IETA has created a two-page document, 'key principles for carbon pricing in the 2015 agreement,' drawn from previous IETA positions and the IETA Straw Proposal for Market Provisions for the Paris 2015 agreement.  This document includes specific IETA principles for market architecture in the agreement.

The document has also been translated in Español thanks to PwC Bogota.

IETA released its ‘market provisions for the Paris 2015 Climate Agreement’ policy briefing ahead of COP 20 in Lima.  

IETA’s Straw Proposal on “Market Provisions for the Paris 2015 Climate Agreement is available here for download

The discussion on maritime emissions at the EU level has, to date, mainly focused on Monitoring, Reporting and Verification provisions (MRV) and is still somehow far from the inclusion of the sector into the EU ETS. At present, the EU Commission has proposed to establish a reliable system and clear rules for monitoring, reporting and verification of maritime transport emissions in view of a future inclusion of the sector.

Access the briefing here.

This briefing note provides a quick overview on the current state of carbon markets and emission trading schemes worldwide. 

The briefing can be downloaded here.

This briefing note provides an overview on the European Union Emission Trading Scheme (EU ETS). It covers design features, main characteristics, achievements, challenges and future priorities, dedicating particular attention to 2030 framework and EU ETS reform. 

The briefing can be downloaded here.

This briefing note provides an overview on basic design elements of Cap and Trade Systems, such as target setting, allocation, offsets, data collection and monitoring and market oversight. The intent is to provide a snapshot of the typical features of Cap and Trade Systems.

The briefing can be downloaded here.

Both spot and derivative contracts relating to EU ETS allowances are covered by the new Markets in Financial Instruments Directive II (MIFID II) and Regulation (MIFIR). On 15 April 2014, the Parliament voted to adopt MiFIR in a first reading agreement, together with the MiFID II Directive. Council adopted the legislation on 13 May 2014. MiFID II and MiFIR are expected to enter into force in June 2014, but the new rules will apply 30 months after MiFID II enters into force (i.e. by early 2017).

This briefing note provides an overview on how the use of offset credits is regulated in different emission trading systems (ETS) and carbon pricing mechanisms around the world. It takes into consideration systems that are active and under-development, and looks at whether rules allow the use of domestic offsets, i.e. credits generated by non-covered projects in the same jurisdiction, and/or international offsets, i.e. credits generated by projects in other jurisdictions. The intent is to provide a snapshot of the regulations in place and facilitate the comparison of their design.

The briefing can be downloaded here

This briefing note describes how the concept of an allowance reserve mechanism has been designed in different emission trading schemes around the world. It takes into consideration systems in Europe ( EU ETS) and North America (RGGI, California, and Quebec).  The intent is to provide a brief description of such reserves and facilitate the comparison of their design.

Download the briefing here

Background

In 2005, European Union (EU) policy makers turned their attention on regulating emissions from the aviation sector. Although aviation only accounted for 3% of global carbon emissions in 2009, the industry’s carbon footprint has increased by 98% between 1990 and 2006.¹  Due to an emissions growth forecast of 667% from 2006 to 2050, the sector stands to become a more important source of GHG emissions in the future unless mitigation policies are being taken.

It is unlikely that the airline industry will be able to improve fuel efficiency at the same rate as air traffic expands. If total EU emissions were to be cut by 80% in 2050, airlines would ‘consume’ almost the entire allocation of CO2 allowances in the EU’s Emissions Trading Scheme (ETS).²  The European Commission (EC) therefore decided to include aviation into the EU ETS as of 2012, on the basis that this was “the most cost-efficient and environmentally effective option for controlling aviation industry emissions”.³  Emissions trading also received the support as best mitigation policy by the main industry body, the International Aviation Transport Association (IATA), in a letter to the EC in 2004.

Rules

All ‘attributed aviation emissions’, e.g. “emissions from all flights falling within the aviation activities listed in Annex 1 [of this Directive] which depart […] from the territory of a Member State and those which arrive […] from a third country”⁴  are included in the regional cap and trade scheme. The ETS rules for the aviation industry will follow similar rules as those for industrial installations. The airline operators will receive free allowances (EU Aviation Allowances – EUAAs) to cover most of their past emissions, but they will have to buy allowances through auctions or on the market if they emit more than the allocated amount. Operators can sell or buy allowances depending on whether they have a surplus or shortage in GHG allowances. It is also possible for the aviation industry to use allowances from industrial installations (EU Allowances – EUAs) or to offset their emissions using units generated under Kyoto Protocol mechanisms (Certified Emission Reductions – CERs or Emission Reduction Units – ERUs). Furthermore, it is possible to ‘bank’ allowances from one compliance period to the next to cover future emissions. The EU ETS next compliance period (phase 3) runs from 2013-2020.

Quick facts

The cap

• Sizes the total quantity of allowances allocated to the aviation sector
• The cap is set a

            ○    97% (2012)
            ○    95% (2013-2020) of the baseline

The baseline

• Is the average of the annual aviation emission for the years 2004, 2005 and 2006
• Baseline was published by the EC in March 2011 and is approx. 221 million tonnes of CO2

The benchmark

• Is used to allocate the free of charge allowances to the operators
• Is calculated by dividing the total cap by the sum of tonne-km data provided by the operators in 2010
• The benchmark is set at

            ○    0.6797 allowances/1000 tonne-km (2012)
            ○    0.6422 allowances/1000 tonne-km (2013-2020)

Free allocation

• Operators had to report their tonne-km date for 2010 to get free allocation
• Amount of allowances for a certain operator is calculated by multiplying the benchmark with the 2010 tonne-km data of the operator
• The operators will receive

            ○    85% of the calculated allowances in 2012 and
            ○    83% in 2013-2020

Special reserve

• In each period 3% of the cap will be set aside in a special reserve for operators

            ○    Who start performing aviation activity after the monitoring year
            ○    Whose tonne-km data increase by an average of more than 18% annually between the monitoring year and the second calendar year of the period

Offset use

• Airline operators can use

            ○    15% of their emissions (2012)
            ○    at least 1.5% of their verified emissions (2013-2020)

For further information on the EU ETS, contact Sarah Deblock: deblock@ieta.org.
Download the full document.
EU ETS & Aviation


___________________________________

¹    United Nations Framework Convention for Climate Change (UNFCCC)
²    Anderson, K. et al. (2006), ‘Growth Scenarios for EU & UK Aviation: Contradictions with Climate Policy’, Tyndall Centre for Climate Change Research Working Paper 84.
³    Homepage Directorate-General for Climate Action (European Commission)
⁴    European Commission (2003), Directive 2003/87/EC, Establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC