Ambition, Cooperation and Opportunity.

Dirk ForristerPresident & CEO, IETASustainable ProsperityOttawa22 June 2016

The Paris Climate Agreement.It’s about three things…

Climate Challenges, Market Solutions

Realizing Ambition

Climate Challenges, Market Solutions

Enhancing Cooperation

Climate Challenges, Market Solutions

Seizing Opportunity

Climate Challenges, Market Solutions

Climate Challenges, Market Solutions

2 C = 450 ppm 80 – 90% Reductions

Climate Challenges, Market Solutions

1.5 C = 350 ppm 95% Reductions?

Climate Challenges, Market Solutions

• 2°C (or 1.5 °C) means massive transformation by 2050 –• Hold atmospheric concentrations to 450 ppm (or 350 ppm?)• Advanced nations reduce 80 – 90 % and emerging economies

reduce growth significantly• Net zero goal (sources = sinks) by 2nd half of century

• Action largely reflected in Nationally Determined Contributions • Current targets closer to 3°C than 2°C• So expect targets to strengthen over time

• Level of change means action must reach beyond borders• Helps keep costs in check and avoid economic shocks• Enables business to be a partner – not an obstacle

The Paris Outcomes on Carbon Markets

Climate Challenges, Market Solutions

Marshall Islands

New Zealand

INDC Submitted

Singapore

INDC includes the use of

International markets

San Marino

Trinidad and Tobago

Comoros

Grenada

Country will consider using markets

Seychelles

Kiribati

Mauritius

Maldives

Barbados

Tuvalu

Cape Verde

DominicaSao Tome and Principe Solomon Island

Monaco

Samoa

INDC Not Submitted

Antigua and Barbuda

Fiji

Nauru

Cook Islands

St Lucia

St. Vincent and the Grenadines

Micronesia

Vanuatu

Palau

SOURCE: IETA/EDF “Carbon Pricing: The Paris Agreement’s Key Ingredient,” April 2016

1. Cooperative approaches through “internationally transferred mitigation outcomes” (para 2)

2. Rules for carbon market accounting, particularly avoidance of double-counting (para 2 & 5)

3. Sustainable development & mitigation crediting mechanism (para 4)

The Big Caveat: Rules, modalities and procedures due by 1st COP/MOP of Parties to Paris Agreement, but negotiators’ track record is mixed.

• Enhanced cooperation through market linkages with accounting principles to drive integrity

• New mitigation mechanism available to all who want to use it• For both developed & developing countries• Could be broader than mere crediting • Operates in context of all Parties implementing NDCs

• Includes direct & indirect references to REDD+ (Art. 5)• NDCs reviewed every 5 years (Decisions 23 and 24) – may

help signal supply / demand trends

• Success in getting Article 6 reflected hard work on carbon pricing over past few years

• Market cooperation now extends beyond INDCs and Article 6• World Bank’s Partnership for Market Readiness and Carbon

Pricing Leadership Coalition• Germany/Japan leading the G7 carbon market platform • New Zealand declaration on carbon markets• Japan’s Joint Crediting Mechanism with 19 partners

• High-level Panel set ambitious goals in NYC to double coverage of pricing by 2020 and double again within a decade

Taking Carbon Markets Forward From Paris

Climate Challenges, Market Solutions

Centralized Hub• Decisions taken in COP 22 and 23

• Trading hub follows GCF, CTCN models

• Governed under COP oversight

• Results in broad buy‐in

Spin Off Clubs• UN gridlock• Coalition forms• Trading club follows CCAC model

• Governed by users• Results in narrow, but strong buy‐in

Climate Challenges, Market Solutions

Climate Challenges, Market Solutions

Common building blocks for trading

Common issuance process

Registry & tracking service

Market oversight system

Standard sector baselines  Reduction targets MRV standards

Defined units of measure 

Agreed offset standards 

Compliance assurance

Climate Challenges, Market Solutions

The Case of the JCM

Japan

Mexico

Maldives

Cambodia

Vietnam

Kenya

Palau

Costa RicaEthiopia

BangladeshIndonesia

Laos Mongolia

Climate Challenges, Market Solutions

The Case of California‐Quebec (+Ontario?)

MOU

WCI Inc.

Compliance Instrument Tracking System Service

Joint Auctions

CA ETS QU ETS

Offsets

California Entities

Quebec Entities

Futures Exchange, Brokers

Offsets???

CAR, VCS, ACR 

Standards

Climate Challenges, Market Solutions

Essential UN function may be reporting (net imports, exports)

Basic rules are similar inside or outside UNFCCC

UN Hub Independent Club

Advantages Broad fungibility Owned by supporters

Experienced team Reduced barriers to adopt policy

Build on existing tools Pulls quality systems forward

Enhance ambition for all Domestic political/reputation 

Disadvantages Political interference Limited fungibility

Bureaucracy No existing institution

Reputation Potential start up pains

SOURCE: Climate Policy, “Compliance of Parties to the Kyoto Protocol in the First Compliance Period,” June 2016

Key Points• Trade enabled EU, Japan & 

New Zealand to comply• EU’s internal AAU trade 

significant (Poland, Romania & Czech)

• Japan imports:150m CERs, 22m ERUs, 226m AAUs

• EU imports: over 1b. units • NZ imports: 90m units

• Carbon markets got a boost from Paris• Business community’s interest is rising• Now action shifts to implementation & business readiness

• National (and sub-national) pricing systems• Cooperation across borders / business relationships• UN FCCC negotiations on rules & guidelines

• Nations are free to cooperate in either “hubs” or “clubs”• For Canada, no obligation to engage markets – just

opportunity

www.ieta.org

Climate Challenges, Market Solutions