Download Diego #1

Global Warming and
Carbon Trading
A brief morning seminar
by:
Diego Villarreal
Brief Outline
 Global
Warming and the Greenhouse
effect
 Greenhouse gases and Greenhouse
potentials
 Brief description of the Kyoto
protocol
 Carbon Trading
 Impacts of this system on CO2
emissions
Contrary to what is said in the popular media, our planet is
warming up, and is likely to continue warming up in the next
century. Therefore, Global Warming is a reality!!!!.
Climate change is affected by a variety of factors such as solar
radiation variations and the concentration of gases in the
atmosphere.
On average, Earth receives around 1.8x10^17 W of solar
radiation over its entire surface area.
Earth is a blackbody.
Incoming energy is re-emitted back to space through reflection
and Blackbody radiation.
Re-emitted radiation is described by the equation below
max 
2.89 E10 * nm * K
T
Greenhouse gases are gases that have the ability to absorb the long
wavelength radiation emitted by the surface of the earth. Some of these
gases are CO2, CH4, N2O and SF6.
In 1996, the Intergovernmental Panel on Climate Change (IPCC)
concluded that “Human activities are changing the atmospheric
concentrations and distributions of greenhouse gases and aerosols. These
changes can produce a radiative forcing by changing either the reflection
or the absorption of solar radiation, or the emission and absorption of
terrestrial radiation”
Inventory of U.S Greenhouse Emissions and Sinks: 1990-2000.
Office of Atmospheric Programs.
US Environmental Protection Agency
April 2002
The conclusions of the IPCC are not based on speculations, but on
scientific data collected over a long period of time.
As seen above, the concentration of CO2 has increased dramatically since
the industrial revolution, causing positive radiative forcing.
Radiative forcing is defined as “The Change in the net radiation at the top
of the troposphere occurring because of a change in concentration of
atmospheric components or solar insolation”.
Tomkiewicz, M.C.R. Chimie 9 (2006) 172-179.
Positive Radiative Forcing implies an adjustment of the overall energy
balance of the planet through an increase in average global temperatures.
Various computer models written by the IPCC predict an average global
temperature rise of ~ 2.4 oC as a result of doubling the CO2 concentrations
in the atmosphere.
The IPCC also noted that the current concentrations of CO2 have not been
exceeded in the past 420,000 years, making the increase of CO2 in the
atmosphere an unprecedented event.
The emissions simulations were done at the Max Plank Institute for
Meteorology.
Commissioned by the IPCC for the 4th assessment report.
Even Under the most optimistic assumptions, the model suggests the Artic
will be ice-free during the summer of 2090
Schiermeier, Q. Nature (2006), 439(7075), 374-375
In 1997 world leaders met in Kyoto Japan to shape, discuss
and amend the United Nations Framework Convention on
Climate Change (UNFCCC).
The amendment to the UNFCCC, known as the Kyoto
protocol, is an agreement under which Industrialized
countries pledge to reduce their emissions of five
greenhouse gases (carbon dioxide, methane, nitrous Oxide,
Sulfur Hexafluoride, HFC’s, and PFC’s) by 5.2% compared
to the Year 1990.
The countries that ratified the protocol, agreed to meet this
quota by the year 2010.
As of the beginning of 2006, a total of 160 countries have
ratified the Kyoto protocol.
Among the countries that have NOT ratified the
agreement are the US and Australia
Enter Carbon Trading
As a way to meet the demands of the Kyoto Protocol and to
establish a system of economic incentives, members of the
EU created the Emissions Trading Scheme (ETS), under
which companies can buy and sell equivalents of CO2
emissions.
Any reductions on the emissions of CO2 could be sold as
credits to parties who did not meet their emission quota,
creating a dynamic market where everybody wins!
In 2005, the EU ETS, involving 12,700 industrial
organizations, came into action across the 25 member
states.
By 2007, the EU market is expected to be worth 10 billion
Euros (~13 billion USD)
Hopkin, Michael. Nature (2004), 432(7015), 268-270
In 2002, the UK set out a “pilot” ETS, where 34 companies sold to
the government commitments to reduce emissions during the
2002-2006 period.
The participating companies, committed to lower emissions by
805 kilotonnes per year, for an economic incentive of
£53.37/tonne of CO2 equivalent ( tCO2e).
The UK ETS is based on an “allowance” system, where a company
holding one allowance can emit one tCO2e during one year.
Allowances are tradable, so a company that is under its permitted
emissions can sell its excess to a company with an emissions
deficit.
The emissions caps for the participating companies were decided
based on the following formula:
Baseline – Agreed Reduction = Cap
Where the Baseline is the average of their emissions for the 3
years up to and including 2000.
Heinen, R; Johnson, E. Environmental International 30 (2004) 279-288.
After baseline emissions are verified by an external party,
each participant is credited with allowances equal to its cap,
for the five years of the UK scheme.
If the participant submits a deficit of allowances, he is
charged a fine of £30 per tCO2e, and his allowances for the
upcoming year would be reduced.
The surplus and deficit of allowances is one of the
incentives for trading emissions, although a party with a
surplus may chose to keep his allowances and “bank” them
for a future year.
In the UK ETS, trading started at around
£12/tCO2e, which was much lower than the £53.37/tCO2e
clearing price due to:
1) Market Risk
2) Corporation Taxes
Heinen, R; Johnson, E. Environmental International 30 (2004) 279-288.
Heinen, R; Johnson, E. Environmental International 30 (2004) 279-288.
HOW WILL THE EU ETS WORK?
The EU ETS will work in a similar way as the UK trading
scheme did.
The EU ETS will be divided into two sections, a pilot phase
from 2005-2007, and a “normal phase” from 2008-2012.
Emission limits are established by National Allocation Plans,
which have to be ratified individually for each EU member
by the European Commission.
Once the commission decides on the number of permitted
emissions for each country, governments give away
emissions allowances to different industrial sectors.
Companies can trade their allowances in the international
market if they are below their cap, or buy from someone
who has a surplus of allowances.
For the pilot phase, each excess tCO2e will cost €40. After
2007, it will be €100.
The EU system will create the largest green house emission
market in the world.
Approximately 4000-5000 facilities will participate,
accounting for almost half of the total carbon dioxide
emissions from the European Union.
Countries that seem to be the most eager with Carbon
trading are UK, Denmark, Sweden, and the Netherlands.
These countries represent around 25% of greenhouse
emissions in Europe.
Since the EU plans to cut emissions by ~ 500 million tCO2e
per year, this means that within the countries described
above there would be an annual market of:
500 million tCO2e X 25% X $5 -10/ tCO2e
= $625 million to $1.125 billion dollars.
Heinen, R; Johnson, E. Environmental International 30 (2004) 279-288.
Norway’s allowances for the year 20052007
www.cicero.uio.no (Center for International Climate and Environmental Research)
US Involvement
In the past, the US developed a trading scheme known as
the Acid Rain Program (1990)
The purpose was to reduce SO2 emissions from coal based
power plants.
In the late 80’s, before the Acid Rain Program, the US
emitted ~16 million tonnes of SO2.
By 2000, SO2 emissions had fallen to about 11 million
tonnes.
In the US SO2 scheme trade only happened among a single
sector.
Hopkin, Michael. Nature (2004), 432(7015), 268-270
Conclusion
Global Warming is an alarming FACT
CO2 emissions MUST be cut down
Carbon trading offers a nice scheme where
everybody wins
The success of the ETS depends on the pressure
of government AND the participation of Industry.
The US MUST JOIN KYOTO AND CAP
EMISSIONS!!!!!
Questions?!?!?!?!