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Carbon Markets - Guest Lecture

Page history last edited by sarah budinger 14 years, 3 months ago

Guest Lecture - Elizabeth Lokey from camco and author of "Renewable Energy Project Development Under the Clean Development Mechanism" (available from Amazon)

Introduction to Carbon Markets

 

  • The carbon market industry is marked by uncertainty, as to what and how regulations will be placed
  • Negotiations at the United Nations Climate Change Conference in Copenhagen this December will attempt to determine what will happen after the scope of the Kyoto Protocol ends in 2012

  • In the United States, carbon markets are emerging among individual states, with some Canadian provinces joining in
    • RGGI – Regional Greenhouse Gas Initiative – New England states, cap & trade, regulates all electric power producers of at least 25MW
    •  WCI- Western Climate Initiative – western states, begins in 2012
    •  AB32- Assembly Bill 32 – California – begins in 2012, aggressive plan, the state won’t import electricity that’s not at least as clean as natural gas
    •  Midwest Regional Greenhouse Gas Reduction Accord – no time table, establishes reduction targets

 

 source: http://www.elementmarkets.com/na_carbon_markets.html

 

 

  • Ways to reduce carbon emissions – imposing standards, cap & trade, hybrid systems (of tax and cap & trade)
  • Cap & Trade
    • Point source emissions are easier to regulate than say, vehicles (which would probably need to be regulated at the fuel level) 
    • An industry would need to hold a permit for every metric ton of CO2.  Allowances are either given or purchased (from an entity with extra) to meet the level of emissions.  Over time, the cap is lowered
  • Offsets
    • Projects that exist outside of the cap.  Provide reductions additional to a business as usual situation
    • As an incentive for reduction of farming emissions, the reductions are quantified and sold onto the market as allowances
    • Example: Instead of a standard open lagoon system to break down animal waste, using a digester to capture methane which can then be burned to create heat or generate electricity, or flared
      •  camco will cover the capital cost for a farm to install a digester in exchange for a portion of the offsets
      • a farm with 3000 head of cattle can earn $1500/day from digester offsets
    • Currently, there are several voluntary offset standards, but there is uncertainty about exactly what will be regulated in the future
      • However, people are buying these now, hedging on the offset market, or for positive PR

 

 methane digester

source: http://www.greenmeadowfarms.com/methane_digester.htm 

  • There are some issues to consider regarding carbon markets  
    • One is that renewable energy sources only benefit indirectly to the carbon market - a national renewable portfolio standard would best incentivize renewable use
    • Another issue is avoiding “double counting” – not paying people to do something they may have already done anyway 

 

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