Supporting carbon pricing policies through crediting and RBCF 2...Cost of policy design and operaon...
Transcript of Supporting carbon pricing policies through crediting and RBCF 2...Cost of policy design and operaon...
Supporting carbon pricing policies through crediting and RBCF
Frédéric Gagnon-Lebrun May 2016
Supporting carbon pricing policies through crediting and RBCF May 2016
World Bank supported
Huge amount of detail, analysis,
(ongoing) thinking
Starting point • Policy-based crediting and Sectoral Approaches have long been
identified as promising options for GHG mitigation … • … but not yet implemented • Experience from CDM instructive, especially re: MRV • Some useful experience of RBF
• Paris Agreement has given structure, more certainty: • International climate policy architecture, with NDCs • Provisions for international transfers of “mitigation outcomes” • A new, UNFCCC-governed baseline-and-crediting mechanism
(for all countries) • Encourages RBF for REDD+
• Crediting of carbon pricing policies – implicit or explicit – is innovative and may help increase mitigation impact
Supporting carbon pricing policies through crediting and RBCF May 2016
DOMESTICECONOMY
Government
*Somerevenuerecyclingcandirectlyimpacttheopera6onofthepolicyinques6on,e.g.ifgovernmentprovidesextrafreeallowancesinanETS.**Verylikelytobeforeign,butcouldbeadomes6ccharityorafounda6on,etc.
External**CreditPurchaser
Withincreasedmi6ga6onimpact
CouldCredi6ngPricingPolicyincreasemi6ga6onimpactfromnew/exis6ng
policies?
DOMESTICECONOMY
GovernmentSurplus,i.e.extrarevenue
Costofpolicydesignandopera@on
*Somerevenuerecyclingcandirectlyimpacttheopera6onofthepolicyinques6on,e.g.ifgovernmentprovidesextrafreeallowancesinanETS.**Verylikelytobeforeign,butcouldbeadomes6ccharityorafounda6on,etc.
External**CreditPurchaser
Withincreasedmi6ga6onimpact
CouldCredi6ngPricingPolicyincreasemi6ga6onimpactfromnew/exis6ng
policies?
SectorsandStakeholders
Significantlyaffectedbythe
policy
Notaffectedbythepolicy
Somewhataffectedbythe
policy
DOMESTICECONOMY
GovernmentSurplus,i.e.extrarevenue
FlowtogovernmentbudgetFlowfromgovernmentbudget
*
Costofpolicydesignandopera@on
*Somerevenuerecyclingcandirectlyimpacttheopera6onofthepolicyinques6on,e.g.ifgovernmentprovidesextrafreeallowancesinanETS.**Verylikelytobeforeign,butcouldbeadomes6ccharityorafounda6on,etc.
External**CreditPurchaser
Withincreasedmi6ga6onimpact
CouldCredi6ngPricingPolicyincreasemi6ga6onimpactfromnew/exis6ng
policies?
4 Case Studies: no external crediting, but show how/why policies were implemented
Supporting carbon pricing policies through crediting and RBCF May 2016
MoroccoEnergySubsidy
Reform
IndonesiaEnergySubsidy
Reform
MexicoCarbonTax
Beijing(China)EmissionsTrading
System
Policy Ongoingreduc6onofsubsidies(fuelandelectricitygenera6on)
Ongoingreduc6onofsubsidies(fuelandelectricitygenera6on)
Carbontaxonfossilfuelsalesandimports.Norevenuerecycling.
OneofseveralpilotETS.Covers40%ofcity’sdirectandindirectemissions.
Drivers Publicfinances;stabilityofpublicpoweru6lity;increasingcompe66onamongpowerproducers
Publicfinancesandfiscaldeficit;electricitygenera6onexpansion;otherfundingpriori6es
Strengthenfinancialcapacity;supportInclusiveMexicoandaProsperousMexico;raiseawarenessaboutclimatechange
Increasedenergyefficiency;supportforeconomicdevelopmentgoals;tes6ngETS
Barriers Concernsaboutimpactsonpoorhouseholds;compe66venessconcernsamongindustry;mixedministerialposi6ons
Popula6onaccustomedtolowandstableenergyprices;weaktransportinfrastructure;minoritygovernmentandcomplexadministra6on
Long-standingcultureofsubsidizedfuelsandelectricity;Industryandcommerceagainstoriginalproposals
Strongopposi6onfromenterprisesfacingabatementscosts
“Carbon Economics”: (very) low value of credits as % of policy financial revenues/ savings
Supporting carbon pricing policies through crediting and RBCF May 2016
Critical Design/Implementation Issue #1: Political Economy • Increasing recognition that overall economic benefits are not the only
consideration for assessing policy: • Experience shows us that impacts on the poor and vulnerable are key – can/
should they be compensated? • Also suggests perception of impacts is higher than what could be/is observed
in practice
• “Carbon Economics” analysis: savings vs potential credit value • Could crediting play a role for increased ambition?
• Perhaps, particularly if there are highly symbolic groups to compensate
• GHG impact depends on how revenues are reinvested • “GSI-IF” shows double reductions if 30% revenue goes to
renewable energy/energy efficiency • Can be very hard to hypothecate or “earmark” savings (e.g.
Indonesia)
Supporting carbon pricing policies through crediting and RBCF May 2016
Critical Design/Implementation Issue #2: MRV • At present no agreed standards or international agreement which allow for
the estimation of GHG emission reductions from policy • Not an issue for ETS
• For fiscal policies, range of assumptions and challenges needed pre-implementation (modelling) or post (empirical analysis)
• Setting a baseline; • Attributing impact to the policy alone; • Time lags for impact; • Period over which credits should be generated, etc.
• Any pricing policy always part of a wider context and interacts with other policies and goals (e.g. carbon tax and subsidies in Mexico)
• Will always be uncertainty for fiscal policies • For a bilateral trade, this is a choice for the buyer • Great benefit from (simple) agreed methodologies
Supporting carbon pricing policies through crediting and RBCF May 2016
3 options to take forward
Supporting carbon pricing policies through crediting and RBCF May 2016
1. Support emission reductions at the policy margin 1. For ETS: could purchase allowances (creating scarcity) 2. Performance benchmarks from which to award credits, under a
carbon tax regime 3. Credit supporting policies (e.g. energy efficiency programmes) for
pricing policies
2. Support emission reductions within the targeted sectors 1. Politically symbolic; but large enough to drive change?
3. Overcome barriers to effective policy implementation and operation
1. Support MRV needs 2. For ETS: increase market liquidity
In all cases, (traditional) technical assistance is useful.
Next steps & Recommendations • In-depth feasibility and identification of suitable policy crediting
approaches is needed • In specific contexts • With engagement with interested countries (“sellers” and “buyers”) and
other relevant stakeholders
• Useful to explore the architecture more generally • Can we go beyond bilateral agreements between a buyer and seller
to fungible credits? • Connect domestic policies through crediting as an alternative to
wider (more difficult) linking? • Is there a role for “non-market approaches” under Paris Agreement
to support policy implementation?
• Need for piloting and testing of the mechanisms
Supporting carbon pricing policies through crediting and RBCF May 2016
Frédéric Gagnon-Lebrun Head – Climate Change Mitigation International Institute for Sustainable Development [email protected]
Supporting carbon pricing policies through crediting and RBCF May 2016