emissions between 10 and 20 percent by 2020 on 1990 levels.
How it works: Emissions units are allocated based on an average of production across each industry. From July 1, 2010, to January 1, 2013, emitters have the option of paying a fixed price of NZ$25 per tonne of carbon, and will only have to surrender 1 unit for every 2 units of emissions. Such assistance will be gradually phased out.
4. Northeast U.S. states’ Regional Greenhouse Gas Initiative (RGGI) Launched: January 2009
Covers: carbon from power plants in 10 northeast states. Allows offsets from five different types of clean energy projects including capturing methane from landfills and livestock manure.
Target: 10 percent cut below 2009 levels by 2018
5. Japan: Tokyo metropolitan trading scheme
Launched: April 2010
Covers: Around 1,400 top emitters
How it works: Tokyo city sets emissions limits for large factories and offices to meet by using technology like solar panels and advanced fuel-saving devices. Target: Japan aims to cut emissions by 25 percent by 2020 from 1990 levels. The government hopes to pass a climate bill in parliament early next year that would include a national trading scheme, starting 2013 at the earliest. Details are still being debated.
Japan is also pushing ahead with a bilateral offsets scheme by promoting emissions reduction projects in developing countries.
1. Australia: Carbon Pollution Reduction Scheme (CPRS)
The government is pushing for a decision next year on how to price carbon emissions. It will need support from Greens and independent lawmakers.
The government failed to pass the CPRS, a national trading scheme that had been planned to start mid-2011. It is now expected to opt either for an initial carbon price, a trading scheme that starts with the power sector or a hybrid.
Target: National target to cut greenhouse gases by 5-25 percent below 2000 levels by 2020, depending on what other countries commit to.
2. Californian climate change law
Launch: Law passed in 2006; carbon trade to launch 2012
Covers: Economy-wide emissions, from power plants, manufacturing and, in 2015, transportation fuels.
How it works: Would give away most of its credits to polluters in the early years of the plan.
Target: To cut the state’s emissions to 1990 levels by 2020.
3. Western Climate Initiative (WCI)
Launch: Phased introduction from 2012
Covers: 11 U.S. states and Canadian provinces.
Target: 15 percent cut below 2005 levels by 2020
How it works: Emitters such as power plants would have to buy offsets to cover their emissions from 2012. The offset limit will be calculated as a percentage of compliance to allow the WCI to be more easily linked with other trading systems. Transport would be included in 2015.
5. South Korea emissions trading scheme
Launch: Phase 1 runs from 2013-2015
Covers: About 470 companies or operations that emit more than 25,000 tonnes of carbon dioxide annually and are collectively responsible for 60 percent of the country’s emissions. All sectors to be covered.
Government expected to introduce laws into parliament by end December and to pass them during 2011.
Target: Government has set a 2020 emissions reduction target of 30 percent below forecast “business as usual” levels.
Launch: Possibly 2011
Covers: Nearly 270 companies responsible for more than half of Taiwan’s greenhouse gas pollution have agreed to supply emissions data to the government to help it launch a carbon offset scheme. Legislation to limit greenhouse gas emissions has struggled to get through parliament since the government introduced a bill in 2008. The bill envisages a three-stage plan that would lead up to a fully-fledged mandatory emissions trading scheme.
Target: Taiwan aims to cut CO2 to 2005 levels by 2020.
7. India: Perform, Achieve and Trade system.
Launch: April, 2011. Trading from 2014.
A mandatory energy efficiency trading scheme covering more than 700 companies in nine sectors responsible for 65 percent of India’s industrial energy consumption.
How will it work? Details are being finalized but, based on historical performance, annual efficiency targets will be allocated to firms according to individual baselines or performance bands. Firms that beat their targets will be credited for their reductions. Those that don’t will pay a penalty or buy credits from firms that are more efficient.
Target: India has pledged a 20-25 percent reduction in emissions intensity from 2005 levels by 2020.
(Sources: Reuters, Point Carbon, IDEAcarbon, California Air Resources Board, Western Climate Initiative)
Compiled by Nina Chestney and David Fogarty in Singapore