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From the Editors

While many of us were still celebrating the Paris Agreement, UN climate boss Christiana Figueres was telling business leaders in Davos that getting the agreement was the easy part. The hard part is implementing it. Nowhere is that more true than in Article 6, which added yet another acronym – ITMOs, or “internationally transferred mitigation outcomes” – to the alphabet soup.

ITMOs are essentially tradeable emissions reductions – the units that could be exchanged if, say, Canada wanted to finance an emissions reduction in Uganda. Though there is no specific mention of carbon markets in the text, experts have been weighing in over the last few weeks on what market-based mechanisms for trading ITMOs could look like. The Paris Agreement leaves the door open for two possible paths, which could develop simultaneously.

One is the “centralized” path, which was championed by Brazil and is shaping up as something of a Clean Development Mechanism (CDM) 2.0, created and administered by the United Nations Framework Convention on Climate Change (UNFCCC). The other approach is a more decentralized “cooperative” one and would allow countries to link up domestic carbon markets, or create regional trading blocks.

“For those cooperative approaches, for countries that just want to link up existing trading arrangements and don’t need the UN to create a new source of credits, the agreement really opens the door for countries to do that,” Nate Keohane, the Vice President for Global Climate at the Environmental Defense Fund, told Ecosystem Marketplace in December. “The role of the UN will be to establish clear and robust accounting rules that everyone abides by so that we know that each emissions reduction will only be counted once but really letting the countries themselves drive the market transactions.”

Whichever path countries choose, they must use emissions trading to drive both sustainable development and deeper emissions reductions than they’d achieve without markets – and therein lies the germ of the debate that will be unfolding over the next five years: Does this mean that each specific trade has to result in steeper reductions that would otherwise have been achieved, or that the overall system has to guide trading in that direction?

In a global cap-and-trade system, the answer to the latter would be easy: each year, the cap comes down, and the overall system drives emissions lower. Countries’ UNFCCC climate plans (known as Intended Nationally Determined Contributions, or INDCs), however, aren’t necessarily caps – although some could evolve that way.

For now, the question isn’t how to answer these issues, but how to create a process for answering them. At least five working groups are dealing with market questions, and that needs to be whittled down. Negotiators won’t formally meet until the Bonn Climate Change Conferencein late May, but there will be plenty of opportunities to meet informally – beginning with a World Bank meeting in Zurich in early March.

Until then, anyone looking for clues into the shape of things to come might want to check out the World Bank’s Networked Carbon Markets initiative and Germany’s G7 Carbon Market Platform – or, for a real deep dive, check Ecosystem Marketplace’s coverage this Friday.

More news about the carbon markets is summarized below, so keep reading!

 
   

HERE’S THE DEAL

Broncos vs. Panthers vs. Climate

The Host Committee of the 50th Super Bowl announced a partnership with TerraPass to offset scope 1 and 2 emissions from the upcoming Levi Stadium game in San Francisco, California as well as from official fan events leading up to it. The transportation and accommodations of the teams will also be offset, and a platform for fans and sponsors encourages additional voluntary purchases. (Fans, for instance, are asked to make a $2 pledge.) The offset dollars will go towards a 132 MW capacity wind farm in Oklahoma. TerraPass does not yet have projections on total purchases. Its umbrella group, Just Energy, previously provided offsets for Super Bowl XLV in Dallas, Texas in 2011. 

PROJECT DEVELOPMENT

Stacking up

Facing demand challenges, the Ohio River Basin Trading Project is considering expanding its scope to include carbon offsets alongside water quality credits. Currently small farms implementing practices that reduce fertilizer runoff can sell water stewardship credits to polluting power plants and wastewater management facilities that provide financing. But to date only 35 farms out of a potential 230,000 in the Ohio River Basin have joined the program. A $300,000 Conservation Innovation Grant from the U.S. Department of Agriculture will help the project assess the viability of quantifying the greenhouse gas benefits of reduced fertilizer use and the possibility of “stacking” credits, with input from the American Carbon Registry (ACR) and the Verified Carbon Standard.

Proof is in the (rice) pudding

Dan Hooks is one of 21 rice growers in the U.S. that is implementing methane-reducing practices – in his case, an alternate wetting and drying planting method –under the ACR’s rice protocol, which was accepted by the California Air Resources Board last November. The combined land represents three offset projects, and impacts less than 1% of the 2.5 million acres of rice-growing land in the U.S. Yet even 100% adoption would affect only about 1% of methane emissions nationwide – about 99% come from sources otherthan rice fields. But the hope is that the rice protocol will pave the way for future agricultural offset protocols, such as those under development for corn and almonds.

POLICY WATCH

Long live ecosystem services

Brazil’s Rondônia state is initiating a legislative process for a payments for ecosystem services law, potentially similar to Acre’s. In an interview with Ecosystem Marketplace, Rondônia Secretary of Environment Vilson de Salles Machado talked about the role of REDD (Reducing Emissions from Deforestation and forest Degradation), indigenous inclusion, and private investment. “The reason policymakers want a law with a long life is to provide the regulatory certainty that long-term investors need,” he said. Four organizations – IDESAM, ECOPOREL, RIO Teja, and an unnamed private company – have submitted bids for the initial feasibility study that will underpin the legislation. In the meantime, the state is forging ahead to certify supply: lumber company Triangulo Manoa will reportedly receive the first “REDD certificate” in the state this June.

The Hateful Eight

China’s National Development and Reform Commission (NDRC) published a list of the eight sectors that will be capped by its national carbon market when it launches in 2017. They are: petrochemicals, chemicals, building materials, iron and steel, non-ferrous metals, paper production, electricity generation, and aviation. Officials have previously said that companies emitting over 26,000 tonnes of carbon dioxide (tCO2e) annually will be regulated, but that number has yet to be confirmed. The NDRC also outlined rules for verifiers, which must not be involved in trading or portfolio management to avoid conflicts of interest. More than 80 Chinese businesses convened by IETA’s Business Partnership for Market Readiness met in Beijing last week to discuss allowance management strategies, offsetting, and other topics.

Not out of the woods

South Korea’s Emissions Trading Scheme (ETS) turned one in 2016, but not everyone is celebrating its birthday. The first year has seen more than 40 lawsuits filed by industry against the Ministry of Environment, most of them claiming that the initial allowance allocations to the 525 regulated companies are too low. Though the cap covers more than 570 million tonnes, only a total of 321,000 allowance units (KAUs) were traded on the Korea Exchange (KRX) in the first year. Companies can also use domestic offset units (known as “KOCs”) for up to 10% of their emissions obligation. However, KOCs are currently traded bilaterally and it is therefore difficult to track the trading life of the 7.1 million offsets issued to date. KRX will launch offset trading starting in May. 

A very long engagement

The European Union and Switzerland have agreed to linktheir Emissions Trading Systems (ETSs) after five years of talks, though the signing and ratification of the agreement depends on first resolving an immigration issue. One of the major sticking points in the talks was whether Swiss airlines, which were previously exempt from the EU ETS, should be folded in. It was decided that they will be – but only after the linkage is finalized. Because Switzerland’s ETS is so much smaller than the EU’s, the linkage is expected to have little effect on allowance prices. However, one contrast that may come up in the future is the fact that Switzerland’s INDC includes the use of ITMOs while the EU’s excludes them.

CARBON FINANCE

Make it rain

The Climate Trust issued a Request for Proposals for early-stage forestry, grasslands conservation, and livestock digester projects based in the United States. Due to support from the U.S. Department of Agriculture and the David and Lucille Packard Foundation, The Climate Trust has $5.5 million to spend in 2016. Project investments will range from $250,000 to $2 million, with the upfront finance equal to one half of the current carbon price multiplied by the project’s projected emissions reductions over 10 years. The Trust will assume partial ownership of the resulting offsets and manage sales, first recovering its investment and then splitting remaining carbon revenues with the project owner. Awebinar on February 3rd will give potential applicants a chance to ask questions. 

Silent but deadly

On the eve of the World Economic Forum (WEF) in Davos, Switzerland, 750 leading economists and other experts agreed that climate change is the biggest threat to the economy in 2016. But a survey of CEOs complied by PricewaterhosueCoopers found that over-regulation was what 79% of businesses were most concerned about, compared to 50% that saw climate change as an urgent threat. Ikea CEO Steve Howard critiqued WEF delegates that talk renewable energy or energy efficiency publicly but still operate in the fossil fuel economy, quietly “trying to defend the status quo.”

HUMAN DIMENSION

Fugitives on the run

Since late October, the Southern California Gas Company’s Porter Ranch facility has spewed more than 87,000 tonnes of methane into the atmosphere, making neighbors sick and contributing significantly to climate change. Because methane has a much higher global warming potential than carbon dioxide, the emissions are equivalent to 2.4 MtCO2e over a 100-year timeframe or 7.3 MtCO2e in the short (20-year) term. But Porter Ranch’s unintentional, “fugitive emissions” do not fall under California cap-and-trade – and the leak is so massive that SoCal Gas would have trouble finding enough offsets to cover it, anyway. Governor Jerry Brown has ordered the company to atone for its blunder by funding projects in California that reduce short-lived climate pollutants.

NEW RESEARCH

De-risk, reuse and recycle

A new report on conservation finance developed by Credit Suisse and the McKinsey Center for Business and Environment presents “a few concrete ideas that we deem to be scalable, repeatable, and investable.” A toolkit suggests two distinct approaches. One involves applying the same proven project management approach across a single project type, financing it through plain equity or debt vehicles, and scaling it up. The other involves bundling heterogeneous projects linked by a common feature – a national park, for instance – and creating a common risk-and-return sharing vehicle. Interviews suggested that risk is often a greater concern to potential investors than the financial return or even the conservation impacts of a project.

Naming their price

In a new issues brief by the World Resources Institute, researchers argue that a carbon price of $25/tonne, implemented either through a carbon tax or cap-and-trade, would lead to emissions reductions in line with the U.S.’s current goals. “When greenhouse gas emissions are unpriced, the costs of climate change are borne by third parties unrelated to the activities generating the emissions,” they write. According to the brief, while a growing number of Republicans support a carbon tax, the most likely vehicle to implement a price on carbon in the near-term will be through multi-state trading in responses to the Clean Power Plan.

JOBS

President – Climate Action Reserve (CAR)

Based in California (Los Angeles preferred, San Francisco or Sacramento considered), CAR seeks a mission-focused, dynamic, and innovative president who will lead the organization in fulfilling its goals. The position requires deep knowledge of climate change science and policy, a collaborative leadership style, and a passion for advancing market-based solutions to reducing greenhouse gas emissions. Ten or more years of experience and an advanced degree are required, as is a willingness to travel regularly.

Read more about the position here

Communications Manager – Verified Carbon Standard (VCS)

Based in Washington, D.C., the Communications Manager will lead VCS’s organizational communications efforts, including helping to develop a communications strategy and executing it. The successful candidate will have a minimum of five years of professional communications experience; excellent written and verbal communication skills; and a good understanding of climate policy, carbon markets, or landscape sustainability.

- Read more about the position here

Sourcing Associate/Manager – Natural Capital Partners

Based in London or on the East Coast of the United States, the Sourcing Associate/Manager will source supply of environmental instruments, including carbon and renewable energy, and conduct due diligence and impact evaluation of projects. The successful candidate will have a postgraduate degree, a minimum of three years of experience working within the carbon market or impact investing, and strong knowledge of emission reduction project standards, technologies, and policy.

Read more about the position here

UN REDD Technical Specialist – United Nations Development Programme

Based in Kampala, Uganda, the Technical Specialist will be responsible for the overall operational and financial management and reporting on the implementation of the Uganda REDD+ Roadmap. S/he will be responsible for the development of annual and quarterly reports as well as relevant policy frameworks and institutional arrangements for REDD+ development. The position requires a master’s degree or higher and at least five years of work experience on REDD+, with experience in Uganda or East Africa preferable.

Read more about the position here

Policy Analyst – Climate Bonds Initiative

Based in London, UK, the Policy Analyst will work on the Climate Bonds Initiative’s green bond policy and government advisory work. The position involves developing work stream, researching and writing high-level policy reports, writing commentary on key policy developments, and presenting findings to policymakers and other stakeholders. The successful candidate will have at least two years of relevant work experience and be a motivated self-starter.

Read more about the position here

Green-e Program Associate – Center for Resource Solutions (CRS)

Based in San Francisco, California, the Program Associate will work on CRS’s Green-e program, which provides certification and verification of renewable energy and carbon offset programs and projects. The position involves managing relationships with program participants, evaluating and processing certification applications, and conducting review of sales verification and marketing materials, among other tasks. In addition to the Program Associate, CRS is hiring four unpaid fellows for spring 2016.

Read more about the positions here

   
   

ABOUT THE ECOSYSTEM MARKETPLACE

Ecosystem Marketplace is a project of Forest Trends, a tax-exempt corporation under Section 501(c)3. This newsletter and other dimensions of our voluntary carbon markets program are funded by a series of international development agencies, philanthropic foundations, and private sector organizations. For more information on donating to Ecosystem Marketplace, please contact info@ecosystemmarketplace.com. 

 
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