The Paris Agreement: Ambition, Cooperation and Opportunity

1. Ambition, Cooperation and Opportunity.
Dirk Forrister
President & CEO, IETA
Sustainable Prosperity
Ottawa
22 June 2016

2. The Paris Climate Agreement.
It’s about three things…
Climate Challenges, Market Solutions

3. Realizing Ambition
Climate Challenges, Market Solutions

4. Enhancing Cooperation
Climate Challenges, Market Solutions

5. Seizing Opportunity
Climate Challenges, Market Solutions

6. Climate Challenges, Market Solutions

7. 2 C = 450 ppm
80 – 90% Reductions
Climate Challenges, Market Solutions

8. 1.5 C = 350 ppm
95% Reductions?
Climate Challenges, Market Solutions

9. • 2°C (or 1.5 °C) means massive transformation by 2050 –
• Hold atmospheric concentrations to 450 ppm (or 350 ppm?)
• Advanced nations reduce 80 – 90 % and emerging economies
reduce growth significantly
• Net zero goal (sources = sinks) by 2nd half of century
• Action largely reflected in Nationally Determined Contributions
• Current targets closer to 3°C than 2°C
• So expect targets to strengthen over time
• Level of change means action must reach beyond borders
• Helps keep costs in check and avoid economic shocks
• Enables business to be a partner – not an obstacle

10. The Paris Outcomes
on Carbon Markets
Climate Challenges, Market Solutions

11. Marshall Islands
New Zealand
INDC Submitted
Singapore
INDC includes the use of
International markets
San Marino
Trinidad and Tobago
Comoros
Grenada
Country will consider
using markets
Seychelles
Kiribati
Mauritius
Maldives
Barbados
Tuvalu
Cape Verde
Dominica
Sao Tome
and Principe
Solomon Island
Monaco
Samoa
INDC Not Submitted
Antigua and Barbuda
Fiji
Nauru
Cook Islands
St Lucia
St. Vincent and the
Grenadines
Micronesia
Vanuatu
Palau
SOURCE: IETA/EDF “Carbon Pricing: The
Paris Agreement’s Key Ingredient,”
April 2016

12. 1. Cooperative approaches through
“internationally transferred mitigation
outcomes” (para 2)
2. Rules for carbon market accounting,
particularly avoidance of double-
counting (para 2 & 5)
3. Sustainable development & mitigation
crediting mechanism (para 4)
 The Big Caveat: Rules, modalities and procedures due by 1st COP/MOP of
Parties to Paris Agreement, but negotiators’ track record is mixed.

13. • Enhanced cooperation through market linkages with accounting
principles to drive integrity
• New mitigation mechanism available to all who want to use it
• For both developed & developing countries
• Could be broader than mere crediting
• Operates in context of all Parties implementing NDCs
• Includes direct & indirect references to REDD+ (Art. 5)
• NDCs reviewed every 5 years (Decisions 23 and 24) – may
help signal supply / demand trends

14. • Success in getting Article 6 reflected hard work on carbon
pricing over past few years
• Market cooperation now extends beyond INDCs and Article 6
• World Bank’s Partnership for Market Readiness and Carbon
Pricing Leadership Coalition
• Germany/Japan leading the G7 carbon market platform
• New Zealand declaration on carbon markets
• Japan’s Joint Crediting Mechanism with 19 partners
• High-level Panel set ambitious goals in NYC to double
coverage of pricing by 2020 and double again within a decade

15. Taking Carbon Markets
Forward From Paris
Climate Challenges, Market Solutions

16. Centralized Hub
• Decisions taken in COP
22 and 23
• Trading hub follows
GCF, CTCN models
• Governed under COP
oversight
• Results in broad buy‐in
Spin Off Clubs
• UN gridlock
• Coalition forms
• Trading club follows
CCAC model
• Governed by users
• Results in narrow, but
strong buy‐in
Climate Challenges, Market Solutions

17. Climate Challenges, Market Solutions
Common building blocks for trading
Common issuance
process
Registry & tracking
service
Market oversight
system
Standard sector
baselines
Reduction targets MRV standards
Defined units of
measure
Agreed offset
standards
Compliance
assurance

18. Climate Challenges, Market Solutions
The Case of the JCM
Japan
Mexico
Maldives
Cambodia
Vietnam
Kenya
Palau
Costa Rica
Ethiopia
BangladeshIndonesia
Laos Mongolia

19. Climate Challenges, Market Solutions
The Case of California‐Quebec (+Ontario?)
MOU
WCI Inc.
Compliance Instrument Tracking System Service
Joint Auctions
CA ETS QU ETS
Offsets
California
Entities
Quebec
Entities
Futures Exchange,
Brokers
Offsets
???
CAR, VCS,
ACR
Standards

20. Climate Challenges, Market Solutions
 Essential UN function may be reporting (net imports, exports)
 Basic rules are similar inside or outside UNFCCC
UN Hub Independent Club
Advantages Broad fungibility Owned by supporters
Experienced team Reduced barriers to adopt policy
Build on existing tools Pulls quality systems forward
Enhance ambition for all Domestic political/reputation
Disadvantages Political interference Limited fungibility
Bureaucracy No existing institution
Reputation Potential start up pains

21. SOURCE: Climate Policy, “Compliance of Parties to
the Kyoto Protocol in the First Compliance Period,”
June 2016
Key Points
• Trade enabled EU, Japan &
New Zealand to comply
• EU’s internal AAU trade
significant (Poland,
Romania & Czech)
• Japan imports:150m CERs,
22m ERUs, 226m AAUs
• EU imports: over 1b. units
• NZ imports: 90m units

22. • Carbon markets got a boost from Paris
• Business community’s interest is rising
• Now action shifts to implementation & business readiness
• National (and sub-national) pricing systems
• Cooperation across borders / business relationships
• UN FCCC negotiations on rules & guidelines
• Nations are free to cooperate in either “hubs” or “clubs”
• For Canada, no obligation to engage markets – just
opportunity

23. www.ieta.org
Climate Challenges, Market Solutions