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Canada Defends UN Climate Role, Overshoots Kyoto    [

    EU's Gyrating CO2 Mart Teaches US About Balance
    By Timothy Gardner
    Reuters

    Wednesday 17 May 2006

    New York - The delicate balance between supply and demand is the lesson the United States, the world's leading emitter of heat-trapping gases, can learn from the European Union's roller coaster ride on its nascent carbon dioxide market, experts said.

    The EU launched a cap-and-trade market last year to meet emissions limits of the gases scientists link to global warming under the Kyoto Protocol. The first round of the pact requires industrialized countries to reduce emissions by about 5 percent from 1990 levels by 2008 to 2012.

    Europe's trading scheme gave nearly all the allowances - rights to emit heat-trapping gases - to its smokestack industries. But that may have distributed allocations to sources that did not need them - in effect skewing the supply/demand balance that keeps markets running smoothly, said William Pizer, a senior fellow at Resources for the Future, an independent research institute in Washington, DC.

    "Maybe there should have been some sort of an auction," he said in an interview.

    In such cap-and-trade markets, plants that cannot cut emissions under set limits buy them from industrial facilities that have trimmed emissions by taking steps such as operating boilers more efficiently or switching from coal to cleaner natural gas.

    An imbalance of credits in the European scheme may have helped to drive CO2 prices to a peak of 31 euros (US$40) a tonne last month, analysts said. This in turn drove power bills higher, as plants hoarded credits in fear that prices would go still higher.

    It may have also played a roll in the 65 percent collapse after a handful of countries, including France and Spain, reported that their 2005 CO2 emissions were far below expectations. Prices had recovered by Tuesday, but they were also volatile - as high as 21 euros and as low as about 15 euros - on uncertainty about demand.

    Coast to Coast

    President George W. Bush withdrew the United States from the Kyoto process in 2001 saying it would hurt the economy. But states on the US east and west coasts are planning their own CO2 reduction schemes.

    In the East Coast effort, the Regional Greenhouse Gas Initiative, states agreed to auction at least 25 percent of their allocations. One state in the plan, Vermont, plans to auction all its allocations. Eliot Spitzer, attorney general of New York, another member state, is lobbying for his state to auction all its allocations.

    Derek Murrow, an emissions expert at advocacy group Environment Northeast, which is participating in setting up the RGGI, said it would be unlikely to repeat the EU's mistake. He noted that the US states are building their system more slowly than the EU did. That should allow the RGGI to measure the demand for emissions credits more accurately.

    Alexander Rau, a founding partner of Climate Wedge, a company that manages a voluntary carbon fund with Cheyne Capital, agreed. "Most of Europe's allocations were based on projections rather than hard data," he said.

    Even so, the RGGI plan is far less ambitious than Kyoto. It seeks to cap emissions in the region's power plants at current levels by 2009 and and reduce them by 10 percent by 2018.

    California's emissions program has been proceeding even more slowly. Gov. Arnold Schwarzenegger, a Republican, said last month the state would measure its greenhouse gas emissions first, and then consider a cap-and-trade program.

    Whether the US systems being developed will work fast enough to reduce the expected effects of global warming - stronger storms, increased floods, and searing temperatures - is another question.

    But Pizer said efficient trading systems could reduce the risks of creating too lax a market in which the cost of emissions could sink so low there's no incentive to reduce them. Analysts say that could still happen in Europe's gyrating market.

 

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    Canada Defends UN Climate Role, Overshoots Kyoto
    By Alister Doyle
    Reuters

    Tuesday 16 May 2006

    Bonn, Germany - Canada defended its leadership of UN talks on fighting global warming on Monday despite admitting that Ottawa will not meet its own goals under the Kyoto Protocol.

    Environment Minister Rona Ambrose, who is chairing the May 15-26 meetings in Bonn, has suggested that Kyoto should be softened for Canada in a second period from 2012 saying Ottawa had no chance of reaching its goals.

    "The challenge we face in achieving the targets domestically has no relevance to our commitment to ... ensure that we are contributing to the international effort to address climate change," Ambrose said of Canada's 2006 UN climate presidency.

    Delegates from 189 countries are attending the Bonn talks aimed at bolstering a global fight against climate change and engaging rich nations outside the Kyoto Protocol, including the United States and Australia as well as developing countries such as China and India.

    "We have very onerous targets that were set for us, negotiated for us," Ambrose told a news conference of Canada's goals under Kyoto, which entered into force last year.

    "We will have great difficulty in meeting those targets. We believe they are unachievable," she said of Canada's Kyoto goal of cutting emissions of heat-trapping gases from factories, power plants and cars by 6 percent below 1990 levels by 2008-12.

    Canada's former government took on the UN climate presidency in Montreal in November and the new conservative government will hand over to Kenya in late 2006.

    Environmentalists said Canada was not the right nation to try to persuade other nations to rein in fossil fuels.

    Ambrose "must live up (to Canada's Kyoto goals) or stand down," said Jennifer Morgan, climate policy director of the WWF environmental group. "Vague statements about 'commitments to international efforts' are not serious."

    Too Early

    German Environment Minister Sigmar Gabriel said it was too early for Canada to give up on Kyoto targets for 2012.

    "I'm not sure it's true (that Canada will overshoot its goals)," he said. "We are in 2006, there's 6 years left".

    Ambrose said last week that Canada's emissions were 35 percent over 1990 levels. She said Canada needs a break as a major energy exporter - the country's emissions are set to soar as Alberta's oil deposits are being exploited amid high prices.

    Kyoto's goals are meant as a small first step to slow climate change that could spur droughts, floods, more powerful hurricanes and swamp low-lying Pacific islands by driving up sea levels in coming decades.

    The first two days of the Bonn talks are a non-binding "dialogue" seeking common ground between about 40 industrial nations which have targets under Kyoto and all other countries.

    "We need a common strategy and common targets and also common policies between the industrialised world and the developing world," Germany's Gabriel said.

    "This must include countries such as the United States, Australia, India, China and others," he said.

    The United States pulled out of Kyoto in 2001, saying it would cost jobs and wrongly excluded developing nations from a first round. Washington is instead making big investments in new technologies, ranging from hydrogen to solar power.

    Developing nations want Kyoto backers to make deeper cuts before they agree to take part in any restraint.

    Brazil said any effort to curb emissions by developing nations "can only be characterised as voluntary and, therefore, cannot be linked or associated to goals, targets or timeframes."