Box 13 Cap And Trade Incountry

Under a cap and trade scheme emitters are allocated or purchase a quantity of emission allowances, an allowance being one tonne of CO2e. Emitters may then face progressive reductions over time in their allowances designed to achieve national greenhouse gas targets. The cap and trade scheme may be global, applying to nations involved in a global cap and trade scheme, for example to the industrialized Annex B countries under the Kyoto Protocol, or it may apply to companies under a mandatory cap and trade scheme within a country. The principles remain the same, whatever the boundaries of the scheme.

A country that faces high cost of abatement has the option of purchasing emission allowances (AAUs) from a country that has low-cost abatement. Likewise a firm within a country that is part of a national cap and trade scheme also has the option of abatement or purchase.

Each country will have different level of AAUs at the end of the period, depending on purchases and sales. Holdings of Kyoto Units from project activities are also counted along with AAUs towards overall emissions reduction and are reflected in the bottom line of the country's carbon accounts. Reductions in AAUs below a cap can be banked against future requirements.

New Zealand in 2007 enacted a national cap and trade scheme. A new government, elected in 2008, suspended the scheme and will be introducing a modified approach in late-2009 (Point Carbon, 2008). Nevertheless, the enacted scheme is summarized in Box 1.4, as it demonstrates the integration of a country scheme with global markets.

The few emission cap and trade schemes in place in other countries are run by individual states or groups of states. The United States Congress refused to ratify the Kyoto Protocol and there is no national scheme to cut emissions. A cap and trade scheme passed by the House in June 2009 goes before the Senate in September, however.

A regulatory scheme that allows forestry offsets is the Greenhouse Gas Reduction Scheme of the State of New South Wales. The RGGI of 10 eastern US states will cap emissions after 2009 and will include forestry. California will cap emissions after 2009 and already has a Climate Change Registry that includes forestry protocols. A new government in Australia is committed to introducing a national cap and trade scheme in 2011.

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