Industrial nations in the East are starting to take reins of their carbon dioxide emissions. China has proposed to set a cap to its greenhouse gas emissions from 2016, to meet its goal of a 40% reduction in carbon intensity by 2020 compared to 2005 levels. Meanwhile, South Korea will soon embark on what is deemed the world’s most ambitious cap and trade market, with the highest global price on carbon, in January 2015 and aims to reduce emissions by 30% compared to current trends. Read more

China agrees to impose carbon targets by 2016

Beijing’s thaw over greenhouse gases seen as major step in battling climate change

By Tom Bawden in The Independent (21 May 2013):

The battle against global warming has received a transformational boost after China, the world’s biggest producer of carbon dioxide, proposed to set a cap on its greenhouse gas emissions for the first time.

Under the proposal China, which is responsible for a quarter of the world’s carbon emissions, would put a ceiling on greenhouse gas emissions from 2016, in a bid to curb what most scientists agree is the main cause of climate change.

It marks a dramatic change in China’s approach to climate change that experts say will make countries around the world more likely to agree to stringent cuts to their carbon emissions in a co-ordinated effort to tackle global warming.

“This is very exciting news,” said Lord Stern, chair of the Grantham Research Institute on Climate Change at the London School of Economics.

“Such an important move should encourage all countries, and particularly the other large emitters such as the United States, to take stronger action on climate change. And it improves the prospects for a strong international treaty being agreed at the United Nations climate change summit in 2015,” added Lord Stern, who, in his 2006 report for the UK government on the financial implications of climate change, produced what many regard as the world’s single most influential political document on the subject.

Nearly 200 countries around the world have pledged to agree legally binding targets to reduce their emissions at the next significant climate change summit in Paris in 2015.

Without a robust global agreement experts say there is virtually no prospect of keep global warming to 2C – beyond which most experts agree the consequences become increasingly disastrous.

Doug Parr, Greenpeace’s chief scientist, said: “This is a big shift in China’s position and should unblock the standoff between the US and China in the global climate change negotiations. Without an agreement between these two major players it is hard to see how an agreement can be reached in 2015.”

The US is the world’s second biggest emitter of carbon dioxide, accounting for 17.6 per cent of the global total, while the UK makes up 1.6 per cent.

Climate and Energy Change Secretary Ed Davey told The Independent that China’s changing attitude to climate change has made him increasingly confident that a deal can be reached in 2015.

“At the end of last year the Chinese leadership changed and started talking about creating an ‘ecological civilisation’. This doesn’t mean they have signed up to every bit of the climate change talks, but it means they recognise that their economic model has to take account of pollution and the environment and that damage that it’s doing to people’s health,” Mr Davey said.

“I’m really much more confident than many people about our ability to get an ambitious climate change deal done in 2015. Obama in his second term clearly wants to act on this and there has been a fantastic and dramatic change in America’s position. Taken together with China’s change, the tectonic plates of global climate change negotiations are really shifting,” Mr Davey added.

Mr Davey said he wants the UK to take a leading part in the global climate change discussions as part of the European negotiating block. However, he said he was concerned that the rise of the climate sceptic Ukip party could drag members of the Tory right in that direction and damage Britain’s credibility in debate on global warming.

Elliot Diringer, of the Centre for Climate and Energy Solutions think tank in Virginia in the US, said China’s move towards a cap was “encouraging news and definitely a move in the right direction” but said its true impact would depend on the level of the ceiling.

The proposal to introduce the cap has been made by China’s National Development and Reform Commission (NDRC), agency responsible for planning the country’s social and economic development. Although the proposal needs to be accepted by China’s cabinet, the State Council, for it to be adopted but experts said the agency is extremely influential and is working with a government that appears to be increasingly committed to the environment. The agency also said it now expects China’s greenhouse emissions to peak in 2025, five years earlier than its previous estimate.

China has agreed to cut its so-called carbon intensity – the amount of CO2 produced per dollar of economic output – by about 40 per cent by 2020, compared to 2005 levels. However, this still allows for a considerable increase in emissions, albeit it at a slower pace. The cap proposed by NDRC would represent the first time China has committed to cut its absolute emissions – something that the US has failed to do.

Lord Stern said the move was a further sign that the EU “is losing its global leadership position on climate policy through its vacillation”.

http://www.independent.co.uk/

South Korea May Launch World’s Most Ambitious Cap And Trade Market

In The Energy Collective (19 May 2013):

With roughly 18 months until launch, South Korea appears ready to create the world’s most ambitious cap and trade market, with the highest global price on carbon.

These findings jump from a Bloomberg New Energy Finance (BNEF) white paper analyzing how potential market designs could affect the nation’s carbon price and market efficiency, and are a reminder that global cap and trade could still be integral to combating climate change.

South Korea’s government is finalizing system design, set to launch in January 2015, but BNEF predicts it could ultimately cover 70% of national emissions and reach $90 per ton of carbon.

Criticism of the EU emissions trading scheme (ETS) centers on if it actually forces industry to cut pollution, but that won’t be the case in South Korea. “If the government implements the scheme without any changes, it will have major implications for Korean companies,” said Richard Chatterton of BNEF.

Over 450 entities participate in the country’s existing greenhouse gas inventory, covering more than 60% of South Korea’s emissions. These entities are all large-scale emitters, and submit annual emissions and energy consumption data to the government, which then sets reduction targets for the subsequent year.

BNEF’s projections assume the same entities would be covered by the ETS, and are based on South Korea’s emissions reductions target of 30% below current trends by 2020. This goal will require a 19% reduction from 2010 levels, and compared to Australia’s 14% and the EU’s 5% reduction target, make the Korean system without equal.

In order to meet its goal, BNEF predicts South Korea would need to cut its emissions by 836 million tons (Mt) of carbon relative to business-as-usual between 2015 and 2020.

Demand for emission reductions would thus rise to 200 million metric tons per year (Mt/yr) by 2020 – almost double demand projected for the EU ETS, even though South Korea’s program is only 20% its size.

But Reducing Those Emissions Won’t Be Easy

However, BNEF expects South Korea will face challenges meeting these goals. The proposed system design restricts the use of carbon offsets to 28% of reduction requirements up to 2020, and starting in 2021 only offsets from domestic projects would be eligible for polluters.

This tight offset market means South Korea’s ETS could be painful for the country’s industrial sector as they’re forced to buy permits or cut emissions. 598Mt of emissions reductions – nearly 75% of total cuts – will need to come from the industrial and power sector, meaning the cost of electricity and manufactured goods would rise.

Further complicating matters, South Korea’s industrial sector is already fairly energy efficient as a result of historically high energy prices, exposure to international fuel price shocks, and national investment in energy efficiency programs.

Clean Energy Is A Clear Solution…But Not Short-Term

So if offsets are going to be at a premium, and much of the country’s energy efficiency potential has already been realized, where will South Korea’s emissions reductions come from? The clearest solution, as in most cases, is cutting coal-fired electricity generation.

BNEF sees the power sector offering the most abatement opportunities both short and long term. Short-term, the white paper estimates South Korea could reduce emissions in 2020 by up to 64Mt/yr by substituting natural gas for coal-fired power. This assumes natural gas generation utilization capacity rises from current projections of 27% in 2020 to 70%

South Korea has traditionally relied upon imported liquefied natural gas (LNG), but tight supply and volatile price swings lead BNEF to predict electricity generation will shift toward higher-efficiency fossil fuel or renewable generation, and overall energy efficiency measures will rise outside of the industrial sector.

In fact, BNEF predicts the ETS will feed into South Korea’s renewable portfolio standard to expand demand and boost renewable generation to 55 gigawatt-hours (GWh) in 2020 – a 700% increase from 2010.

Toward A Global Carbon Market Via South Korea

But the best way for South Korean polluters to comply with the ambitious reduction goals may not be within its borders – BNEF recommends linking to other functional carbon markets with an abundance of low-cost abatement options.

Two other mature markets will be operating in 2015 when South Korea’s system launches: the EU-Australian, and California-Quebec linked programs. BNEF predicts EU-Australian allowance prices will be below $40 per ton, and California-Quebec around $50 per ton in 2020.

Global cap and trade allocation demand forecast image via BNEF

Linking to these two systems would benefit all parties. South Korea’s ETS will create demand four times greater than California’s system, and 60% higher than the EU-Australia scheme. Thus, South Korea reduces abatement prices by accessing cheaper permits from other systems, while boosting demand and whittling away surplus permit supply in other carbon markets.

Perhaps most promising in this equation, BNEF’s estimates don’t even consider China’s fledgling market. Seven regional pilot programs began rolling out this year, and they will cover up to 1 billion tons of emissions by 2015 before the country launches its own national system in 2020. Remember China is by far the planet’s biggest emitter of carbon.

Of course, these rosy scenarios hinge on the ETS unfolding as originally proposed, and that’s far from a certainty. South Korea’s government is consulting with large emitters this month, and they have called for many revisions to loosen the strict allowance, offset, and reduction policies.

The ETS “Master Plan” is due to be published in December 2013, and it will provide the legal basis for emissions reductions until 2018.

So South Korea, it’s decision time. Stay on your ambitious path, and cut emissions 30% while helping create a truly global carbon market. Or, water down the system proposal, and watch your national emissions climb 28% by 2020, according to BNEF – no pressure.

Source: www.theenergycollective.com/