The Energy Chamber has put Trinidad & Tobago on the map for the work being done in the development of a carbon market or emissions trading system (ETS), according to Katie Sullivan, Director of the Americas, International Emissions Trading Association. Speaking at the Trinidad and Tobago Energy Conference – Green Energy Day, she says “If anyone says, no one is putting a price on carbon, no one is doing emissions trading, then show them these maps”
It quickly emerges that many major economies are already trading carbon or using some form of market mechanism to reduce carbon emissions.
The International Emissions Trading Association (IETA) places Trinidad and Tobago on their map as a location of a developing ETS, championed by Energy Chamber. It places Trinidad & Tobago in the company of other countries developing ETSs, including Brazil and China.
The COP 21 Paris agreement on climate change in late 2015 marked a notable renewed interest in carbon trading from a global perspective. The final agreement included a paragraph dedicated to carbon markets and market mechanisms. The Paris agreement in essence binds all nations in the world to a commitment to achieve a balance of CO2 emissions (from industry) and sinks (natural areas where CO2 is stored, such as forests) by the second half of the century and a goal of limiting global climate change to 1.5 – 2.0 degrees Celsius.
Noting that carbon markets are a key to achieving the desired outcome, Katie Sullivan says that pricing carbon happens all over the world right now. The challenge is that markets are quite fragmented but this is evolving rapidly. Pricing of carbon is mainly happening through emissions trading, though there is also some countries with carbon taxes and some places have a hybrid of these measures. Some countries, notably the USA, have sub-national systems meaning that states, provinces or even cities have their own systems in place to price carbon.
Talking at the conference, Dr Axel Michaelowa said the COP21 was a significant milestone in climate change because it represents a shift in the global climate policy regime. He explains that the Kyoto Protocol had a top down approach but some major players and industrialized countries did not participate, including the USA and Canada. After the failure of the Copenhagen conference, many assumed that the UN climate initiatives would fall apart and this is why it was so important that agreement was reached in Paris. The Paris agreement creates a hybrid system with a “bottom up” element where each country makes its own commitments and a “top down” system where there are a set of international rules. The only danger now to the agreement is that it requires ratification by countries covering 55% of emissions which would probably mean the USA, China, the EU and another large player such as Russia or India. Given the commitments in Paris it seems that this target will be reached.
In the agreement there is one full paragraph on market mechanisms. The cornerstone is the “centralized mechanism” or what some have deemed the sustainable development mechanism (SDM) which incorporates a series of elements from the Clean Development Mechanism (CDM) from the old Kyoto protocol.
Market mechanisms will also include corporative approaches which give rise to a new commodity, named Internationally Transferable Mitigation Outcomes (ITMOs). The rules for ITMOs will not be set at an international level. They use a bottom up approach so it can be a link of the existing emissions trading systems, and could use joint crediting mechanism where countries sign MOUs with other countries and jointly decides on rules and regulations. The only principles that they operate under are that they must have high environmentally integrity and should be transparent in their operations.
Dr Michaelowa said cautiously that, the market will only be as good as the demand. The challenge according to Vintura Silva – Team Lead United Nations Framework Convention for Climate Change (UNFCCC) is that while there were markets being developed, countries that have indicated that the market is based on their ability to sell credits and there are not necessarily many buyers. In the final hours of Paris, eighteen countries led by New Zealand indicating that they wanted to see a strong role of markets. The countries that had not indicated the use of markets in their INDCs were made to sign an agreement that they will purchase credits from these market countries. This represents a good opportunity for Trinidad and Tobago for partnerships. He also suggested that that local or regional markets may be beneficial for Trinidad and Tobago.
Derek Walker, Associate VP of the Environmental Defense Fund, also praised the Energy Chamber for its work because from their perspective, business led solutions are some of the most powerful and longest lasting initiatives. He drew a comparison to California which has some similarities to Trinidad and Tobago with regards to manufacturing and the level of automobiles/ drivers on the road. In 2009, California developed a Cap and Trade System for the state. They also invited other jurisdictions to participate in the market with them. There are parallels that can be made for Trinidad and the rest of the Caribbean. He noted that Quebec also linked with the California ETS to take advantage of the mitigation opportunities and also the existing trading mechanism including monitoring and verification systems already in place.
He urged countries to be cautious when developing Climate Policies because it can lead to run away costs in industries. Through the California ETS US$ 3.5 billion was raised since 2009. The money is reinvested in the economy to create jobs. Walker was impressed by the T&T INDC submission because it was specific in decoupling emissions growth and economic growth. Internationally there is now an awareness that there is no high carbon path to global prosperity – EDF believes that carbon markets are a route to cutting pollution as fast as possible while allowing participating economies to creating prosperity and growing the economy through new jobs and industries.
The Energy Chamber is pleased to be recognized by such high caliber speakers for its role in the development of a carbon market in Trinidad and Tobago. The Energy Chamber continues to work on the ETS and hopes to have a monitoring, reporting and verification (MRV) framework in place within the near future. The Energy Chamber anticipates that carbon markets and energy efficiency will be major thematic area to be discussed at the Trinidad and Tobago Energy Conference 2017.