International Climate Policy Carbon Markets · final reference section. Bi-monthly report...

International Climate Policy & Carbon Markets N° 18 – January 2012 of 14

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International Climate Policy and Carbon

Markets is a bi-monthly report aimed at

providing a clear analysis of the

worldwide evolution of the carbon

market, and the international and

domestic climate policies.

The report is organized in four sections

focused on i) international negotiations

and national policies, ii) European and

international energy policy, iii) flexible

mechanisms and developing countries,

and finally, iv) evaluation of the carbon

price in the hypothetical global market.

The information and data presented in

each section are not only an update of

recent events but also an extrapolation

of the quantitative implications of recent

events, based on a detailed analysis of

academic papers and recently

published reports (i.e. how the carbon

price will be impacted by changes in

the energy demand, etc). Every two

months for each section we will briefly

introduce and analyse the most

important policies (proposed or applied)

and actions. Each article will include

boxes, figures and graphs in order to

provide in-depth examinations and data

exemplifications; all papers and reports

used for the analysis will be cited in the

final reference section.

Bi-monthly report

International Climate Policy

&

Carbon Markets

N° 18 - January 2012

FEATURING

pp. 2-5: INTERNATIONAL NEGOTIATIONS and NATIONAL POLICIES

Durban Conference delivers a

last-minute compromise

What’s beyond Canada’s

withdraw from Kyoto Protocol?

pp. 6-8: ENERGY POLICY

Europe sets 2050 Energy

Roadmap

How farm waste provides

energy in Pakistan’s farm

districts

pp. 9-12: FLEXIBLE MECHANISMS and DEVELOPING COUNTRIES

State of play of domestic ETS in

Non-Annex I Countries

Adaptation to climate change:

from recognition to

implementation at local level

p. 13: THE CARBON MARKET

A snapshot on carbon markets:

December 2011 – January 2012

p. 14: REFERENCES

For questions and comments please contact:

VALERIA BARBI - [email protected] MARINELLA DAVIDE - [email protected]



INTERNATIONAL NEGOTIATIONS AND

NATIONAL POLICIES

Durban Conference delivers a last-

minute compromise

After more than 14 days of negotiations

the 17th Conference of the Parties to the

UNFCCC (COP 17), held from November

28th to December 9th 2011 in Durban,

came to an end. Although the low

expectations, delegates from 195

countries managed to achieve three

main outcomes[1].

Firstly, the Ad Hoc Working Group on

Further Commitments for Annex I Parties

under the Kyoto Protocol (AWG-KP)

agreed on a second commitment

period. It shall begin on January 1, 2013

and end either on December 31, 2017 or

2020 (to be further agreed by the

group). By May 1, 2012 countries which

take part to this second period have to

convert their economy-wide reduction

targets into quantified emission limitation

or reduction objectives (QELROs) and

submit them for consideration by the

next session of the AWG KP. From a legal

point of view, the Conference proposed

to amend the Annex B of the Kyoto

Protocol by including Annex I Parties’

commitments for a second reduction

period. This solution allows to save the

future of market-based mechanisms

and, at the same time, to avoid that

developing countries will continue to

block the negotiation process on that

issue. However, the document takes into

consideration that Canada, Japan and

Russia do not intend to participate in a

second period. In this connection, just a

day after the Conference closed, the

Canada’s Environment Minister Peter

Kent confirmed that his country will

formally withdraw from the Kyoto

Protocol [2].

BOX 1. FUTURE CLIMATE AGENDA [3]



The proposal also adds the Nitrogen

trifluoride (NF3) to the six greenhouse

gases (GHG) regulated under the Protocol

(1995 or 2000 will be the base year).

The second key outcome is the

mandate to launch of a new process

aimed at developing a protocol,

another legal instrument or a legal

outcome under the Convention

applicable to all Parties. To achieve this,

a new Ad Hoc Working Group on the

Durban Platform for Enhanced Action

has been established. The group shall

start its work in 2012 in order to adopt the

new instrument by 2015 and to

implement it from 2020. In addition, the

Conference asked to raise the level of

ambition of the new agreement,

according to the recommendations of

the next IPCC Assessment Report. This

last-minute compromise, which put

together developed and developing

countries, represents a success of the EU

strategy which strongly linked its

approval of a second commitment

period to the adoption of a roadmap for

a new climate comprehensive

agreement to be launched by 2020.

Given the Kyoto’s commitments will

expire at the end of 2012, the Durban’s

Conference represented the last

opportunity to find a compromise [4].

Besides these two unexpected results,

the COP also achieved some progress

in defining outstanding issues of the

Cancun Agreements. In particular, the

Green Climate Fund has been

launched as an operating entity of the

Financial Mechanism of the

Convention. It will start to operate in

2012. Although countries failed to agree

to a plan to capitalise it, they

succeeded to approve a broad design

of the Fund and to set up the body that

will manage it. Resources will be

allocated between mitigation and

adaptation activities in a balanced

proportion, ensuring appropriate

allocation for other activities and taking

into account vulnerable developing

countries’ needs. As regards the REDD

mechanism, further technical steps to

better define safeguards and modalities

for forest reference emission levels have

been undertaken. Particularly

noteworthy is the fact that a summary of

information on how the safeguards are

being addressed should be provided

periodically and should be included into

national communications from non-

Annex I Parties. Procedures to include

Carbon Capture and Storage (CCS)

activities into the CDM have been put

forward. Finally, countries decided that

the Technology Mechanism will enter in

function in 2012.

Almost all countries welcomed the

Durban package as a first step in the

right direction, with the exception of

Venezuela that reported poor nations

had been threatened they will not get

money for climate finance if they

blocked the texts [5].

M.D.



What’s beyond Canada’s withdraw

from Kyoto Protocol?

Just three days after the beginning of

the Durban Conference, Canada

declared its official retreat from the

Kyoto Protocol, the only international

agreement that set clear reduction

targets of greenhouse gas emissions.

Canada became the first country to

withdraw from the agreement stating

that it’s not the way forward for climate

change.

Under the agreement, Canada was

required to reduce carbon dioxide

emissions by 6 percent from 1990

emission levels by 2012. Rather than

meet this target, carbon emissions from

Canada have increased dramatically.

Last year alone, emissions of Co2 in the

country has increased 35 percent

compared to 1990 emission levels [6].

The Government, joined by the United

States, Russia and Japan, proposed to

the international community to

negotiate a new, more inclusive and

more practical agreement that would

draw in developing nations, particularly

the emerging economic giants China,

India and Brazil. Even an unprecedented

offer by China to consider accepting

cuts to its greenhouse gas emissions if

the second stage of Kyoto were

approved, failed to move the

government.

Canada’s environment Minister cloaks its

position in principle, stating that Kyoto

doesn't work and “the world can do

better”, but it's hard to avoid the fact

that there is an element within it of self-

interest for Canada. With the retreat of

the Kyoto Protocol, Canada freed from

the obligation to pay a fine of 14 billion

Canadian dollars.

Since Canada clearly has failed to meet

its terms, it has little other choice than to

bail out or expose a certain hypocrisy.

Canada, in fact, cannot meet the

commitments it made when the Liberal

government of Jean Chrétien joined up

in 1998. Successive governments, Liberal

and Conservative, have shown varying

degrees of enthusiasm for the idea of

the Kyoto Protocol, but none of them

has shown any zeal in actually

implementing it because of the

economic costs of meeting the accord's

rigorous schedule. Nonetheless, the

Kyoto Protocol has never been

embraced by Prime Minister Stephen

Harper’s conservative government

Walking away from Kyoto, then, was all

that Canada could reasonably do if it

were not to fall into a violation of it, but it

was also a useful wake-up call on

climate change.

However, some economists stated that

beyond Canada’s choice to withdraw

from the agreement there would be also

the belief that under its soil there’s a true

answer to climate change. In fact,

Canada is the world's third largest

producer of natural gas. Although

overall production has recently been

declining, new sources and methods for



exploiting "unconventional" natural gas

reserves, such as shale gas, have led

industry and government officials to

argue that gas could play a deep role

as a "bridging" fuel to kick-start near-

term reductions in the greenhouse gas

emissions responsible for climate

change. The Government believes shale

gas is an important strategic resources

that could provide numerous economic

benefits to Canada and playing an

important role forward a clean energy

future.

However, a report published in

December 2011 concluded that

although natural gas contains less

carbon than other fossil fuels, fighting

climate change requires slower, not

faster addition of new natural gas

production capacity [7]. The report also

concludes that governments in Canada

must take much greater care before

giving the green light to the

development of unconventional

resources, such as shale gas, and focus

on zero-emission solutions, such as

renewable energy. Shale gas requires up

to 100 times the number of well pads to

extract the same amount of gas as

conventional sources, and recent shale

gas development in the U.S. has had

major environmental impacts due to the

extraction process (“fracking”). Many

supporters of natural gas see it as a

"bridging" fuel that will allow Canada to

make small, short-term reductions in

greenhouse gas emissions but the report

concludes that the environmental

impacts of natural gas are too great,

and that it is not worth it to delay

advancements in renewable energy

technology. Getting at some of the

"unconventional" gas poses huge

environmental risks, and natural gas still

causes greenhouse gas emissions.

Luckily, the concept that Kyoto is

effectively dead, or at least so badly

wounded as to be out of action, is not

popular everywhere and in developing

countries, which are spared the burden

the protocol imposes on industrialized

economies, or in European nations that

managed to meet their Kyoto goals

more through economic luck than

economic sacrifice.

V.B.

BOX 2. ENVIRONMENTAL RISKS DUE TO SHALE GAS EXTRACTION PROCESS [7]

Technically known as hydraulic

fracturing, ‘Fracking’ involves using

water pressure to introduce fractures

into the gas-bearing layers of rock

containing trapped natural gas,

allowing it to flow out. To bring about

the fracturing, the water is first mixed

with sand, along with additives to

speed the process up. These are

injected down kilometre-long steel

pipes that are concreted into place

to prevent contact with water

aquifers on the way down to the gas-

bearing layers.

Consequences for the environment:

• water pollution due to proppants

and toxic chemical compounds

used;

• water wastage;

• chemical disclosure;

• health concerns;

• heartquakes.



ENERGY POLICY

Europe sets 2050 Energy Roadmap

At the end of December 2011, the

European Commission (EC) published

the “Energy Roadmap 2050”, which

explores the challenges posed by the

EU’s long-term emission reduction

strategy while at the same time ensuring

security of energy supply and

competitiveness. The Communication

analyses five illustrative scenarios aimed

at reducing greenhouse gas (GHGs)

emissions to 80-95 percent below 1990

levels by 2050 by combining four main

mitigation measures (energy efficiency,

renewable sources, nuclear and carbon

capture and storage - CCS) in order to

highlight some “no regret” options to

bring down emissions [8].

To begin with, all scenarios show that

decarbonisation of the energy system is

possible at a relatively low cost. Indeed,

with the policy initiatives currently

planned, the total energy system cost

could represent slightly less than the 14.6

percent of European GDP in 2050

(compared to 10.5 percent in 2005). This

is mainly due to lower fossil fuel price

volatility, as import dependency falls to

35-45% in 2050. The average capital

costs of the energy system will increase

significantly creating major opportunities

in terms of impact on the economy and

jobs in manufacturing, services,

construction, transport and agricultural

sectors. In this transition energy

efficiency and renewable sources play

a crucial role irrespective of the energy

mix chosen (Box 3). However, a stable

framework is likely to require further

actions to save energy, especially with a

view to 2030. Electricity will double its

share in final energy demand to 36-39

percent in 2050. Most scenarios suggest

that electricity prices will increase to

2030, but fall thereafter, influencing with

the same trend the households’ bill. To

achieve its objective, the EU has to

modernise the energy system and to

make infrastructures more flexible,

including a common energy market to

be completed by 2014.

However, if other countries will not join

EU efforts, a potential trade-off between

ambitious energy policies and

competitiveness could emerge as risk for

some sectors especially in a perspective

of full decarbonisation.

M.D.

BOX 3. ENERGY ROADMAP: KEY FIGURES[8]

− Primary energy demand need to be

reduced in a range of:

• 16 - 20% by 2030

• 32 - 41% by 2050

− The share of RES in 2050 rises

substantially in all scenarios,

achieving:

• at least 55% in gross final energy

consumption (up 45% from now);

• 64% in a High Energy Efficiency

scenario;

• 97% in a High Renewables Scenario.

− CCS (if commercialised) will have to

contribute significantly with shares

between 19 to 24%

− Nuclear energy (where it is pursued) shows the highest penetration of 18 and 15% in primary energy in Delayed CCS and Diversified supply

technologies scenarios



How farm waste provides energy in

Pakistan’s farm districts

Energy shortage is the major problem for

Pakistan’s economy but the solution is

growing in the country’s soil. In fact,

Pakistan is an agricultural country where

almost all the crops are grown

producing a huge amount of waste and

biomass which can be used in gasifiers

for the production of syngas or producer

gas. Unfortunately, this source of energy

has not been utilized for power

generation in the past but the growing

urbanization and changes in the pattern

of life has given rise to generation of

increasing quantities of wastes sooner

becoming a threat to the local

environment.

However, in recent years, waste-to-

energy technologies have been

developed to produce clean energy

through the combustion of municipal

and farm solid waste in specially

designed power plants equipped with

the most modern pollution control

equipment to clean emissions. Biomass

and waste to energy plants are used not

only to generate sufficient power but

also to cleanup the environment as well

by conserving non-renewable fossil fuel

resources (one ton of MSW combusted

reduces oil use by about 45 gallons; or

coal use by about 0.28 tons) and

reducing the environmental impacts of

trash disposal. It has been estimated that

one ton of MSW combusted rather than

land filled reduces greenhouse gas

emissions by 1.2 tons of carbon dioxide

[9]. Furthermore, biomass and waste-to-

energy facilities can also contribute to

the country’s economy by providing jobs

apart from generating electricity. In

2011, a new project backed by the UNEP

and now fully operative, started working

to make clean energy a reality for

Pakistan, even in its most remote areas.

Among these, Shangar, a farming district

home of nearly 2 million people where

access to reliable sources of energy is

difficult. A survey realized by UNEP found

BOX 4. ENERGY FROM WASTE: WHAT’S GOOD IN THIS TECHNOLOGY.

• It provides nearly three times more useful energy than that

dung directly burnt and produces

nutrient-rich manure;

• If crop residue or biomass are

available in sufficient amount without any danger to forest and

animal feed, gasifier can serve as

an option for energy supply in

remote areas;

• the Corn Cobs (pith) can be used

without any prior processing, It’s

cheaper than coal and charcoal

and gives almost equal volume of

gas as compared to other fuels;

• the promotion of biogas

technology seems to be one of

the best options, which cannot

only partially offset the fossil fuel

from wood consumption but also

facilitates recycling of agro-

animal residues as a bio-fertilizer;

• being clean and renewable it will

contribute towards environment

protection, sustenance of

ecosystem and biodiversity;

• Biogas Plants can result in

improving economic and financial conditions at micro as

well as macro level.



that the energy potential of the 2.5

million tonnes of waste produced in the

district was equivalent to 1.07 million

tonnes of fire wood, or 910 million units of

electricity (with a conversion efficiency

rate of 20%). If this energy potential was

fully realised, the converted waste could

meet the energy demands of roughly

400,000 households (at 2400 units per

household). Further research was done

to determine how agricultural waste was

managed and used, to avoid future

conflicts. For instance, it was learnt that

20% of sugarcane tops was being fed to

animals, but 80% was being burnt in the

fields, along with the entire quantity of

banana plant waste and about 70-80%

of rice straw [10]. These materials could

therefore be used for energy conversion

without impacting on food supplies or

other needs. Promotion of the biogas

technology seems to be one of the best

options, which cannot only partially

offset the fossil fuel from wood

consumption but also facilitates

recycling of agro-animal residues as a

bio-fertilizer.

In Pakistan, PAK-Energy Solution from

University of Engineering and

Technology (Lahore) has taken the most

innovative and responsible initiatives in

biogas technology. In this regard, the

company is also awarded by 1st prize in

"Young Entrepreneur Business Plan

Competition" jointly organized by Punjab

Govt. e LCCI and "Battle of Business

Giants" in Techno'Fest 11. The company

is aiming to install 70,000 biogas plants in

next 3 years [11].

Currently, there are 2,500 waste-to-

energy plants in operation in as many as

32 countries. Another 125 waste-to-

energy plants are under construction,

whereas 220 projects are planned,

mostly in the developing world, utilising

modern technology.

The demand for waste-to-energy plants

is estimated to be growing worldwide by

6% annually. In some countries, it is a

strategic component of integrated

waste management policy: the US

generates 2,800 mw electricity through

waste-to-energy plants, while India has

three plants in operation with a

cumulative capacity of 17.6 mw. Wide

range of waste materials includes

municipal solid waste, industrial and

commercial waste, agricultural or

biomass waste, healthcare waste,

sewage, sludge, waste from mineral

mining activities and hazardous waste.

Despite the clearly visible step forward in

considering climate change threats, just

a month away from the Durban

Conference, it has to be underlined that

Pakistan still have no national climate

change policy framework. Ranked at

the top among countries facing

extraordinary weather extremes in the

Global Climate Risk Index [12], Pakistan’s

Climate Change Policy stands nowhere

after devolution of the federal

environment ministry.

V.B



FLEXIBLE MECHANISMS AND

DEVELOPING COUNTRIES

State of play of domestic ETS in Non-

Annex I Countries

Since the adoption of the Kyoto Protocol

in 1997, the establishment of a

harmonised international carbon market

has been seen as one of the main

strategies in international climate policy.

So far, however, the market is far from

being globally harmonised or

systematically linked but plans for the

establishment of emissions trading

systems (ETS) are emerging also in

various non-Annex I countries and

prospects for linking them to existing

systems seem to finally get in reach (Fig

1). However, linking developed and

developing country schemes raises

another fundamental issue: since

developing countries do not dispose of

Kyoto-valid trading units, new

mechanisms or policy options need to

be developed if trading units from

developing countries are to be used by

industrialised countries. Brazil has

established a stock exchange for

voluntary carbon units which may

precede a domestic trading scheme.

Rio de Janeiro, Brazil’s second richest

state, recently announced to launch an

ETS for its largest emitters between 2013

and 2015 and is also in consultation with

its neighbour states.

China has made concrete steps towards

the creation of regional ETS in various

cities and provinces. However, these

plans differ widely in their institutional

designs: for example, whereas

Guangdong is likely to put in place a

trading system based on absolute

emission caps, Tianjin and Beijing have

indicated that their trading schemes

might be based on energy saving

credits. Newer announcements even

envisage the creation of a national

system by 2015.

India has not shown much propensity for

a domestic ETS due both to political and

institutional reasons. However, trading

schemes for energy efficiency and

FIG 1. CO2 AND EFFICIENCY TRADING SCHEMES AROUND THE WORLD [13]



renewable energy are already in place.

Kazakhstan has very definite plans for an

ETS, and has in fact a draft law in

parliament. Mexico has been one of the

earliest proponents of a domestic ETS,

but has not taken this plan much farther.

Under the World Bank’s Partnership for

Market Readiness, Mexico has been one

of the first eight countries to receive an

initial grant of USD 350,000 in order to

build up domestic capacities for the

implementation of carbon markets.

However, Mexico’s focus seems to have

shifted from a domestic ETS to the

development of credited NAMAs in

energy efficiency in housing, appliances

and other end uses, methane

destruction or use in solid waste disposal,

improved cement blended production,

and urban transport. South Korea has

already come very far in the design of its

ETS. However, due to opposition by

domestic industry, targets have been

weakened and the start date pushed

back. There are currently two

competing bills in Parliament. In the

interim, a Greenhouse Gas & Energy

Target Management System is to ensure

that the pledged emissions reduction of

30% below business as usual by 2020 will

be met. The question is in particular how

the very diverse design choices of the

envisaged pilot schemes are to be

aligned to form a convergent system on

such short notice. The trading systems

that do emerge may not necessarily be

based on GHG emissions. Like some

Chinese provinces, also India is

establishing trading systems for energy

efficiency and renewable energy [13].

On the one hand, such systems might

optimistically be seen as potential

precursors to a GHG trading system that

help to build capacity and gain first

experiences with trading. On the other

hand, institutional lock-in and path

dependencies might prevent a later shift

from energy consumption to GHG

trading. In addition, even where a GHG

ETS is pursued, such a system will not

necessarily be compatible with the

global carbon market. It will depend on

the design of trading system regarding

the nature and stringency of the targets

and the inclusion of cost containment

features. Through linking, such features

would impact the whole combined

trading scheme and thus impair rather

than enhance its environmental

effectiveness [14].

Taken together with the developments

in Australia and California, 2015 might

see a very substantial share of global

emissions being covered by domestic

emission trading systems. Incidentally,

2015 has just been set to be the end

date of the new negotiation process

launched in Durban. The endgame of

the Durban Platform might hence play

out in the context of a very substantial

share of global emissions being covered

by domestic emission trading systems,

which should constitute a rather

favourable environment for agreeing to

a global framework.

V.B



Adaptation to climate change: from

recognition to implementation at

local level

Building on the Cancun Agreements and

other related adaptation discussions,

such as the Bali Action Plan and Nairobi

Programme, Durban resulted in

encouraging progress on adaptation.

Thus, COP-17 resulted in the

operationalization of the Adaptation

Committee and progress of National

Adaptation Programs of Action (NAPAs)

along with National Adaptation Plans

(NAPs) which were of critical importance

to ensure G77, Association of Small

Island State and least development

countries negotiating group support for

other elements of work.

But what does the word adaptation

means if related to the climate change

field? Climate change adaptation is the

adjustment of ecosystems or human

systems in response to the impacts of

current of projected changes in climate

caused by human-induced climate

change. That these impacts are already

occurring is widely documented, and

they will probably increase in scale,

frequency, and intensity.

Vulnerability to climate change is a

function of the nature and severity of

the climate impact and capacity to

cope with it. “The degree of vulnerability

depends on the environmental, social,

economic and political characteristics

of an area, population, activities, or the

environment and is measured by the

ability to anticipate, cope with, resist,

and recover from an event, process, or

a phenomenon like a drought hazard”

[14]. Therefore, adaptation responses

can be seen as a continuum (Fig 2): at

one end of the spectrum the focus is on

the underlying causes of vulnerability

(poverty and food insecurity for

example), at the other end of the

spectrum are responses to specific

climate impacts (responding to a rise in

sea level for example). In the middle,

organizations and individuals can build

adaptive capacity through knowledge

sharing and increasing awareness of

climate impacts, and can manage

climate risk by integrating climate

change in program decision making

(climate-proofing projects and

investments) [15].

In the last years the need for adaptation

has been recognized everyday more,

both at international and national level,

so that the World bank estimates that

FIG 2. CONTINUUM OF ADAPTATION

ACTIVITIES: FROM DEVELOPMENT TO CLIMATE CHANGE. [15]



$75-100 billion will be required each

year from 2010 to 2050 to meet

adaptation requirements. However, to

date less then $2 billion has been

deposited to various climate funds

established to help raise and manage

international support to that field

(including those set-up through the

UNFCCC). In addition to the identified

need for financial resources, has been

recognized that climate change

impacts and adaptation should be

integrated in development assistance

(OECD Development Assistance

Committee). However, while these

international activities are without any

doubt important to climate change,

some case studies demonstrate that the

most effective adaptation responses will

occur at the local level [16].

In Kenya, for example, drought events

associated to climate change have

become more pronounced in recent

years, adversely affecting the lives and

livelihoods of smaller farmers. In response,

the International Institute for Sustainable

Development (IISD) and the Centre for

Science and Technology Innovations

(CSTI) have undertaken a pilot project

that links together the provision of

downscaled weather forecast,

improved agricultural practices,

increased access to water and

revolving microcredits system for

women [17]. Furthermore, the project’s

continual engagement with district and

national-level policy-makers is also

facilitating the integration of

adaptation to climate change into

sustainable development plans and

policies. Specifically, the CSTI and

ALRMP implementation teams have

worked to influence the content of

Kenya’s draft National Disaster

Management Policy and its revised

policy on the sustainable development

of arid and semi-arid lands [18].

Therefore, local adaptation is crucial but

climate change adaptation strategies

need to relate somehow to national

programs and planning. Local action

alone will not have the effect needed to

accomplish the scale of adaptation

that’s required. The final goal must be to

mainstream adaptation into national

planning to develop regular and

effective mechanisms to involve

stakeholders and to explore a range of

adaptation methodologies and

assessment tools.

V.B.

BOX 5. RULES TO BE FOLLOWED TO TAKE EFFECTIVE ACTIONS ON ADAPTATION

• Actions must be locally or

community-driven;

• it’s better to promote specific

practices that are workable for

local contexts;

• focus on most vulnerable groups;

• build up the adaptive capacity of

communities and local and

provincial or State governments;

• promoting understanding of

climate change impacts;

• developing multi-disciplinary teams and promoting different

sources of knowledge.



THE CARBON MARKET

A snapshot on carbon markets

December 2011 – January 2012

The front year EUA contract ended the

2011 at €7.32 under the pressure of the

debt crisis that continued to affect most

European countries. Anticipation of

additional carbon supply in form of the

so-called New Entrants Reserve 300

added to the bearishness in December.

Overall, the European carbon permits

lost half of their value during 2011. The

CER contract fell even more than its

European counterpart (-62 percent) and

close the trading year 2011 at €4.22

amid uncertainties concerning the

future of the Kyoto mechanisms. In the

first weeks of the new year the positive

economic sentiment about the euro

zone crisis managed to push prices up

again, supported by the extraordinary

cold weather which gripped Europe and

boosted the demand for electricity.

M.D.

BOX 6. A SNAPSHOT ON THE CARBON MARKET

SOURCE: OWN ELABORATIONS FROM POINTCARBON DATA AVAILABLE AT www.pointcarbon.com



REFERENCES

[1]UNFCCC (2011). Decisions adopted by COP 17 and CMP 7. At http://unfccc.int

(accessed January 19, 2012)

[2] The Guardian (December 13, 2011) “Canada pulls out of Kyoto protocol”

http://www.guardian.co.uk/environment/2011/dec/13/canada-pulls-out-kyoto-protocol

[3] SIA Partners (January 25, 2012 )“Durban conference: enough to face climate change?” Energy Outlook at http://energy.sia-partners.com/1901

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