Publication Name

KICK THE HABIT

THE CYCLE – OFFSET

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Emissions Trading offers the choice whether to take possibly unpopular

steps at home, like restricting road traffic, or to pay another country to cut

its emissions instead. A deal like that may mean the emissions can be re-

duced more cheaply.

There are

regional emissions trading schemes

with similar objectives but

not identical to the Emissions Trading under the Kyoto protocol. The larg-

est is the EU Emissions Trading Scheme

(EU ETS)

. It is different from

In Australia the New South Wales government has set up the NSW Greenhouse

Gas Abatement Scheme to reduce emissions from the electricity sector by requir-

ing generators and large users to buy NSW Greenhouse Abatement Certificates

(NGACs) to offset part of their GHG emissions. This has led to the free distribution

of energy-efficient compact fluorescent light bulbs and other energy efficiency mea-

sures, with the cost met by the credits generated. The scheme has made possible

the creation and trading of verifiable greenhouse abatement certificates.

In 2003 New York State obtained commitments from nine Northeast US states

to form a cap-and-trade CO

emissions programme for power generators, called

the Regional Greenhouse Gas Initiative, or RGGI. That year also saw corporations

begin voluntarily trading GHG emission allowances on the Chicago Climate Ex-

change. In 2007, the California Legislature passed a bill aimed at curbing carbon

emissions. California is one of five states and one Canadian province that have

joined to create the Western Climate Initiative, aiming to set up a regional GHG

control and trading environment.

The EU ETS issues trading units called EU Allowances (EUAs) which are com-

parable to the AAU under the Kyoto Protocol. Today, there is common under-

standing that caps during the first phase of the EU ETS from 2005 to 2007

have been set too large, with the consequence that prices for CO

certificates

are too low to provide any incentive to reduce emissions. In January 2008, the

European Commission proposed a number of changes to the scheme, including

centralized allocation (no more national allocation plans), a turn to auction-

ing a greater share of emission permits rather than allocating freely. They also

included the greenhouse gases nitrous oxide and perfluorocarbons. Moreover,

the proposed caps foresee an overall reduction of greenhouse gases for the sec-

tor of 21 per cent in 2020 compared to 2005 emissions. Today the price within

the ETS lies around 25 Euros per tonne CO

compared to below 10 Euro cents

in late 2007.

the Flexibility Mechanism in a way that here companies (not countries) in

certain emission-intensive sectors such as power generation and cement

are assigned a certain amount of emissions by the countries. The latter

are required to reduce them over time since the number of allowances de-