APPENDIX 9
Memorandum submitted by the International
Emissions Trading Association
IETA—THE ASSOCIATION,
ITS MEMBERS,
AND ITS
ROLE
The International Emissions Trading Association
(IETA) is a non-profit organisation created in June 1999 to promote
a functional international framework for trading greenhouse gas
emission allowances, as a market solution to address climate change.
IBTA members are around 100 major international
corporations with global reach that have formed the association
to support the objectives of the UNFCCC convention and ultimately
climate protection. We believe business and market-based trading
systems for greenhouse gas emissions can make major contributions
to these objectives if they are fair, open and combine environmental
integrity with efficiency and accountability.
While our membership is global with substantial
representation from developed and developing countries, IBTA has
a substantial UK representation amongst its members as well as
within its Board.
LETA has been active in contributing to implementation
and development of the EU Emissions Trading System (ETS), based
on the expertise of our members, ranging from industrial companies,
law and accountancy firms, traders and market makers, and also
companies with expert services, such as auditing and verification.
ETS is particularly important in helping to
ensure emission reductions are delivered both environmentally
effectively and economically efficiently, especially when the
UK and EU are showing leadership in both international debate
and domestic action, inevitably raising issues and concerns for
international competitiveness of companies.
The UK will shortly take leadership of the G8
group, and then in mid 2005 Presidency of the EU, at crucial stages
in preparing to discuss a long term global framework for addressing
issues of climate change. A global framework is needed to be effective.
We believe market approaches, including emissions
trading, can be an important part of a global approach to controlling
greenhouse gas emissions that the world needs for the post-2012
period. Such a global approach is needed both to ensure environmental
effectiveness and economic efficiency, so also minimising competitive
distortions.
It seems clear already that a global approach
will need to be based on diversity, taking account of different
national circumstances. We believe that an ability to link trading
systems will be an important strategic option in dealing with
such issues of diversity, whilst ensuring companies receive signals
that will encourage the investment needed.
For this reason, one of JETA' s main objectives
is to work for the development of an active, global greenhouse
gas market, consistent across national boundaries, and with scope
for all the flexible mechanisms. We believe these mechanisms have
a valuable role to play in any future global regime, with trading
having the potential to form an essential link, providing price
signals to focus business engagement with these issues.
IETA RESPONSES TO
THE COMMITTEE'S
SPECIFIC QUESTIONS
Q: Whether an international ETS is feasible,
given that targets and compliance penalties would need to be rigidly
enforced and bearing in mind the political pressures to which
an international ETS would be subject?
A: The current architecture has provided
the framework and the incentive for the creation of the EU ETS
as well as other current efforts to create Domestic Emissions
Trading systems (DETs) in other jurisdictions, such as Canada,
where business can take part. The EU Linking Directive leaves
the door open to the linkages between systems inside and outside
jurisdictions that have ratified the Kyoto Protocol. IETA's objective
is to encourage the linking of DETs and effectively create a global
GHG market.
The work that has been done over the last few
years has shown that, to be linked, these DETs do not have to
be identical, but can in many aspects reflect the circumstances
in each jurisdiction. It is important that these diverse trading
systems have similar fundamental characteristics that allow linking
through a similar price for a ton of carbon dioxide equivalent.
Fundamental are effective measuring and monitoring of emissions,
a transparent compliance regime, and installation targets related
to absolute national targets expressed as tons of carbon dioxide.
Like the DETs, the future international framework
may have too allow for variable geometry and will certainly have
to recognize the competitive pressures, especially on those industries
that compete globally. An international trading system is feasible
provided that it can recognize national circumstances. Over time,
such an international trading system would need to move to greater
consistency of target setting, compliance, and above all of transparency,
that are supplemented by policies and measures also moving to
greater consistency. Crucial to progress and political acceptance
at international level will be that developing countries will
be engaged effectively.
DETs, while sufficiently rigorous to ensure
the integrity of the international system, will also have to be
sufficiently flexible to recognise individual circumstances of
companies, capital turnover cycles, and technological innovation
potential. In these respects, the UK DET should serve as an example
to the rest of the world. These elements must not be lost, as
the UK system is integrated with the EU ETS.
Q: What other alternatives to an international
ETS exist; and whether an ETS would be more effective than such
alternatives in maximising carbon reductions worldwide and in
channelling investment in low-carbon technologies into less developed
countries?
A: In principle, control of greenhouse emissions
from industrial installations might be by targets and allowing
the flexibility of trading, or issuing permits/targets that do
not allow any flexibility, or by market signals that apply taxes
and/or charges for emissions. IETA believes the flexibility trading
offers is crucial for business response and to ensure economic
efficiency. A tax or charge can in theory be efficient, but is
a blunt instrument penalising rather than motivating business
responses and accentuating competitiveness concerns. But trading
has a key further advantage in linking to and encouraging projects.
It is important that the Clean Development Mechanism can fulfill
its promise of contributing to commitments made in 2002 at Johannesburg
to sustainable development of developing countries. We need to
ensure that this will happen.
The challenges to development of an effective
CDM are increasingly evident and it is not clear that it will
be an adequate inducement to the adoption of Best Available Technology
in developing countries. The world should consider ways to facilitate
this transition with arrangements parallel to, but fungible with
DETs and the CDM.
Q: What approach and specific objectives
in relation to climate change the UK Government should adopt during
its presidency of the G8 and EU in 2005?
A: The UK Presidency objective should be
to seek to shape an acceptable global approach to a global problem,
rather than the partial results we have had up to now. Without
an effective global approach, the environmental objective will
not be achieved, since the EU represents less than 20% of global
greenhouse gas emissions. An effective global approach will need
to recognise diversity, taking account of different national circumstances,
cultures and interests. We believe the ability to link trading
systems will be an important strategic option in dealing with
such issues of diversity, offering a single clearing price for
a ton of carbon.
The need to recognise diversity, however, will
put at risk emissions intensive industry in capped countries,
while encouraging its replacement with higher emissions intensive
production, with much larger production volumes, in non-capped
countries. Hence, there is a need to engage global industry coalitions
with global standards and long term time frameworks (well beyond
2012). Furthermore, effective treatment of consumption, as well
as production emissions and their consideration in the full life
cycle context, is fundamental to long term success. Therefore,
a means must be found to bring energy consumption into the international
trading system.
Q: What contribution individual departments
can make (eg FCO, Defra, HMT, DtT, and DFID), and whether they
are sufficiently "joined-up"? in delivering a coherent
UK agenda?
A: It is important the UK Presidency ensures
a coherent approach in assessing policy options for EU climate
change strategy post-2012. Discussion at Spring European Council
will be just a start of assessing costs and benefits of options,
on which the UK Presidency will need to build in EU, UN and G8
discussions. The UK's own coherent policy analysis can set an
example in the EU and G8.
International Emissions Trading Association
Members as of October 2004
1. Accord Energy Ltd.
2. AES Corporation
3. AgCert International LLC
4. Alcan
5. American Electric Power (AEP)
6. Anglo American plc
7. Baker & Mckenzie
8. Barclays Capital
9. Berkemeyer Attorneys and Counselors
10. BC Hydro
11. BlueSource LLC
12. BP
13. Brazilian Mercantile & Futures Exchange
14. Carbon Management Group
15. CDC IXIS
l6. Cemex
17. CER Inc.
18. ChevronTexaco
19. Chicago Climate Exchange (CCX)
20. CO2e.com
21. Companhia Vale do Rio Doce (CVRD)
22. ConocoPhillips
23. Davies Ward Phillips & Vineberg
LLP
24. De Brauw Blackstone Westbroek
25. Det Norske Veritas (DNV)
26. Deutsche Bank
27. Deutsche Boerse Computershare GmbH
28. Dow Chemical Company
29. DuPont Inc.
30. Ecosecurities
31. EDF Trading
32. Electricity Supply Board (ESB)
33. EmC Emission Control s.r.I.
34. Encana
35. Endesa
36. Eni S.p.A.
37. Entreprises pour IEnvironnement (EPE)
38. Environmental Resources Management (ERM)
39. Environmental Software Providers (ESP)
40. Eskom
41. Essent
42. Evolution Markets
43. Forexster Ltd
44. Fortis Bank
45. Freshfields Bruckhaus Deringer
46. Gaz de France
47. GreenStream Network Ltd
48. Gujarat Fluorochemicals Limited
49. Holcim
50. Iberdrola Generacion
51. ICF Consulting
52. lndustrial Technology Research Institute
(ITRI)
53. International Paper
54. International Petroleum Exchange (IPE)
55. Japan Quality Assurance Organization
(JQA)
56. JGC Corporation
57. J-Power (Electric Power Development
Co., Ltd.)
58. Kansai Electric Power Co. Inc.
59. KPMG
60. Lafarge
61. Lahmeyer International
62. Lloyds Register
63. Macleod Dixon LLP
64. MGM International Ltd.
65. Mitsubishi Research Institute (MRI)
66. Natsource
67. Morgan Stanley & Co. International
Limited
68. Nexen Inc.
69. Norr Stiefenhofer Lutz
70. Norsk Hydro ASA
71. Nuon
72. Ontario Power Generation
73. Pacific Consultants Co., Ltd
74. Petrobras
75. Point Carbon
76. PricewaterhouseCoopers
77. PT. Indonesia Power
78. PT. PLN Persero
79. Repsol YPF
80. Russian Carbon Fund
81. RWE
82. 5G5 Société Générale
de Surveillance SA
83. Shell International Limited
84. Statoil
85. Stora Enso
86. Suncor Energy Inc
87. SwissRe
88. Tokyo Electric (TEPCO)
89. TotaI
90. Toyota Motor Marketing Europe
91. Toyota Tsusho Corporation
92. Tractebel
93. TransAlta Corporation
94. TransCanada PipeLines
95. TUV Suddeutschland
96. Unica
97. Unocal
98. UR5 Corporation
99. Vattenfall AB
100. Woodside Energy Ltd.
1 November 2004
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