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 $142 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: Five 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 the future of the scheme after that date is still uncertain as U.N. climate talks flounder.
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 metric ton 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. New Jersey to withdraw by end of year. 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. Government hopes to pass a climate bill which includes a national trading scheme have faded after the Fukushima nuclear accident took precedence.
Japan is also pushing ahead with a bilateral offsets scheme by backing CO2 reduction projects in developing nations.
1. Australia: Carbon Pollution Reduction Scheme (CPRS)
Likely to adopt the largest emissions trading scheme outside Europe next year after more than a decade of trying.
Covers: 60 percent of Australia’s carbon pollution apart from exempted agricultural and light vehicle emissions.
How it works: 500 companies will pay a A$23 per metric ton carbon tax from next year, rising by 2.5 percent a year, moving to a market-based trading scheme in 2015.
Target: National aim 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: Could be delayed by a year to 2013 [ID:nN1E75S28I]
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: Cut the state’s emissions to 1990 levels by 2020.
3. Western Climate Initiative (WCI)
Launch: January 2012 but likely delayed
Covers: California, Canada’s British Columbia and Quebec.
Target: Cut emissions 15 pct below 2005 levels by 2020
How it works: Emitters such as power plants would have to buy offsets to cover their emissions. Transport would be included in 2015.
5. South Korea emissions trading scheme
Launch: Between 2013 and 2015
Covers: About 470 companies that emit more than 25,000 metric tons of carbon dioxide annually and are collectively responsible for 60 percent of the country’s emissions. All sectors to be covered.
The government wants the bill to be passed before September to start the scheme from 2015. It bowed to industry pressure by increasing free carbon permits and softening penalty rules for non-compliance in a bid to get parliamentary approval.
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 emissions has struggled to get through parliament since the government introduced a bill in 2008.
Target: Taiwan aims to cut CO2 to 2005 levels by 2020.
7. India: Perform, Achieve and Trade system.
Launch: Three-year rollout period set to start in September. Trading slated to start from 2014.
A mandatory energy efficiency trading scheme covering eight sectors responsible for 54 percent of India’s industrial energy consumption.
How will it work? Annual efficiency targets will be allocated to firms. Tradeable energy-saving permits called Escerts will be issued depending on the amount of energy saved during a target year.
Target: India has pledged a 20-25 percent reduction in emissions intensity from 2005 levels by 2020.
(Sources: Reuters, Point Carbon)
Compiled by Nina Chestney and David Fogarty in Singapore, editing by Anthony Barker