2. The key question - allocation

3. Global considerationsPrepared by: MuraliVenkatesh Version. 1.0 July 12 2011

4. Emissions Trading in an energy &climate change policy framework Introduction 2

5. 3 Key Sectors in the “energy and CO2 economy” Oil Biomass Gas Coal Nuclear Renewables Primary Energy Power Generation Direct combustion Industry and Manufacturing Liquids Energy Energy Energy Final Energy Mobility Buildings Agriculture and Land Use

6. 4 A structured policy approach is needed A simple, high profile and credible target for the renewables’ share of power generation, supported by a range of incentives to encourage investment. "Cap and trade" emissions trading systems for power generators, most industrial facilities and large fleet transport such as aviation. Measures to incentivise new fuels based on their “well-to-wheels” CO2 reduction potential, implementation of vehicle efficiency standards and vehicle/road-use programs targeted at drivers A series of robust energy standards for buildings, appliances etc. with incentives for retrofit of existing infrastructure.

7. 5 Emissions Trading or “Cap-and-trade” Government issues 88 million allowances into the economy Offsets Year 5 at 95 Initial emissions 100 Mt p.a. Year 10 at 88 Year 15 at 80 Efficiency Project CCS Project Allowance trading between facilities $ CO2

9. It will deliver its environmental objective at lowest cost to the economy.

10. A national trading system can be linked with other such systems, delivering over time a global carbon market.

13. The rate at which this happens varies considerably.

14. It can be very fast for electricity.

17. Access to external projects can act as an efficient cost control mechanism within the capped sector.

18. Projects can help developing countries begin managing emissions.

19. The flow of project credits can help build a global CO2 market.All national emission trading systems should recognise the same global project mechanisms.

20. 11 Global Plan New technology mechanisms evolve China adopts CCS standard CDM evolves to includes sectors CDM Linkages develop between all systems and more systems appear Japan technology standards Norwegian ETS Expanding EU-ETS EU-ETS Danish-ETS New Zealand ETS UK-ETS Australian ETS US National “cap-and-trade” 2000 2005 2010 2015 2020 2025 Pre-Kyoto Kyoto Post 2012 Linkage framework