Linking treaties to expand the market
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Transcript of Linking treaties to expand the market
The Fridtjof Nansen Institute
Linking treaties to expand the market
Kristian Tangen and Henrik HasselknippeA post-2012 Architecture
Bonn June 12 2003
The Fridtjof Nansen Institute
Merits and shortcomings of cap-and-trade
• Merits– Cost effectivness and price signals
– Large reduction at low prices
– TEETH!
• Shortcomings– High prices: Politically impossible
– Need other instruments for technological change
Create incentives for cap-and-trade Develop supplementing instruments
The Fridtjof Nansen Institute
Challenges & Solutions
• Negotiations of several treaties– GOOD: Fewer negotiation parties– BAD: Fewer trade-offs, package deals
• Challenge – Weaker incentives for cap-and-trade?
• Solution?– Linked multi-treaty system– Differentiated rights and duties– Graduation thresholds
The Fridtjof Nansen Institute
Linking rights and duties
UNFCCC/KP/CDM
Reporting Treaty
SupportTreaty
TradingTreaty
Other treaties-Technology-Development
Rights: Only parties negotiate
The Fridtjof Nansen Institute
Reporting Treaty
• Reporting: first step for effective policies• Rights
– Gateway to Support and Trading treaties
• Duties – Comply with reporting requirements
• Reporting requirements– Kyoto-style reporting (art. 5,7 & 8)– For sectors or whole economy– Depends on developing level– E.g. only CO2 from energy
The Fridtjof Nansen Institute
Support Treaty
• Below threshold• Duties
– Compliance with Reporting Treaty
• Rights– Participation
– Capacity building
– Financial support
• Above threshold• Duties
– Compliance with Trading Treaty
• Rights– Participation
The Fridtjof Nansen Institute
Cap-and-trade Treaty
• Duties– Caps for sectors, or the whole economy– Caps only sectors covered by Reporting Treaty
• Rights– Full participation in emissions trading– Can be party to Support Treaty– Additional support for newcomers
The Fridtjof Nansen Institute
Caps
• To be set by negotiations between parties to the Trading Treaty
• Possibility, one of many– Caps set as reduction from BAU – BAU has to be approved by review team – Lower reductions for newcomers
• Example– Newcomers: -0.1% from BAU– Veterans: -2% p.a. from BAU– With various levels in between?
The Fridtjof Nansen Institute
Possible first steps
• Bottom-up processes• Trading countries (EU, Japan, Canada)
– Should develop common currency
– Discuss linking and future evolution
• Reporting– Increase support for developing country reporting
• Technology and innovation– Establish framework for international cooperation
• Sensible also if KP does not enter into force