So remember our past posts about the Australian carbon tax, i.e. Paul wondering if the hybrid approach might yield empirical evidence for the relative efficacy of taxes vs. cap-&-trade schemes, and me wondering how the country’s estimated abatement cost curve might be borne out? Yeah, apparently never mind:
Tony Abbott will be forced to negotiate with minor parties in the Senate as he seeks to scrap carbon pricing and a mining tax, after his coalition won the biggest parliamentary majority since at least 2004 in Australia’s election…
…“Labor will try to put up resistance on scrapping the carbon price, but it may not be able to block it, depending on how the Senate finally plays out.”
So what’s the status of the mandatory carbon emissions control programs out there? Here’s my short list:
- Australia: the program phased in last year started off as a carbon tax of ~24USD/metric tonne CO2 (23 Australian dollars/tonne) covering and would transition to a cap-&-trade market linked to the EU carbon market after a few years, though the new conservative government will likely phase it out entirely.
- European Union: this cap-&-trade market has been running for ~8 years, but has been plagued by falling prices and high volatility. The carbon price is currently around 6.20USD/tonne (4.7 Euros/tonne), though a new plan to delay the sale of allowances in order to effectively lower the ‘cap’ is projected to triple that.
- US- RGGI: this regional cap-&-trade scheme has covered emissions from power plants in 9 states in the New England and mid-Atlantic region since 2008 (originally 10 states, but New Jersey dropped out in 2011). Paul has linked to some of the economic impacts of this one previously. The price has hovered around 2-3USD/short ton (1 short ton = 0.91 metric tonnes), and the large scale shift from coal to natural gas in the US power sector has spurred a drastic reduction of the program cap starting this year.
- US- California: Paul wrote about the first auction of allowances in this cap-&-trade program last November. Allowance buying started out at the 11USD/tonne ($10/short ton) floor, but is now up to 15USD/tonne. Note that this program was part of the wider Western Climate Initiative covering 7 US states and much of Canada, though the other 6 western states have since dropped out.
- China is just starting to experiment with regional-scale emissions markets, though there are concerns that the limited scope may just result in emissions leakage in neighboring provinces.
- New Zealand: this program started in 2008, and gives the energy, industrial, waste management, and forestry sectors covered the option of either buying offsets under the Kyoto mechanism or paying a tax rate of 10USD/metric tonne CO2 (they actually say $25 NZ/tonne, but the 2:1 ‘progressive obligation’ means that only half of your emissions are counted, confusingly…)
- Kyoto Protocol/CDM: this figure from wikipedia pretty much sums it up (hint: the falling price is not a sign that the program is succeeding!!)-
In addition to these, there are several voluntary markets, some of which are doing well (transactions in the 7-8USD/tonne range) and some of which have been disbanded. Let me know if there are any major programs I’m forgetting here… also, I don’t have a good sense of how these regional/national programs interact with the voluntary markets and the Kyoto protocol, so if you do please leave a comment! It would be interesting to collect some more detail about trading prices and volumes over time, though that analysis will have to wait for another post. To sum it up in the meantime, you have:
- the most aggressive carbon tax (Australia) is about to go away entirely after only a year
- the newest c&t scheme (California) is off to a strong start
- a variety of other c&t programs (EU, CDM, RGGI) are still sputtering along but have been unable to set their caps appropriately to generate a sizable, stable market