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Von Der Fehr N.-H.M.,University of Oslo | Hansen P.V.,Point Carbon
Energy Journal | Year: 2010

We analyze retailer and household behavior on the Norwegian electricity market, based on detailed information on prices and other market characteristics. We find that there exists a competitive market segment where a number of retailers compete fiercely for customers, with small margins on all products. However, we also find indications of monopolistic behavior, whereby retailers exploit the passivity of some of their customers. We discuss potential explanations for these results. Copyright © 2010 by the IAEE.

News Article | December 22, 2016
Site: www.theenergycollective.com

If the EU is serious about raising the carbon price in the EU Emission Trading System (ETS), the best option for the short term is to strengthen the Market Stability Reserve by increasing the amount of “surplus allowances” taken out of the system, according to Hæge Fjellheim, Head of carbon analysis  at Thomson Reuters Point Carbon. Fjellheim discusses progress on the ETS reform in light of the recent vote in the European Parliament’s Environment Committee, and sets out which elements in this deal need to survive in order to prevent the EU’s “flagship climate instrument” from sinking into irrelevance. On 15 December the Environment Committee in the European Parliament (ENVI) voted in favour of a significant strengthening of the EU ETS. ENVI wants a much more ambitious framework for phase 4 of the system (2021-2030) than the reforms proposed by the European Commission so far.  If these ideas survive the legislative process, they will lead to a tighter market balance and support carbon prices both in the short and long term. There is no guarantee that this will happen of course: the Environment Ministers from the Member States who met on 19 December were unable to reach agreement as yet on how to go forward with the EU ETS reform. In addition, there will be a plenary vote in the European Parliament, scheduled for 13-16 February. Although the position of ENVI has not yet won the day, it does illustrate how sentiment around the EU ETS review has shifted. The “phase 4 review process” was supposed to focus on long-term reform proposals for the period 2021-2030, but it is increasingly focusing on how to increase carbon prices, the sooner the better. This was not what the review was originally intended for. In 2014, measures were adopted by the EU that were supposed to address the issue of the permanently low carbon prices in the system, the result of overallocation of allowances in the past. The two key measures that were taken are: “backloading” (postponing the auctioning of allowances) and the establishment of a Market Stability Reserve (MSR). This MSR, which will start operating in 2019, will be filled with “backloaded” allowances and other unallocated allowances, and continue to soak up oversupply in the market with the aim to restore the EU ETS market balance. These two measures were expected to lead to a gradual price uptick. At the same time, the EU embarked on a long-term reform process, which was kicked off on 15 July 2015 with a proposal from the European Commission. They include a plan to ratchet up the annual rate at which the EU ETS cap goes down after 2020 from 1.74% to 2.2%. In addition, the Commission proposal sets out detailed rules for issues like the free allocation of allowances, how industries vulnerable to international competition (‘carbon leakage’) should be protected and how auctioning revenues should be shared among the member states. The Commission’s initial proposal is still part of the debate around the ETS review that is going on today. But rather than just looking at more technical changes to the EU ETS and how the system can be improved in the long-term, the debate is increasingly centring around how reforms can boost the carbon price in the short and medium term. An important reason for this change in sentiment is the superfast adoption of the Paris Climate Agreement. This has put strong pressure on the EU to “align the EU ETS with Paris” – i.e. to make it more ambitious. Another reason is that the market, disappointingly, did not respond to the backloading and MSR measures. On the contrary, carbon prices in the EU ETS crashed right after Paris, declining 40%. They have remained in the doldrums since, at around €5/ton. Many are worried that the MSR will be too weak to really restore the market balance and boost prices, and that national or Union-wide overlapping policies will prevent carbon prices from recovering. The emission reductions from alternative policies, e.g. in energy efficiency, will help the EU reach its overall climate ambition, but they will also reduce demand for allowances in the EU ETS, unless counteracted. In order for the EU ETS to deliver its fair share of emission reductions under the EU’s 2030 climate and energy framework, all details have to be agreed between the co-legislators in one concerted package of amendments to the Commission proposal. A common Parliament position may be getting closer, as the Industry and Energy Committee (ITRE) reached agreement in October, and the Environment Committee (ENVI) adopted a common position on 15 December. The ITRE opinion directly addresses the depressed carbon price levels, explicitly linking the success of the ETS as a policy instrument to carbon price levels. The committee proposes that member states can voluntarily account for the effect of certain overlapping policies through cancelling the equivalent number of EUAs (emission allowances), and also suggests cancelling 300 million allowances from the MSR in 2021. (To compare: there are 15.5 billion allowances available in the entire period 2021-2030 under the current cap, i.e. on average 1550 million per year.) The ENVI position consists of a number of proposals that will have significant price impacts, including the following: ENVI also proposed other potentially important measures. For example, it holds that the cement sector should not be eligible for free allocation anymore in phase 4. To offset the risk of carbon leakage, ENVI suggests a new import scheme which would imply that importers of cement and clinker have to cover emissions related to their products – adding new demand for EU carbon allowances. In addition, ENVI wants the allocation for the aviation sector to be tighter, both by lowering the sector cap in 2021 and by setting the same linear reduction factor for aviation as for the other sectors in the EU ETS. Under current legislation, the aviation sector will have a flat cap throughout phase 4. As to the Member States, the latest progress report  from the Slovak Presidency – Slovakia holds the EU presidency until the end of the year – outlines three outstanding issues which will have to be resolved politically: ensure adequate protection to industry at risk of carbon leakage, strengthen the ETS (such as by doubling the MSR intake rate) and get the low-carbon funding mechanisms targeted towards low-income member states right. The latest meeting of the Council of Environment Ministers on 19 December failed to reach any firm agreement, let alone agree on measures that would go further than the Commission’s proposals. The Slovak Environment Minister Lázló Sólymos said that “we wanted to reduce … uncertainty and give the market a clearer signal, but unfortunately we were not able to do that because of political differences.” According to press reports, a group of ten countries, including France and Germany, found themselves in opposition to a bloc of Eastern European countries plus Spain, Italy and Croatia. The east-west divide became particularly clear when ministers discussed the MSR. Any strengthening of this mechanism during the ETS review process will have to be balanced against concessions on industry protection and low-carbon funds. Although the review proposal is currently in the hands of Parliament and Council, the role of the Commission in the legislative process is still important, as it acts as mediator in the trilogue negotiations. The Commission was for a long time firm in its opposition to reform proposals directly targeting the price, such as the price floor proposal put forward by France this Spring. It has consistently called for patience, asking for time to see the MSR in action from 2019. However, after Energy Commissioner Cañete during the June Environment Council opened the door to discuss further volume-based approaches, Commission representatives have been more vocal. For example, the Commission’s climate chief Jos Delbeke was recently quoted saying that the Commission “…would like to have higher prices because it would facilitate the take-up of renewable energy, for example, or encourage energy efficiency improvements, so we are considering a more proactive way of dealing with the surplus that is currently in the market”. That’s a pretty clear way of saying that the Commission will be open to discuss the MSR and other elements not mentioned in its initial phase 4 review proposal. In the impact assessment accompanying the recent proposal for a revised energy efficiency directive, the Commission addresses the interaction between the EU ETS and more ambitious efficiency targets. It recognises the potential shortcomings of the current MSR for “very ambitious levels of 2030 energy efficiency targets”, and that a review of the MSR withdrawal rate might be justified as part of the regular review of this mechanism by 2021. Moreover, during the press conference following this week’s Environment Council, Climate and Energy Commissioner Cañete said that he considered topics related to the MSR to have overall support as a main tool to deliver reasonable carbon prices, adding that strengthening the ETS was a general concern – the question remained how to do it. Thomson Reuters Point Carbon has a sophisticated long-term price model that shows the impacts of various proposals on European carbon prices until 2030. The policy options are modeled against our base case, which assumes, among other things: In this base case the MSR will withdraw volumes until 2025 and enter into sleep-mode for the remainder of phase 4, while the release of allowances from the reserve starts in 2035. The MSR retrieval lifts the price in the early 2020s, before it flattens when the MSR goes into hibernation. We expect a further uptick towards the end of phase 4, as market participants will start to anticipate that the market turns short after 2030. We modelled the effect of a strengthened MSR by assuming a doubling of the MSR intake rate from 12 to 24 percent. In this scenario, the supply overhang is reduced more aggressively with an average of 305 Mt/yr (million tons per year) transferred to the MSR in the first four years of operation (compared to 181 Mt/yr on average in the base case). The MSR will be in hibernation from 2022 with the oversupply lingering between the upper and lower threshold levels. In this scenario, we found that the price increase will be sizable in the near-term. As illustrated by Figure 1, the price lift starts to materialize already from 2017, as market participants will prepare for the more aggressive MSR in advance. Average prices under a strengthened MSR will be 10% higher in phase 3 and 4% in phase 4 compared to our base case. What we also found is that the proposal to cancel allowances from the MSR in 2021, as has been propsed by both ITRE (300 Mt) and ENVI (800 Mt), would have limited impact on prices in phase 4 (2021-2030). Allowances are released from the MSR only when the oversupply in the market falls below the lower threshold (oversupply below 400 Mt), at a rate of 100 Mt per year. The effect of cancelling allowances will thus come when the MSR is close to exhaustion, probably post-2040, while it will not change the market balance in phase 4. Under the Commission proposal a New Entrance Reserve (NER) will be set up with approximately 400 million unallocated phase 3 allowances, effectively adding this volume to the phase 4 supply. As described above, the ENVI proposal in contrast suggests to fill the NER with phase 4 allowances, which would imply a tightening of the phase 4 cap. According to our modelling, the effect of sourcing the NER from phase 4 rather than phase 3 allowances will increase prices with 10 percent in average over phase 4 (as illustrated in Figure 1). We have also modelled a combined scenario, both strengthening the MSR and sourcing the NER from phase 4. In this scenario, we see a consistent price uptick from 2017. Prices are lifted on average 11 percent in phase 3 and 15 percent in phase 4. The stronger MSR causes the lift in the near term, while the price effect of sourcing NERs from phase 4 kicks in from 2021 and gets stronger over time (see Figure 1). Finally, increasing the linear reduction factor from 2.2 percent to 2.4 percent would increase overall ambition and be more aligned with the path towards 2050. However, since the delta between the two reduction factors is only about 5 Mt/yr, the price effect will hardly be noticeable in the first few years of phase. Our model shows rather a price spike towards the end of the period as market participants start to factor in the prospect of market shortage post-2030.The policy signal of increasing overall ambition should not be underestimated, however, and could give a more prominent price impact  in the short to medium term than what our model predicts. Figure 1 Aiming for a smooth increase of EUA price levels towards 2030 Thus, our analysis suggests that if the main aim is to strengthen the price signal in the near term, strengthening the MSR in combination with sourcing the NER with phase 4 allowances seems to be the best option at hand. In contrast to increasing the linear reduction factor or cancelling allowances, it would most likely have a significant impact also in the near term. However, even in this more ambitious scenario we do not see a dramatic price increase before 2030. For example, the €20 price level that is needed to get fuel switching from average coal plants to modern gas plants in the base load power production is only reached in the second half of phase 4, according to our price model. In theory, it should be easier to get an agreement to change more technical and “cap-neutral” elements of the MSR and the NER, than to get both Council and Parliament support to increase the reduction factor or to cancel allowances. Our assessment is when voting in February, the Parliament Plenary is likely to support the overall compromise deal reached by ENVI, thereby agreeing measures to tighten the market balance and increase prices. While it is still too early to say to what degree this will be mirrored in the Council, we think there is a good chance a stronger MSR will be part of the final deal. As the UK will be unable to take its normal leadership role, Germany will have to join France and step forward with a very clear position to swing the Council discussion towards stronger ETS support. The alternative could be another decade with irrelevant carbon prices. Hæge Fjellheim is the Head of carbon analysis, Thomson Reuters.

Sjolie H.K.,Norwegian University of Life Sciences | Tromborg E.,Norwegian University of Life Sciences | Solberg B.,Norwegian University of Life Sciences | Bolkesjo T.F.,Point Carbon
Forest Policy and Economics | Year: 2010

In many European countries, the use of policy measures to decrease greenhouse gas (GHG) emissions from energy consumption, including heating, is high on the political agenda. Also, increasing the absolute consumption of bioenergy seems to partly be an objective in itself. But neither the costs of replacing fossil fuels with bioenergy in heating, nor the effects on the GHG emission account are clear. This study analyses first the avoided GHG emissions from substituting one energy unit of fossil fuel with forest based bioenergy (wood fuel) in several heating technologies. Secondly, the effects on bioenergy production of two policy measures in Norway - higher tax on domestic heating oil and paraffin and investment grants to district heating installations based on wood fuels - are investigated. Thereafter, the results are combined to display how the emissions from heating are affected. Finally, the achievements are compared to the costs. The analysis is done by using a partial, spatial equilibrium model of the Norwegian forest sector, wood fuels included. Based on model runs we conclude that a tax of 60 €/CO2eq on competing fossil fuels could increase the bioenergy use in district heating installations with almost 4000 GWh/year. The same amount of bioenergy could be used in pellet stoves and central heating systems, but a higher tax is then necessary. 50% investment grant to district heating installations may also have a large effect on the bioenergy use, but the effect of the subsidies decreases rapidly if applied together with a tax. Around 70% of the emissions from heating in Norway may potentially be avoided, but such achievements depend on very high taxes on fossil fuels. Both taxes and subsidies may greatly influence the energy market, but should be used with caution in order to obtain the preferred goals. Few similar studies are carried out in this field, and the results might be of interest for the bioenergy industry and the energy policy authorities. © 2009 Elsevier B.V. All rights reserved.

Lee C.,Ashima Research | Lawson W.G.,Point Carbon | Richardson M.I.,Ashima Research | Anderson J.L.,IMAGe | And 3 more authors.
Journal of Geophysical Research E: Planets | Year: 2011

We describe a global atmospheric data assimilation scheme that has been adapted for use with a Martian General Circulation Model (GCM), with the ultimate goal of creating globally and temporally interpolated "reanalysis" data sets from planetary atmospheric observations. The system uses the Data Assimilation Research Testbed (DART) software to apply an Ensemble Kalman Filter (EnKF) to the MarsWRF GCM. Specific application to Mars also required the development of a radiance forward model for near-nadir Thermal Emission Spectrometer (TES) observations. Preliminary results from an assimilation of 40 sols of TES radiance data, taken around Ls = 150 (August 1999, Mars Year 24), are provided. 1.3 million TES observations are ingested and used to improve the state prediction by the GCM, with bias and error reductions obtained throughout the state vector. Results from the assimilation suggest steepening of the latitudinal and vertical thermal gradients with concurrent strengthening of the mid-latitude zonal jets, and a slower recession of the southern polar ice edge than predicted by the unaided GCM. Limitations of the prescribed dust model are highlighted by the presence of an atmospheric radiance bias. Preliminary results suggest the prescribed dust vertical profile might not be suitable for all seasons, in accordance with more recent observations of the vertical distribution of dust by the Mars Climate Sounder. The tools developed using this DA system are available at http://www.marsclimatecenter.com. A tutorial and example TES radiance assimilation are also provided. Copyright 2011 by the American Geophysical Union.

News Article | October 19, 2015
Site: www.techtimes.com

First world countries are reportedly falling short on efforts expected of them to combat climate change. The U.S. and several other rich countries are not contributing as much as they should, according to a new study made by several concerned organizations including the International Trade Union Confederation, Christian Aid, Oxfam and WWF International. Researchers found that these countries' pledges to curb carbon emissions are not enough to prevent rise in global temperatures that causes eleveated sea levels, unpredictable weather and intense heat. "The ambition of all major developed countries falls well short of their fair shares," researchers wrote in their study. These findings are timely with talks being held this month among more than 150 nations on exchanging plans to combat global warming and climate change. The sessions' results will help prepare a deal for the Paris summit in December to control climate change beyond 2020. Many of these nations have already submitted plans to fight climate change, but there is no agreed way to measure each country's level of ambition or whether they were contributing what could be called a fair share. If the measures of a country's history of using fossil fuels and their capacity to adjust fossil fuel use are to be considered, however, then reporters point out that the United States, several European countries and Japan are underperforming by 5 to 10 percent. China on the other hand, is performing beyond expectations. Admirable effort, analysts said, but unfortunately not enough. "The overall ambition of the developed countries is still not sufficient," said Niklas Hoehne, founding partner of the New Climate Institute. Last year UN's Intergovernmental Panel on Climate Change (IPCC) said that developed countries that are members of the Organization for Economic Cooperation and Development in 1990 should reduce their carbon footprints by at least half come 2030 compared to global emissions of 2010. The rate that global emission is cut in each country is a benchmark for emerging economies in terms of how they should implement their own carbon emission cutting strategies, especially among countries like India and South Africa which are yet to set their own goals. The U.S. and other developed nations have pledged to cut global emission rate equal to 9 billion tons of carbon dioxide by 2030, though the US said their cuts will run only up to 2025. Frank Melum from Thomson Reuters Point Carbon, said many of the rich countries' pledges could be positively received by reviews from the upcoming summit. He added that the rich countries' targets could be achieved successfully because these targets are made attainable by existing policies and regulations such as power plant restrictions as well as acces and promotion of renewable energy sources.

News Article | January 22, 2016
Site: www.reuters.com

Tens of thousands of firms will have to participate in the nationwide emissions trading scheme (ETS) from next year, and third-party agents need to verify their carbon emission levels as well as the offsets allowed on carbon mitigation projects. China is the world's biggest emitter of climate-warming greenhouse gases and it has vowed to make use of market mechanisms to bring carbon dioxide levels to a peak by around 2030, but the accuracy of its data has been questioned. Amid concerns about the independence of verification firms, China's top economic planner, the National Development and Reform Commission (NDRC), said it would ban them from trading and from managing the carbon portfolios of market participants. China has already accredited nine organizations to verify emissions reports for projects capable of generating offset credits tradable on the seven pilot regional carbon markets. But provincial governments have also allowed hundreds of local agents to assist in carbon auditing, many involved in trading. "Such agents have breached the independence of data reporting," said a carbon project developer who did not want to be named. To improve the credibility of the verifiers, the NDRC also said they should not hire staff who have worked in companies being audited at any time during the previous five years. It has not been decided how many agents will be approved. China has set a capital threshold of 5 million yuan ($760,098) for private firms, who must also have at least 10 staff members with experience in carbon-related projects. Companies consuming more than 10,000 tonnes of standard coal in any year between 2013-2015 have been obliged to submit emissions data, and the biggest emitters will join the national trading scheme in 2017. China's carbon market is likely to be the world's biggest ETS once it is launched. Officials are sticking to the 2017 launch date, though Reuters Point Carbon expects China may need another two years to develop a national market, citing legislative bottlenecks and the difficulties in integrating the existing pilot markets. Sectors to be covered by the national market include energy-intensive industries like oil, aluminum, copper, steel and cement.

News Article | December 29, 2015
Site: news.yahoo.com

A gas cooker is seen in Boroughbridge, northern England in this November 13, 2012 file photograph. REUTERS/Nigel Roddis/Files More (Reuters) - British wholesale gas prices snapped a months-long bearish spell on Tuesday with week-ahead prices jumping 13 percent on forecasts for colder temperatures that should bolster demand for the heating fuel. The most traded gas contracts rose by between seven and 13 percent from pre-Christmas holiday levels despite a current glut of gas and low demand. Day-ahead gas for Wednesday delivery was up 7.26 percent or 2.26 pence to 33.40 pence per therm at 1249 GMT, while gas for working days next week jumped 13.19 percent to 34.75 p/therm. "[The forecast provides] a very different picture to what we were seeing before Christmas," a trader at a top European utility said, referring to mild outlooks which weighed on prices. Local distribution zone consumption forecasts for next week are seen up by 30-40 million cubic metres (mcm) per day compared with pre-Christmas levels, according to analysts at Thomson Reuters Point Carbon. "Overall, temperatures are likely to be in the near to just above average category, although there remains a low probability of a more prolonged spell of colder weather," the Met Office said. The price rebound could partly be due to an overdone pre-Christmas selloff, one analyst said. A trader said the price moves were too big to ignore even if the fundamentals did not explain the gains. Britain's gas network was oversupplied by around 8 mcm/day, National Grid data showed. Flows through the Langeled pipeline, Norway's main export route to Britain, were at 60 mcm versus 35 mcm/day during the Christmas break. In the Netherlands, the day-ahead gas price at the TTF hub was up 0.43 euros at 14.85 euros per megawatt hour. In Europe's carbon market, the benchmark EU Allowance (EUA) were down 0.03 euros at 8.35 euros a tonne.

News Article | November 27, 2015
Site: www.reuters.com

Steam rises at sunset from the cooling towers of the Electricite de France (EDF) nuclear power station at Nogent-Sur-Seine, France, November 13, 2015. Yet, 10 years after the EU launched the world's biggest carbon trading scheme, the effectiveness of the concept is in question and climate activists are disenchanted or hostile. While there is still support for national or regional markets, not least in China, which plans to launch the world's biggest scheme in 2017, any hopes of creating a global carbon market at next week's U.N. climate conference in Paris look wildly optimistic. Major corporations, in particular, back the concept because its costs are more predictable than those of prospective future regulations. In June, a group of European energy companies led by Royal Dutch Shell wrote to the United Nations to call for a global carbon price that would "discourage high carbon options and reduce uncertainty". U.N. climate chief Christiana Figueres told them to do more and to spell out price levels, something they have yet to do. Climate activists say the corporations' enthusiasm can be explained as a desire to dodge more aggressive measures, such as targets for renewable energy. "The call for a carbon price is a shield with which to defend themselves from calls for faster change," says Tom Burke, chairman of the environmental campaign group E3G. Even with the jury out, nearly half of the more than 170 national pledges for reducing greenhouse gas emissions include some form of carbon pricing to meet their targets, officials say. They range from the top emitter, China, to the tiny Pacific nation of Kiribati, imperilled by rising sea levels. The best test case, for now, is the EU's Emissions Trading Scheme, which raised 8.9 billion euros ($9.4 billion) in the three years to June 2015, according to European Commission figures. Jos Delbeke, director general of the Commission's climate action department and one of the chief architects of the ETS, says it has shown, crucially, that reducing carbon emissions is compatible with economic growth. He says the EU's gross domestic product has risen 46 percent since 1990, while greenhouse gas emissions have fallen by 23 percent, and that the ETS is still central to EU efforts to tackle climate change. The scheme sets a cap on how much big emitters, chiefly power plants and factories, can pollute. Mostly they have to buy the emissions credits at auction. Those who emit less than their cap can sell the surplus credits to companies that exceed their limits, which are progressively reduced over time. So far, from the more than 11,000 industrial and energy plants covered by the EU ETS, emissions have fallen by almost 15 percent since 2008, Thomson Reuters Point Carbon figures show. But critics say it is unclear how much of this was a direct result of the ETS, as opposed to Europe's economic slowdown. They also say the revenues generated have merely boosted general government coffers rather than being spent on the environment, let alone on the poorer countries that pollute least but are set to suffer most from climate change. "The carbon market promised the world lots of things it has failed to deliver. The ETS is riddled with loopholes and in thrall to vested interest," said Tim Gore, Oxfam's international policy adviser on climate change. Most critically, the activists say the polluters have been given an easy ride. Point Carbon figures show that industry, which lobbied hard for help in dealing with extra energy costs, was given free carbon permits with a tradable value of 77 billion euros in the years to 2014. Alongside this, the market price of EU ETS permits, and therefore the cost of pollution, has at times fallen to near zero as economic recession and miscalculations led to a surplus of credits. The allocation system has now been reformed, but the total of free permits is still expected to hit 325 billion euros by 2030. At the same time, in the absence of a global carbon pricing system, industry continues to complain that the cost of permits is driving it to leave Europe for cheaper regulatory environments. ETS prices have risen back to 8.5 euros per tonne of CO2 produced, but are still far below peaks of above 30 euros, and too low to encourage investment in lower-carbon fuel. EU regulators are working on further reforms. There is a similar story of flawed execution behind another trading scheme, the United Nations' Clean Development Mechanism. This was supposed to allow Western industries and governments to contribute to green projects in developing countries too small to support their own domestic or regional trading schemes, "offsetting" rather than cutting their own emissions. The United Nations says the scheme has provided more than $315 billion for environmental projects. However, the value of these certificates also fell from a high of more than 23 euros per tonne of CO2 avoided to near zero in 2014 as the scheme's credibility was called into doubt and the value of the EU's permits crashed. Environment campaigners say the funds were concentrated in a handful of industrial gas projects rather than filtering down to the poorest nations, known as the Least Developed Countries (LDCs), who found the scheme hard to access. "By the time the LDCs were ready to take advantage ... the prices had collapsed," Giza Gaspar Martins, Angola’s climate negotiator for the U.N. talks, told Reuters. U.N. carbon credit prices still languish around 0.60 euros a tonne, but Martins still backs the scheme in the hope that rich nations can push up prices to a level where they can provide significant funds to help the poorest nations adapt to climate change. As for a true global carbon market - a draft of the agreement to be finalised in Paris, intended as the first ever pact to unite rich and developing nations against climate change, contains only a small, oblique reference to "internationally transferred mitigation outcomes".

News Article | November 9, 2015
Site: www.reuters.com

A bulldozer works on a heap of coal at the Boleslaw Smialy coal mine, a unit of coal miner Kompania Weglowa (KW) in Laziska Gorne, Silesia, southern Poland September 11, 2015. Miners work about 500 meters underground at the Boleslaw Smialy coal mine, a unit of coal miner Kompania Weglowa (KW) in Laziska Gorne, Silesia, southern Poland, September 11, 2015. A motor glider flies near the Belchatow Coal Mine, the biggest opencast mine of brown coal in Poland, outside of Belchatow Power Station, Europe's largest coal-fired power plant, in Belchatow, October 31, 2013. Ahead of U.N. talks in Paris on a new climate pact, Poland's president vetoed an amendment to the Kyoto protocol on greenhouse gas emissions, saying Warsaw needed more time to assess the economic impact, a gesture the newly elected government says is just the start. It says it will oppose any attempt to tighten European Union climate regulations and has even threatened to start undoing agreed EU law to reform the carbon market that adds to the cost of burning fossil fuel. Poland's economy depends on highly polluting coal and the country has long opposed EU initiatives to curb carbon emissions. The conservative Law and Justice (PiS) party, elected last month, has pledged to take an even tougher stance than the previous centrist government, which was staunchly pro-EU. The EU agreed last year to cut greenhouse gases by at least 40 percent by 2030, pitting heavy industry against green business, but PiS leader Jaroslaw Kaczynski called last month for a renegotiation of that deal, saying Poland needed more coal-based power stations. "There are decisions that seem sacred, but then, with the changing world, they are modified," said Piotr Naimski, PiS politician and a former deputy economy minister responsible for energy. He has said that Poland needs special solutions because of its "unique" coal-based energy sector. Diplomats, lawyers and analysts, however, say Warsaw has much to lose by being too radical. Poland has raked in more than 26 billion euros ($28 bln) from free pollution allowances and carbon auction revenues over the 10 years since the EU Emissions Trading System (ETS) - on which permits to burn fossil fuels are bought and sold - was launched, according to Thomson Reuters Point Carbon data. "We are realistic and we are aware that Poland as just one country will not have an impact on the Paris outcome," said Grzegorz Tobiszowski, a PiS member with particular responsibility for the coal sector. "But we want to draw our partners' attention to the extraordinary situation of Poland's coal-based economy." To reinforce the point, PiS wants coal industry trade unions to accompany the Polish delegation to the climate change talks in Paris, which start on Nov. 30. EU sources say the president's veto is unlikely to have much impact, especially as Poland is locked into EU-wide legal commitments to cut greenhouse gases by 2020 and is on track to more than meet its requirements. Given that the entire EU is responsible for less than 10 percent of global emissions, top polluters China and the United States are more significant in the Paris talks, the sources say. The EU, to be heard, needs to be united and Poland could alienate traditional allies who do not wish to be seen as so radical, diplomats said. "Poland is addressing its domestic audience. It is not in its interest to isolate itself diplomatically," one European diplomat said, speaking on condition of anonymity. "The Visegrad countries will not support it." The Visegrad group includes the Czech Republic, Hungary and Slovakia, as well as Poland, and they often unite when negotiating within the European Union. Those countries have helped Poland to win concessions, such as free EU pollution allowances, for its coal industry, a major employer and the source of nearly all Poland's energy. Poland has long said it needed to avoid regulatory or energy costs that would damage its competitiveness. "I wouldn't expect any significant changes in the Polish government's approach to the EU and international climate policy but what I do expect is a change in the language," Ilona Jedrasik, policy officer at environmental law group ClientEarth, said. Warsaw plans to continue to block reforms to strengthen the ETS, which forces more than 11,000 power plants, factories and airlines in the EU to surrender one carbon permit for every tonne they emit. EU sources, though, are skeptical Poland can succeed, for instance, in challenging the creation of a Market Stability Reserve, agreed by the EU this year to remove some of the surplus allowances that have depressed the ETS, although industry also seeks to challenge different aspects of the market in court. Naimski has said Poland could even leave the ETS, but analysts say they do not see how it could without also leaving the EU, something even the Eurosceptic PiS does not want.

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