Towards a global carbon market – Europe and the US converges?- But what about the rest of the world?

       

Further reading

• IEA - World Energy Outlook 2007 (198)
• ETS Study for the European Parliament (108)
• Global action needed (123)

It will certainly be some time before we see a global carbon market, but there are a few interesting proposals which show that thinking might be converging.

Firstly, the European Trading System will tighten. It has already been previously flagged up that the quotas will be distributed and decided centrally by the EU in Brussels, a view that is further emphasised in a new study for the European Parliament. This report also advocates that targets should be narrowed between countries and that the trading could (or should?) also be extended to other industries such as the aviation business. However, the most important issue may be that they say the allocation of emission rights should be done largely by auctioning.

The Hillary-type of US energy policy

And this view of allocation is also embraced by Hillary Clinton, who recently revealed her plans for an energy policy in the US if she takes the office in the White House. She goes as far as saying that she wants a cap-and-trade system that auctions 100% of the emission rights! In her manifesto, she proposes this as a measure to prevent utilities from obtaining windfall profits from the trading. Obviously a lesson learnt from the European experiences. She further says that the funds obtained from the auctioning can be used to cushion the effects in some specific cases where industry otherwise could export their emissions to other countries.

The Hillary Clinton campaign also has many other interesting proposals showing approaches that would also be interesting for Europe. One is the idea to establish “smart-grid cities”. Another is to ensure that building refurbishment opportunities are fully used to reduce energy use, and a third is that publically traded companies should be mandated to carbon disclosure in order to enable investors to understand the risk their savings run from climate change.

However, China and India have the leading role

One third of the global population lives in these two countries and they are under-privileged in terms of access to energy and energy services. The IEA has devoted this year's WEO (World Energy Outlook) to India and China. The Chinese press has highlighted the problem by asking if part of the solution should not be a greater restraint in old industrialised countries. A well-taken argument that we have a global problem, i.e. an obligation for all.

The position of different markets in relation to each other, and in possible development, can be seen from this figure below. However, if it is now possible for fire and water (Europe and US) to converge, then it should be possible to take the next steps towards a global solution, shouldn't it?