By Erica Morehouse

This post originally appeared on ipolitics.ca.

Air pollution in Toronto. Photo credit: Flickr/ United Nations Photo

On Apr. 3, the Ontario government will announce the results of its first ever auction of pollution permits under its new cap-and-trade program aimed at cutting the emissions that contribute to global warming. As historic and newsworthy as the event may be, it would be wrong to read too much into the results as a measure of the success of the overall environmental program.

Ontario’s cap-and-trade program, launched on Jan. 1, requires emitters such as power plants to surrender a “carbon allowance” for every ton of pollution they produce. The ‘cap’, or limit on emissions, will be reduced over time, ensuring continuing reductions of emissions. The ‘trade’ — allowing emitters to sell excess allowances on the market — provides emitters with a flexible, cost-effective path to going green.

The Ontario government will auction many of these carbon allowances, as they did this month, and the new climate law requires all proceeds to be reinvested in public transit, green technologies and other environmental endeavors that reduce carbon pollution.

The actual auction was held Mar. 22, and offered for sale a total of 28 million allowances at about $17 each. Theoretically, that means the final result announced in April could be hundreds of millions of dollars raised by the province for investments in green projects.

History suggests the actual sum could be considerably less.

Results from recent California and Quebec auctions, which could influence Ontario’s results, have varied widely; those auctions sold 88 per cent and then 18 per cent of available allowances in the two most recent auctions.

There’s a number of reasons why cap-and-trade programs can get off to a relatively slow start.

Relatively soft auction results in the early stages of a cap-and-trade program may simply indicate that the system is working exactly as it was designed.

In the initial stages, for instance, many polluters can find relatively simple ways to cut their emissions enough to meet their cap for the year and thereby avoid having to buy allowances. Or, since they have a few years before they are required to turn in the required allowances, they could simply wait to purchase them.

Many allowances also will be provided to businesses for free — especially those energy-intensive businesses that have competitors in other jurisdictions not subject to similar climate regulations.

Relatively soft auction results in the early stages of a cap-and-trade program may simply indicate that the system is working exactly as it was designed — by allowing industries to make a gradual transition to lower emissions without causing undue economic upheaval or job losses.

Cap-and-trade programs already are showing that economic prosperity and ambitious climate action can go hand in hand. Ontario’s system is modeled after the joint program between Quebec and California, which have both seen carbon pollution decline even as their economies thrived in their first four years of cap-and-trade. In fact, in the first four years of California’s program, emissions under the cap declined while jobs were added faster than the national average — and California’s GDP grew to make the state the fifth largest economy in the world.

The Ontario scheme is designed to achieve similar environmental and economic results by easing consumers, businesses and industries gradually into the new cap-and-trade regime which will put the province on track to a low-carbon economy.

Ontario was able to develop and implement a rigorous but flexible emission-reduction program in less than half the time it took California and Quebec, an example of how climate giants can spur faster and more ambitious action by working together.

A significant feature of Ontario’s plan is that it includes a proposed linkage with Quebec and California’s market. That would mean carbon allowances could be used interchangeably in all three locations, and that Ontario would begin auctioning allowances at the same time as California and Quebec, who held their last auction in February.

Ontario has a rich history of environmental innovation, and its cap-and-trade program is poised to be a key component of its larger climate policy.

As tempting as it may be to judge the Ontario cap-and-trade program by the revenues it will generate, by far the more important measure of success is what it will do for the environment.

By Chris Meyer

REDD+ activity has shifted from securing recognition in the global agreement to focusing on development and implementation at the national and subnational levels. Image source: flickr

The director general of a leading tropical forest research center recently told a Yale conference of international forest experts that Reducing Emissions from Deforestation and Forest Degradation (known as REDD+) was a “good idea [that] didn’t work,” and has now “disappeared” (video clip at 1hr 9min). But far from having vanished, REDD+ is steadily advancing in countries and states around the world.

Emerging REDD+ programs at national and subnational levels

For much of the past decade, REDD+ was a hot topic of global conferences, and a standout success at the UN climate negotiations, where it received explicit recognition in 2015’s international Paris climate agreement.

Now enshrined at the UN Framework Convention on Climate Change (UNFCCC), REDD+ is experiencing a groundswell of action at the national and subnational levels. Tropical forest countries are designing and implementing their REDD+ programs at home, as well as submitting documentation to the UNFCCC and Forest Carbon Partnership Facility (FCPF) for review and funding.

Here are some examples of REDD+ programs and activities that are demonstrating progress at the national and subnational levels:

• Brazil has taken the lead and submitted to the UNFCCC 1) a national REDD+ strategy, 2) a forest reference level (i.e. a baseline for deforestation), 3) information on safeguards to protect the environment and society, and 4) a national forest monitoring system. These four elements are vital to ensuring that emissions reductions for REDD+ are real, measurable and provide benefits to the environment and society. 

  REDD+ is experiencing a groundswell of action at the national and subnational levels.

• The Democratic Republic of Congo and Ecuador also submitted their national REDD+ strategies to the UNFCCC.
• 25 countries have submitted their forest reference levels to the UNFCCC, 10 of which were submitted at the end of 2016.
• Chile, Costa Rica, Democratic Republic of Congo, and Mexico all had their REDD+ programs approved by the FCPF in 2016; these programs will begin generating emissions reductions this year. The World Bank plans to sign purchase agreements with some of the programs by the end of 2017.
• The Green Climate Fund approved in 2016 two REDD+ implementation grants worth tens of millions of dollars for Ecuador and Madagascar.
• Germany, UK, and Norway pledged $5 billion for results-based payments between 2016 and 2020.
• The Green Climate Fund will define its criteria for REDD+ results-based payments for approval by April 2017, unlocking another pathway for REDD+ financing.

Results-based REDD+ financing still needed

REDD+’s explicit recognition in the Paris Agreement politically secured its future in the post-2020 climate framework. But for REDD+ to be fully implemented, it needs adequate and sustainable financing to support a results-based payment system that includes:

• The UNFCCC should finish its guidance on International Transfers of Mitigation Outcomes (ITMOs), which will facilitate REDD+ market transactions.
• The Green Climate Fund should complete its REDD+ results-based payments criteria for those countries interested in non-market finance.
• Other potential compliance markets in California and International Civil Aviation Organization (ICAO) need to give their approval to REDD+ offsets.

In conclusion, I do partially agree that REDD+ has “disappeared” in that certain – the parts facets and activities of REDD+ that needed to disappear are no longer. REDD+ activity has – appropriately – shifted from securing recognition in the global agreement to focusing on development and implementation at the national and subnational levels.

Now, building on the momentum from the Paris Agreement’s entry into force, countries need to expedite the process of creating the results-based payment mechanisms to ensure a sustainable and reliable REDD+ finance system.

By Erica Morehouse

California's Alta Wind Energy Center, Image Source: flickr

Carbon auction results released today show low demand for California’s carbon allowances in the first carbon auction of 2017, with only 18% of allowances selling.

The results say more about the many milestones that are ahead for the cap-and-trade program rather than anything about the cap-and-trade program’s core function of reducing overall emissions.

Results from the February 22 auction show:

• The auction offered more than 65 million current vintage allowances (available for 2016 or later compliance) and sold about 11.6 million. Most of these allowances were utility-held allowances and some were from the province of Quebec. No ARB current allowances sold.
• Almost 10 million future allowances were offered that will not be available for use until 2020 or later; a little over 600,000 of those allowances sold.
• This means only about $8 million was raised for the Greenhouse Gas Reduction Fund.

Why cap and trade is working

Auction results themselves cannot tell us whether cap-and-trade is “working.” Though selling most allowances offered at stable prices at or above the minimum or floor price is generally a good sign, the reverse does not necessarily indicate that something went wrong with the cap-and-trade program itself. Disappointing auction result could simply be a product of the market’s expectation that more information on which to make an investment decision and plenty of allowances will be available in the future.

The best indicator is whether greenhouse gas emissions are declining.

The best indicator of whether California’s climate policies, including cap and trade, are working is whether greenhouse gas emissions are declining. As we reported in November’s auction blog, all indications suggest California’s policies are reducing emissions.

Another important factor is whether California’s economy continues to thrive as the state implements some of the most ambitious climate policies in the world. Recent data from the Bureau of Labor Statistics shows that in 2016, California continued to add jobs faster than the national average, as it has in every year that cap and trade has been in place.

So what explains current low demand

Outstanding litigation brought by the California Chamber of Commerce and others challenging California’s cap-and-trade program design is likely still hampering sales of allowances and negatively affecting the auction, as many participants may be waiting to see how the Court of Appeals rules on the legality of carbon market auctions. Oral Arguments were held in late January and a decision is likely by the end of April.

At the same time, Governor Brown in January asked the Legislature to extend the cap and trade program beyond 2020 with a two-thirds vote; the supermajority vote, also recommended by the independent Legislative Analyst’s Office, could insulate the cap-and-trade program from legal challenges like the one brought by the Chamber. Two bills currently in the Assembly – AB 378 (C. Garcia) and AB 151 (Burke) – could both facilitate the extension of cap and trade and be passed with a two-thirds vote. But we are still early in this process and the market is clearly still waiting to see how the Legislation plays out.

What we can understand from California’s February carbon auction

• Regulated businesses under the cap-and-trade program will have to purchase a large portion of available allowances in order to comply with the cap-and-trade program requirements. It appears they have just decided to deploy the wait-and-see strategy they utilized in May and August, perhaps hoping for more information perhaps in advance of the next auction.
• One thing that is different between this auction and the May auction that also saw similarly low demand, allowances prices on the secondary market were quite close to the current floor price of $13.57. This means that entities are still valuing carbon allowances close to the floor price, showing expectations of a steady market in the future, there just wasn’t quite enough demand to soak up all the supply in this auction.
• The November auction when 88% of allowances sold was the last time participants were able to buy allowances for $12.73 at auction instead of the 2017 floor price of $13.57.  This opportunity for lower cost allowances seems to explain the higher demand in November.
• Importantly, the ARB allowances that went unsold represent a temporary tightening of the cap. They will not be offered again until two auctions have fully sold all available current allowances. This is an important self-regulating design feature of the cap-and-trade program that helps stabilize prices in the face of inevitable market fluctuations in supply and demand.

What to expect from 2017 auctions

Two major developments this spring may provide more certainty about the post-2020 cap-and-trade program, which we’ve noted before could significantly increase auction demand. First, there will likely be a decision from the appeals court on the California Chamber of Commerce case. There could also be more clarity on the bill or package of bills that could move through the Legislature this year.

The core functions of the cap-and-trade program are operating as intended, reducing carbon emissions while the economy thrives.  But it remains to be seen whether the Legislature will be able to act to provide the highest level of certainty for the cap-and-trade market.

By Christina McCain

Photo credit: Sweetie187/Flickr

The stark realities of the environmental policy challenges we are likely to face, in the United States and internationally, have not faded in the month since the U.S. election.

During his campaign, I and many others were deeply troubled by the statements President-elect Trump made about Latinos, African-Americans, women, people with disabilities, immigrants and other religious groups, as well as our critical relationship with Mexico. He called climate change a “hoax”; vowed to “cancel” the Paris climate agreement; and pledged to undo the Clean Power Plan, the regulation that would put the first-ever limits on carbon pollution from power plants in the United States. Just last week, he selected a climate denier, and sworn opponent of bedrock protections for clean air and clean water, as his pick to head the U.S. Environmental Protection Agency.

But in the days following the election, I have been heartened by messages of empathy and solidarity from my friends and colleagues from around the world. These messages remind me that as a community we have strength – and that we can and will keep pushing forward, together. Our resolve is greater than ever, and there are many reasons for hope.

First, no one country can solve climate change alone – and thus no one election, in any country, can put the solution out of reach. A single president cannot reverse the hard-won progress of the world’s countries, who came together in 2015 to craft the historic Paris climate agreement, and met again last month in Marrakesh to continue putting that plan into action.

Mexico has taken on global leadership on the issue of climate change – pledging ambitious reductions to its national emissions, and forging collaborations in North America with the state of California, and the provinces of Quebec and Ontario, among other international partnerships. Mexico’s leadership and international collaboration now play an even more critical and influential role in the global effort on climate change, and particularly in North America. And Mexico will not be alone in moving forward to develop a low carbon economy – emissions giants including China have pledged they will continue to move forward with their plans to reduce emissions, and use market-based mechanisms to get there.

The transformation underway toward clean energy and low-carbon economies is unstoppable.

Second, the transformation underway toward clean energy and low-carbon economies is unstoppable. In 2014, the U.S. clean energy market, which includes wind turbines, solar panels, home energy storage and energy efficiency, grew by 14 percent – at nearly five times the rate of the overall economy – to nearly $200 billion. And hundreds of major businesses just called on the new Administration to meet US carbon pollution reduction targets, invest in clean energy, and implement the Paris climate pact.

Even beyond the Paris Agreement, the world is beginning to shift. The reform and modernization of Mexico’s power sector, as one example, has the potential to transform its economic and energy future in way that is both more profitable and more sustainable.

California has been leading the way on climate change and energy innovation in the United States – and working in active partnership with Mexico on climate change since 2014. California’s also forged a collaboration among more than 130 subnational governments representing more than half of the world’s GDP through the Under 2 MOU.

And let us not overlook that two-thirds of Americans want reducing carbon pollution to be a priority and over 80% of Americans support boosting clean energy sources such as wind and solar.

Our work in Mexico has all the key ingredients we need to succeed. Our partners in Mexico, from government to civil society, are committed – as are we – to working in partnership to put our collective knowledge, expertise, creativity, and will to the task of fighting climate change – together.

I know that I will, and my organization will, continue to face and fight the battles ahead for protecting our health, the climate, and clean air, healthy ecosystems, and clean water – and there will, no doubt, be many.

I am extremely proud of my work and I am fortunate to come to work every day and be a part of the global effort to solve one of the most formidable environmental challenges of our time, and to work in partnership with dedicated leaders and committed citizens of Mexico.

By Steve Schwartzman

Amazon Forest. Photo by Joseph King/Flickr

The latest New York Times Retro Report, “The Fight to Save the Amazon,” shows how Chico Mendes's ideas, his story, and the indigenous and local forest communities’ fight for their land rights that he gave his life for, have changed the Amazon, Brazil and the world – and how very far from over the fight is. My last post discussed what hasn't changed in the Amazon rainforest in the 28 years since Chico Mendes was assassinated. Here, I discuss three major changes to which Chico and indigenous leaders, including the Kayapô leaders Raoni and Megaron, profiled in the story, made major contributions.

What has changed since the fight to save the Amazon began in the 1980s? 1. The whole idea of development has changed.

Part of what gave the ranchers and land-grabbers who killed Chico such confidence that no one would be held to account for the crime was they thought they were on the right side of history. “The gringos cut down all their forests and got rich – why shouldn’t we?” was the received wisdom. When Chico said “We realized that in order to guarantee the future of the Amazon we had to find a way to preserve the forest while developing the region’s economy,” he was way ahead of the curve.

Now no one says that deforestation is the price of progress anymore – and deforestation was down about 80% between 2004 – 2014, while cattle and soy production increased. Brazil’s Agriculture Minister, mega-soybean producer Blairo Maggi, says that nobody is more conscious of the need to stop deforestation than farmers, because they know that standing forest is critical for the rain they need. Maggi – as well as agribusiness, state governments, indigenous groups, grassroots social movements like the rubber tappers’ movement, and many in the federal government – now agree with Chico that the Amazon needs real economic incentives to make forest protection a viable environmental asset.

2. Environmentalists recognize that indigenous and other forest peoples’ land rights are central to forest protection – and Amazon social movements see environmentalists as allies.

When Chico was alive, mostly environmentalists thought that people in the forests were the problem and that real conservation was about finding the highest-biodiversity and most remote, inaccessible pieces of forest possible and setting up parks with guards. While defending remote high-biodiversity forest is a good thing, leaders like Chico, Raoni and Megaron , showed the world that their people were holding the line against the advance of the lawless, entirely unsustainable frontier. Environmentalists – and increasingly, Brazilian public opinion –came to support indigenous and forest peoples’ rights and recognize that protecting the forest is a valuable service. This has greatly helped swing numerous local struggles to the Indians’ and forest peoples’ side.

Today, nearly half of the Amazon (think of half the land in the continental US west of the Mississippi) is officially recognized indigenous territories and environmentally protected areas (almost all of which are occupied by forest communities like Chico’s) and these territories are a big part of the reason Brazil is the world leader in reducing greenhouse gas pollution because of its success in reducing Amazon deforestation.

3. Companies are getting on board with deforestation-free commodity supply chains.

In Chico’s day, a lot of economic activity in the Amazon wasn’t very efficient and was heavily subsidized. Global markets, with the partial exception of timber, didn’t really connect with the Amazon.

Since then Brazil has become an export agriculture powerhouse, and major multinationals like Cargill and Walmart source a lot of soy and beef in the Amazon. But, as Fight for the Forest explains so well, Amazon deforestation became a global issue after Chico’s assassination and the Kayapo convergence against the Belo Monte dam, and it has remained on international public opinion and decision makers’ agendas. Big consumer goods companies like Walmart, Unilever and Marks and Spencer found out that having their brands stained with the ashes of dead forests was bad business, so many of them have committed to zero-deforestation supply chains, and are telling their suppliers they’ll need to comply to do business. That’s a message farmers and ranchers get – even though the last three years’ increases in deforestation show that the gap between taking the pledge and making it happen is large, and governments need to stop backsliding on law enforcement.

The people who killed Chico were fundamentally wrong. Chico died, but he didn't lose.

It’s worth remembering, as we head into what could be a time of great trial and trouble for the environment, that when Chico started out, the odds were seriously stacked against him. Dirt poor, illiterate, and under the thumb of an unenlightened  oligarchy at the end of world isn’t a great resume for most-likely-in-class-to succeed.

Chico started from a position far more disadvantaged, and had to overcome greater challenges than just about anyone who will read this. But he changed the world. Let him be an example to us.

By Steve Schwartzman

Chico Mendes in the window of his home with Sandino, his son, in Xapuri, state of Acre, Brazil. Author: Miranda Smith, Miranda Productions, Inc. November 1988. Photo: Wikimedia Commons

I was at home on the evening of December 22nd, 1988 when I got the call from Brazil telling me that Chico Mendes had been murdered a few hours earlier.

Chico Mendes's ideas, his story, and indigenous and forest communities’ fight for land rights that he gave his life for have changed the Amazon, Brazil and the world. But the fight is far from over.

I, and Chico’s other friends, had thought that drawing media attention to his struggle to protect the forest and forest communities against the depredations of land-grabbing cattle ranchers would protect him. We were tragically mistaken.

But the cabal of land grabbers and their hired guns who killed Chico were wrong on a deeper level. They thought that his murder would go unnoticed, and that even if it didn’t everyone would know that cutting down the forest and driving a few poor rubber tappers off the land was the price of progress – inevitable.

The latest New York Times RetroReport, “The Fight to Save the Amazon,” does a very good job of showing both how very much Chico’s ideas, his story, and the indigenous and local forest communities’ fight for their land rights that he gave his life for, have changed the Amazon, Brazil and the world – and how very far from over the fight is. My next post will address what’s changed over the past 28 years, but here I’ll address four things that haven’t.

What hasn’t changed since the fight to save the Amazon began in the 1980s? 1. The frontier is still lawless.

Even though government and state agencies have stepped up enforcement, particularly since the 2004 Plan to Prevent and Control Amazon Deforestation, about 30% of the Amazon is still at risk for illegal logging, deforestation, gold mining and land grabbing.

Deforestation went down from about 27,000 km² in 2004 to a little over 4,000 km² in 2012 – but since then has oscillated around 5,000 km² and now has increased for the last three years, to an alarming near-8,000 km² this year.

It seems that a big part of the residual deforestation is linked to illegal activities, if not organized crime. Environmental/land rights activists like Chico don’t get killed in his home state of Acre, where ten years after he died, his people came to power and have made the state a sustainable development leader. But Brazil is still the world leader in killings of environmental activists, such as Luiz Alberto Araújo, municipal secretary of environment, murdered in Altamira, Pará on October 13th. Dismantling land grabbing and illegal deforestation gangs (as the Federal Police have clearly shown they can do in the last few years) and aggressively prosecuting their leaders need to be high priorities, and gathering the intelligence to do it needs dependable support.

2. The forest is still worth more dead than alive.

Chico’s prescient ideas on the need for forest protection while developing the Amazon economy have won the rhetorical war – but the actual incentives needed to create robust economic alternatives for indigenous peoples and forest communities, compensate good-actor landowners willing to forgo legal rights to clear forest, and fund the shift to high-value, zero-deforestation agriculture for family farmers and agribusiness alike have yet to materialize, and Brazil’s climate negotiators are not helping. Brazil should open up to emerging carbon markets to fund the elimination of deforestation in the Amazon and other biomes, while also pursing public donor funding.

3. Technology and capital to build 21st century supply chains and develop markets for sustainable forest products are still lacking.

After Chico was killed and his story went viral a wave of newly minted MBAs washed over the Amazon, full of passionate conviction that commercially viable sustainable alternatives based on non-timber tropical forest products were there for the taking (Full disclosure: I thought so too, at the time.) Then they figured out that bringing products of highly variable supply and quality to market over continental distances and no infrastructure wasn’t all that good a recipe for business success.

In some places, though, governments and NGOs kept at it, and developed alternatives that yield real benefits for local people. In Acre, for example, the government has invested heavily in things like fish farming on already cleared land, a high-tech condom factory using native rubber latex, and scaled-up Brazil nut processing technology.

In the Xingu indigenous territories and protected areas, NGO Instituto Socioambiental has brought in state-of-the-art technology to add value through local processing of fruits, nuts and oils, while training local people to collect native tree species seeds for sale to famers obliged by law to restore degraded lands. Alternatives like these raise incomes and help the communities get access to the market, and with investment, could help landowners derive sustainable value from the 80% of their holdings they’re required to keep under forest cover. But with over 2 million km² (equal to the size of four Californias) of indigenous territories and protected areas, these innovative pilots will need major investment and a world of new technology to come to scale.

4. The weather in the Amazon is still changing for the worse.

Chico saw before almost anyone else that the weather in the Amazon was changing. The combined effects of climate change and deforestation on regional and global rainfall regimes are provoking more frequent and intense droughts, and causing runaway forest fires in places that were always too moist to burn, even in the dry season. About half the rain that falls in the Amazon is from moisture cycled into the atmosphere by the forest itself – about 20 billion tons of water a day.

If climate change, deforestation and fires continue feeding off of each other, the Amazon ecosystem could unravel, and large parts of the forest could change into savanna. This could affect rainfall patterns as far away as California, and seriously reduce agricultural production in Brazil and other countries.

In one of the last interviews Chico gave before he was killed, he talked about the death threats he was getting and said he wanted to live to save the Amazon. In my next post, I’ll talk about some of the things that have distinctly changed for the better in the last 28 years – in no small measure because of Chico’s life and story – that make saving the Amazon a real possibility.

By Erica Morehouse

Co-authored by Erica Morehouse and Jonathan Camuzeaux.

While we hope President-elect Trump will listen to the almost unanimous global voice of governments and business leaders who all understand that we must act to avert catastrophic climate change, it’s indisputable that leadership from U.S. states will be of paramount importance. Amidst this chaos and uncertainty California and Quebec are now four years into a successful cap-and-trade program with shrinking carbon pollution footprints and thriving economies.

California and Quebec released results today from a much anticipated carbon auction that took place on November 15, and sold a greater number of allowances than in the past two auctions resulting in proceeds for the state Greenhouse Gas Reduction Fund.  This good news comes after California’s 2015 greenhouse gas reporting data earlier this month showed another year of carbon pollution decline for the Golden State.

These year-over-year pollution declines are the most important indicator of success.  But understandably the auction performance and amount raised for climate investment priorities will get a lot of attention in California, Quebec, and Ontario, which is slated to launch its own cap-and-trade program in January with linkage likely to California and Quebec in 2018.

Auction results see increased demand

The November 15 auction offered more than 87 million current vintage allowances (available for 2016 or later compliance) and sold almost 77 million. Approximately 10 million future allowances were offered that will not be available for use until 2019 or later; over one million of those allowances were sold.

These auction results represent a significant increase in demand from the August auction which offered a similar number and sold about 31 million allowances, up from a little over eight million allowances sold at the May auction, the first auction to experience very low demand for allowances.  The May and August auctions raised almost no revenue for the California Greenhouse Gas Reduction Fund (GGRF).  While final numbers won’t come in for another few weeks, based on the allowances sold, this auction likely raised over $360 million for the California GGRF. 

Impacts on demand for this auction

A number of factors, good and otherwise, contributed to this quarter’s results.

1. One of the most immediate factors that likely contributed to increased demand in this auction is the knowledge that the minimum sale price or “floor price” will rise to about $13.50 in 2017. This is the last auction that participants will be able to purchase allowances for $12.73 before the annual increase.

1. A constant during this and previous auctions is litigation brought by the California Chamber of Commerce and others challenging California’s cap-and-trade program design. The case was brought the day before California’s very first auction in 2012 and California won at the trial court level. The plaintiffs appealed, and the Court of Appeals will hear oral arguments on January 24, 2017. This outstanding litigation may be leading some potential auction participants to take a wait-and-see approach.

1. This wait-and-see approach is only possible if regulated businesses in California already have enough allowances to cover their 2016 obligations. California just released preliminary data for 2015 which shows emissions were about 14 percent below the cap. This suggests a successful set of climate policies that are incentivizing polluters to lower levels of pollution below required levels if they are able.  Some have referred to this as an oversupply of allowances, but it’s perhaps more accurate to refer to it as over-compliance.  Businesses have a choice of how to respond when they over-comply: avoid buying allowances in a future auction or buy allowances when they are presumably cheaper and bank them for future use.

A big question is how much the passage of SB 32 in August has impacted auction demand.  Governor Brown had previously established a target of reducing carbon pollution 40 percent below 1990 levels by 2030 through an executive order, but SB 32 cemented this requirement into law making it much more certain.  Setting a 2030 target could increase demand for allowances, but the market will not necessarily get certainty about that target or how California will meet it in one fell swoop.  While SB 32 set the 2030 target, like AB 32 it was silent on policy tools to meet that target so decisions about cap-and-trade post-2020 are still outstanding.

Greenhouse gas emissions decline again in 2015

California’s Mandatory Greenhouse Gas Reporting program requires that state’s largest polluters to report their emissions annually. The California Air Resources Board released the final tally of 2015 greenhouse gas emissions on November 4th, which showed yet another year of carbon pollution decrease.

In 2015, California’s emissions covered under the cap-and-trade program decreased by roughly one percent compared to the year before. California is on track to meet its target of reducing pollution to 1990 levels by 2020.  Carbon pollution for capped and uncapped sources was down in 2015.

Meanwhile, data from the Bureau of Economic Analysis shows the state’s gross domestic product increased by almost six percent in 2015 – while California also experienced an increase of total employment of a little over two percent in 2015 – proving again that economic output and emissions don’t necessarily go hand in hand.

With these results California is on solid footing to continue as a beacon of hope for climate action in the United States and perhaps even to attract new partners inside or outside the country who are ready to join a successful program.

 

By Dana Miller

By Jade Lu, Environmental Science and Biology major at Duke University, and Dana Miller, EDF Policy Analyst

November 14, 2016 – the SBSTA closing plenary at COP22 in Marrakesh, photo by Dana Miller

Hailed as the “COP of Action” since before its opening, COP22 no longer holds such promise for agriculture. The scene, seemed set for action: the Paris Agreement opened the doors for real progress on agriculture and there were clear commonalities in both country goals and practices. During the negotiations, while there were differences, countries were able to agree on some significant issues and worked hard to reach a decision. However, differences won out and countries were not able to focus on these areas of consensus to reach a substantive decision when the agenda item closed on Friday, postponing discussions until the next negotiations in May 2017. So, how did this happen, and where do we go from here?

The promise for action

As parties began to discuss agriculture, they unearthed many areas of common ground. There was a strong sense of urgency and desire for action shared by many countries. Countries agreed on the need to explore policy options to spur action. Countries also acknowledged the need to address climate change through good agricultural practices and to share knowledge and lessons learned. As we wrote in our last blog and analysis, countries are already implementing many common practices, which they shared in their submissions to SBSTA 44. These practices include efficiently managing resources like water, nutrients, and soil, which can have multiple benefits for adaptation, mitigation and productivity.

Full negotiating texts were put forward, giving parties a starting ground. This was further than negotiators had gotten since discussions on agriculture started in Durban in 2011. They finally had the ability to address possible points of contention, then to adjust, and finally compromise. The delegates were obviously hard at work in the days leading up to their submission deadline. They met late into the night negotiating a text that could be somewhat acceptable to all parties. After three long days, however, negotiators could not get past fundamental differences. This led to a half-worked upon text that countries decided they could not use as a starting point for negotiations at the next SBSTA in May, losing much of the progress they made this week.

What went wrong?

Even as progress was made in certain areas – with valuable contributions from many parties – other components were locked in complete standstill. There were fundamental disagreements that stalled the negotiations, such as:

• Whether to only focus on adaptation and food security—which is of utmost importance to all, but especially vulnerable, developing countries—or to also address mitigation in agriculture
• and whether there should be a call for developed countries to provide finance and other support for developing countries.

While the COP presidency strongly encouraged the Parties to reach an agreement and put pressure by offering clear deadlines, parties were unable to negotiate efficiently. It is clear that both significantly more time and efficiency will be required to achieve real progress on agriculture.

The silver lining

The issue of agriculture is complex and the fact that parties are offering texts as starting points for negotiations shows that future progress on agriculture may be closer than it looks:

• There is even stronger urgency and desire for action. Negative impacts of climate change are being felt now for agriculture. Agricultural emissions are significantly contributing to the warming of our planet. Inaction will no longer be an option. This urgency will be made clear on Wednesday, November 16 at the Agriculture and Food Security Action Day during the second week of COP22.

• Though it was difficult to reach agreement at this COP, countries are starting to acknowledge that many best agricultural practices have benefits for both adaptation and mitigation.

• Countries are already implementing many good agricultural practices, which they have shared with each other at the UNFCCC and in other international fora. These practices can provide areas of common ground for the next negotiations.

• Progress, even incremental and painstaking, is still progress. Text was proposed and discussed; valuable contributions and ideas were shared. Parties can take elements of this text, especially points of consensus, to the subsidiary meeting in May.

Of course, this is all dependent on the commitment and willingness to engage on agriculture – from all stakeholders. Countries must be willing to focus on common goals between all countries, and also to compromise where needed. EDF and our partners stand ready to provide support and share our experiences in agriculture in countries around the world to reach a decision on agriculture.

By Dana Miller

Photo: Rakesh Tiwari (SACRED)

By Jade Lu, Environmental Science and Biology major at Duke University, and Dana Miller, EDF Policy Analyst

The interactions between the agricultural sector and climate change have undeniable implications for both global food security and our environment. Despite this global significance, and perhaps due to the complexity of the subject, there has been little progress to date on agriculture in the United Nations Framework on Climate Change (UNFCCC) process. However, this could be about to change.

The impetus of Paris Climate Agreement and leadership by the Moroccan presidency could unlock the opportunity to advance agricultural issues at the climate talks, known as COP22, taking place this week in Marrakesh. Furthermore, country actions and targets as inscribed in the Nationally Determined Contributions (NDCs) both show commitment to the agricultural sector and help highlight key common practices that could form a basis for international collaboration.

While much of COP22 will be focused on laying groundwork for the Paris Agreement, agriculture could be an area of significant progress in Marrakesh, potentially resulting in a COP decision or work program on agriculture.

There is a strong need to address agriculture in COP22

Agriculture at once contributes significantly to climate change and faces some of the greatest risks posed by climate change. Agriculture is estimated to contribute one-third of all emissions. Conversely, climate change is projected to have negative impacts on agriculture, especially in developing countries. With 800 million people currently undernourished worldwide, the majority of whom depend on agriculture for their livelihoods, and a projected population increase of more than 2 billion people by 2050, it is no wonder that “Zero Hunger” is identified as the 2nd Sustainable Development Goal by the UN and that adequate nourishment is interwoven with almost every goal listed.  However, agriculture has yet to be codified within the UNFCCC framework.

There is an opportunity to address agriculture in COP22

The Paris Agreement, monumental in more ways than one, identifies food security as a priority in the climate agenda. This recognition is emblematic of the necessity to address the foundation for food security – the agricultural sector – in the international climate negotiations.

It is clear from previous negotiations that countries have different priorities and perspectives in considering mitigation versus adaptation.  However, it is becoming increasingly clear that these two goals are not mutually exclusive in practice.

A new EDF analysis of countries’ submissions to the 44th SBSTA (Subsidiary Body on Science and Technological Advice) finds that countries are employing similar agricultural practices in different parts of the world. Several submissions also noted that these practices can have multiple benefits for adaptation, productivity and mitigation.

For example, soil management can increase soil fertility (and therefore productivity) as well as carbon storage in soils. Improvements in livestock such as diet management could both increase productivity and reduce methane emissions. The efficient management and storage of water could also increase resiliency to drought and reduce reliance on irrigation. These are just a few examples of commonly identified agricultural practices that meet both goals of adaptation to climate change and mitigation of emissions.

In addition to common practices, it is also clear that the vast majority of countries, driven by national interest, are committed to taking actions on agriculture in the context of climate. Within countries’ INDCs (intended nationally determined contributions), 80% include agriculture in their mitigation targets and 64% include agriculture in adaptation strategies.

Parallel to the negotiations, the Global Climate Action Agenda will highlight agriculture and food security on November 16th, demonstrating leadership by the Moroccan presidency to advance issues on agriculture at COP22.

The potential way forward

With clear necessity and urgency, a way must be paved for work on agriculture issues within the UNFCCC.  The Paris Agreement, INDCs, and common practices from SBSTA submissions that countries are already implementing could provide a foundation for countries to work together on agriculture. The best outcome of Marrakesh would be a COP decision on agriculture.

International cooperative action on agriculture is in the best interest of all countries due to critical importance of food security, adaptation, and climate stabilization. In addition, international collaboration could facilitate accounting for emissions towards INDCs and accelerate deployment of finance for agriculture.

We hope that negotiators will work constructively together on agriculture inside and outside of the negotiations, especially on areas of common ground such as the practices mentioned above. EDF and our partners will be closely following the agriculture negotiations at COP 22 and meeting with negotiators to discuss how to move forward on agriculture issues in the UNFCCC.

By Alex Hanafi

Photo credit: Luc Viatour

Friday, November 4, 2016 was a day for the record books: it marked the day that the landmark Paris Agreement on climate change entered into force, unlocking the Agreement’s legally binding rights and obligations for countries that have joined the agreement. This milestone came almost four years earlier than many expected even just last year. 

Rapid entry into force proves that the diverse political coalition of countries that constructed the Paris Agreement – both developed and developing, large and small – is alive and strong around climate change. It sends a powerful, immediate signal to global markets that governments take the agreement seriously, and that now is the time to ramp up investment in a prosperous, low-carbon future. 

Early entry into force also adds a sense of urgency to the work of the just-opened climate talks in Marrakesh under the United Nations Framework Convention on Climate Change (UNFCCC), known as COP22, from November 7-18. The inaugural session of the Conference of the Parties serving as the Meeting of the Parties to the Paris Agreement (CMA1) will take place in conjunction with COP22. 

What to expect at Marrakesh

Countries in Marrakesh will be expected to provide concrete evidence that the world is on track to effectively implement the Paris Agreement.

The goal of the Marrakesh gathering is to maintain the strong momentum on climate action that comes from the trio of climate wins we’ve seen recently: entry into force of the Paris Agreement, the adoption of a market-based-measure to tackle significant climate pollution from airlines, and the phase down of HFC “superpollutant” greenhouse gases. 

To continue that momentum, countries in Marrakesh will be expected to provide concrete evidence that the world is on track to effectively implement the Paris Agreement, in the form of an ambitious workplan to complete the Agreement’s necessary infrastructure. The Agreement provides an inclusive, solid foundation for global climate action, but the “nuts and bolts” of how to implement the Agreement were left to future meetings.

Key implementation tasks that will occupy negotiators in Marrakesh include Finalizing the Paris Agreement’s “enhanced” transparency framework and building an effective ambition mechanism.

Finalizing the Paris Agreement’s “enhanced” transparency framework

Transparency is the backbone of the Paris Agreement: It drives climate action by holding countries accountable to their commitments on action and support. 

But often overlooked are the additional direct domestic benefits of transparency to countries and subnational actors, which helps them to:

1. understand the scope of the climate challenge;
2. develop strategies to address it;
3. assess the extent to which policy interventions are succeeding; and
4. more easily access resources needed for effective implementation, including via carbon markets.

The Paris Agreement lays out common and legally binding rules that require – for the first time – each country to regularly report on progress they are making in meeting their commitments.  And those reports must go to a panel of experts for technical review. As EDF President Fred Krupp wrote, “It's the environmental version of President Reagan's ‘trust but verify.’”  

The details of the Agreement’s enhanced transparency framework must now be elaborated to ensure that countries demonstrate credibly and publicly how they are making progress against their commitments. Support should be made available to assist countries that need help to meet these new requirements. A variety of climate funds and support programs currently exist that can help developing countries to build the necessary institutional and technical capacity. 

At the same time, nations must now prioritize efforts to develop a set of clear accounting rules that prevent “double counting” of emissions reductions and facilitate the high-integrity emissions trading needed to drive emissions down and investment up. Double counting – applying one ton of emissions reductions towards more than one commitment, a sleight of hand that cheats the atmosphere – is explicitly prohibited by the Paris Agreement no less than six times.

Building an effective ambition mechanism

We know that the commitments pledged by countries thus far are not enough to limit warming below new temperature limits set by the Paris Agreement – “well below 2 degrees above pre-industrial levels” – let alone enough to meet the Agreement’s aspirational limit of 1.5 degrees.

That’s why the heart of the accord is the process it establishes to periodically review countries’ progress toward meeting their commitments, and to ratchet up ambition over time, beginning with a global assessment (a “facilitative dialogue,” in UN-speak) in 2018 and updates of commitments in 2020.

The Paris Agreement recognizes that cooperation on emissions trading between countries can help drive the ambitious emissions reductions that science demands. Under Article 6, the Agreement encourages the growing use of bottom-up agreements between jurisdictions to link markets for greater efficiency, as California and Quebec have done. Countries that prefer the option of an international structure can wait to utilize the nascent new market mechanism outlined under Article 6.4 of the Agreement – the strong rules and accounting standards necessary for this new approach must also be fleshed out by negotiators in the coming months and years.

Prompt agreement on accounting for market mechanisms under Article 6, including how to practically implement the requirement to avoid double counting of emissions reductions, will help quickly build the infrastructure needed for carbon markets to drive ambition. In particular, the facilitative dialogue among Parties in 2018 to assess global progress appears to be a good time to provide additional clarity on the tools available under the Paris Agreement to increase ambition. 

What will happen during CMA1 

Although the Paris Agreement specifies that the significant amount of work necessary to build its essential infrastructure must be completed by CMA1, countries are likely to agree a “procedural fix” to give themselves the time necessary to develop the Paris Agreement’s rulebook. For example, Parties could agree to keep CMA1 formally in session rather than gaveling it closed at the end of the COP, extending CMA1 – and the associated deadlines – until perhaps 2018. Countries used a similar fix to minimize procedural wrangling in the successful negotiations that led to the Paris Agreement. Given the Paris Agreement’s surprisingly quick entry into force, it is not surprising that negotiators will need more time to complete the long list of tasks on their plate.

The upshot is that substantive discussions will occur instead in the COP, the APA (the “Ad Hoc Working Group on the Paris Agreement”) and the UNFCCC’s subsidiary bodies, in which all Parties to the UNFCCC can participate. As long as these bodies move promptly to accomplish their “to do” list, keeping discussions under the COP provides an additional benefit to inclusiveness and political “buy-in.” That's because decisionmaking in the CMA is limited to only those Parties to the Paris Agreement, currently slightly more than half of those participating in the UNFCCC, but expected to be nearly equal by 2018. 

The continuing need for national and “minilateral” action

A decade ago, the presumptive approach to climate progress was a global governance structure driven by international institutions such as the U.N. Now, the challenges are more urgent and the landscape is more decentralized. 

"Minilateral" cooperation among groups of countries is emerging as a focal point for climate action. The prospect of “climate clubs” is gaining currency as a vehicle for securing greater investment, market access, and financial stability, and for driving greater ambition in climate action. For example, a coalition of carbon market jurisdictions, or “CCM”, could go faster and farther than the UNFCCC in promoting coordination among carbon markets, ensuring environmental integrity, and ultimately spurring greater ambition in climate action. Robust coalition standards could potentially inform global approaches, complementing and building additional momentum for climate efforts under the UNFCCC.

No major environmental problem is solved with one document. The Paris Agreement provides a solid foundation for cooperation among jurisdictions, but nations recognize that progress on climate depends on implementation at home. It’s time for countries to roll up their sleeves and get to work on the rules, guidance, and domestic policies that will put Paris into practice. 

The significant political will reflected in the entry into force of the Paris Agreement now needs to be translated to building the essential infrastructure for implementation. The world is watching.

By Chris Meyer

Photo credit: Flickr @CIFOR

With the Paris Agreement entering into force on November 4th, climate negotiators at this years’ climate talks (COP22) in Marrakesh will have to roll up their sleeves and get to work on the rules and guidance that will translate Paris climate commitments into action.

As the only sector with its own article in the Paris Agreement, the land sector will be discussed this year in the context of implementation and progress – especially REDD+. There are no agenda items directly addressing forests at COP22, so REDD+ negotiators will need to focus on how REDD+ fits into other items on mitigation, accounting, transparency, and markets. Forests will also be highlighted during a series of COP events in the Global Climate Action Agenda (GCAA).

Forests in the Global Climate Action Agenda

On November 8th—the US election day—the Global Climate Action Agenda (GCAA) will showcase important forest initiatives. Held alongside the negotiations, the GCAA is meant to highlight initiatives not only from nation states, but also from a broad set of stakeholders including civil society and the private sector. Partnerships among these stakeholders will be especially emphasized.

The GCAA will also highlight the New York Declaration on Forests annual assessment report, which was released globally on November 3rd. This year’s report focused on private sector’s implementation of their zero-deforestation supply chain commitments. The report also gives a good overview of overall progress against halving deforestation in natural forests by 2020, which should be at the center of the discussions at the GCAA forest showcasing event.

While I find it heartening that many companies based in North America, Europe, and Australia are making deforestation commitments, the world’s forests need countries and companies in emerging markets to start implementing and reporting on their commitments.

Negotiations: Transparency, Accounting, and Markets

At COP22, REDD+ negotiators will most likely be found at the sides of their colleagues that focus on transparency and accounting. REDD+ methodological guidance included in the Warsaw Framework for REDD+ and other previous decisions already ensures a high level of transparency in any REDD+ programming. Experience with effective transparency provisions under REDD+ provides an opportunity to inform the development of the “enhanced transparency framework” that will be critical to the success of the Paris Agreement.

Accounting in the land and forest sector is as important as that in other sectors – if not more important, given the sector’s potential to remove carbon dioxide from the atmosphere. It is critical to ensure that consistent principles apply throughout all sectors, including effective accounting that avoids double counting of emissions reductions.

To promote environmental integrity between countries’ policies to implement REDD+, an upcoming report by EDF and four other leading organizations collected recommendations from experts from REDD+ countries and technical assessment teams on forest reference levels. It will provide key guidance for tropical countries to receive payments for results from REDD+.

The negotiations on markets will probably be some of the most interesting. Markets could provide a much needed source of funding to support results from REDD+, while REDD+ could provide useful lessons for the development of accounting guidance for Article 6 (related to transfers of mitigation outcomes), as detailed in our joint submission with four other leading observer organizations.

Countries may choose to use REDD+ emission reductions as Internationally Transferred Mitigation Outcomes (ITMO) under Article 6.2 of the Paris Agreement, consistent with the Warsaw Framework and other REDD+ decisions. The use of ITMOs toward national commitments must also be consistent with the accounting guidance yet to be developed under Article 6.2, including the clear requirement to avoid double counting of emissions reductions.

The country of Brazil offers an example of where the REDD+ and ITMO debate is playing out. Recently, the Brazilian Coalition on Climate, Forests and Agriculture, made up of over 130 leading environmental NGOs and companies has recently, after extensive internal discussion, approved a consensus position on REDD+. Their position – that can be found here – posits that the positions of Brazil’s international climate negotiators dealing with land use – in particular their opposition to market-based REDD+ and failure to recognize subnational REDD+ systems in national carbon accounting – do not reflect the overwhelming majority views on these issues in Brazilian society. It will be interesting to see these differences between Brazilian society and their climate negotiators debated at the COP.

It is not clear how forests or REDD+ will be featured in the new market mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development (under Article 6.4 of the Paris Agreement). I don’t expect negotiators to start discussing a new REDD+ methodology for Article 6.4 in Marrakesh, and this is likely many years down the road.

As previous analysis has shown significant costs savings from using REDD+ in carbon markets, I expect countries interested in using markets to discuss the details of transacting REDD+ ITMOs next year, either within the UNFCCC negotiations or in clubs of carbon markets in parallel to the UNFCCC.

The Marrakesh COP will probably yield less tangible text related to REDD+ than past UNFCCC meetings, though REDD+ negotiators will probably have much to discuss with each other outside the negotiating rooms. What I will be looking for are signs that REDD+ implementation is accelerating and how the accounting and transparency discussion in the UNFCCC might impact REDD+ and the forest sector.

By Chris Meyer

An indigenous woman of the Xingu Seed Network at work | Photo courtesy: Tui Anandi and Danilo Urzedo (ISA)

Brazil is a great laboratory for studying indigenous and community enterprises that support forest conservation and community development. It has abundant and diverse indigenous and community projects and enterprises across the Amazon.

As part of an initiative to foster the growth of these enterprises, EDF catalogued as many examples as we could find and used the Canopy Bridge Atlas to map indigenous enterprises in the Amazon Basin. We selected three cases to investigate further, which are unique in different ways, but face similar challenges.

By studying the three cases, we found that:

• Securing operating and sanitary licenses from the government has been the most significant challenge for the enterprises due to bureaucratic hurdles. They either are currently experiencing problems in obtaining these licenses or encountered significant problems in the past.
• Government is also a key source of initial and steady demand, either directly or indirectly, of the products of these enterprises.
• The enterprises have partnered with allies for technical assistance, start-up funding, and/or continuing funding, in order to scale and maximize impacts.

The Babassu Nut Collecting Cooperative

The Cooperativa Interestadual das Mulheres Quebradeiras de Coco Babaçu (CIMQCB) is a decentralized cooperative formed by women from forest communities who collect and process babassu nuts in Brazil. CIMQCB sells its main products, babassu nut soap, oil, and flour, to various types of local, regional, and national customers.

While obtaining sanitary licensing from the government has been an obstacle for CIMQCB to accessing some markets, the federal government’s school food acquisition program is also a consistent and large client for one of its sub-groups.

Partnerships with foreign development programs have been essential for its organizational development. The European Union and the German Development Bank were some of its first donors. Currently, the cooperative receives supports from the Program of Small Ecosocial Projects.

Read full case study 

The Jupaú Cassava Flour

The Jupaú indigenous people, also known as Uru-Eu-Wau-Wau, who were officially contacted for the first time forty years ago. Their traditional processing techniques create a unique flavor and have attracted significant demand for their product.

However, the Jupaú are not formally organized as a business and are faced with the challenge of meeting sanitary and business regulations as well.

To help them overcome the challenges, Kanine, a local non-profit, is working with the Jupaú to find a culturally appropriate manner to increase their production and secure appropriate licenses from the state, while maintaining their unique and traditional processing that makes their product special.

Read full case study

The Xingu Seed Network

The Xingu Seed Network (RSX) was officially established in 2007 by an association of individuals and organizations working on community development in the Xingu River region. The network sources seeds for 200 different native species that are used for reforestation in the Amazon and Cerrado regions. In RSX, indigenous women are the majority of the seed collectors and the activity is an important source of income for them.

Financial and technical support from donors has played a key role in RSX’s growth. It is on the pathway to financial sustainability from its seed sales ($95,000 in 2015).

Similar to the other cases, business regulations and obtaining the proper licenses have been challenging for RSX. The Brazilian Forest Code drove a significant amount of early demand for their seeds, recent changes to it depressed demand.

Read full case study

Overcoming bureaucratic licensing hurdles, finding right partners, connecting with government programs, and complying with government regulations are the key challenges and opportunities the enterprises highlighted here and many others face.

In the future, EDF and our partners will continue to work with these indigenous and community enterprises throughout the Amazon to help them to overcome the challenges, scale their businesses, and maximize their impacts. There is still much to be done to conserve what is left of the Amazon forest.

By Annie Petsonk

The International Civil Aviation Organization (ICAO), the UN agency charged with setting standards for international flights, has set a goal of “carbon neutral growth from 2020” – i.e. capping net emissions at year-2020 levels. The ICAO Assembly today adopted a global market-based measure that lets airlines purchase high-quality emission reductions to offset the carbon growth above the cap.

Analysis of high-quality data on aviation emissions projections demonstrates the ICAO market-based measure is a critical step forward for climate action, and could prevent nearly 2.5 billion tonnes of CO2 emissions into the atmosphere over the first 15 years of the program. Here’s how.

The market-based measure provides that:

• from 2021-2023, nations would opt in to a voluntary pilot phase;
• from 2024-2026, nations would opt in voluntarily to another phase;
• from 2027-2035, all nations would be required to participate, with some exceptions;
• least developed countries, land-locked developing countries, and small island developing countries would all be exempt throughout (although these states could opt in at any time if they so choose).

What this means for ICAO’s commitment to “carbon neutral growth from 2020” depends on how many more countries decide voluntarily to opt in.

EDF has developed an interactive tool to allow users to estimate how many emissions would be covered of the billion-tonne gap between projected emissions and the 2020 cap, if various countries opt in to the MBM.

The tool provides unique calculations of the aviation sector’s emissions growth based on projections from ICAO, industry and analysts. The focus on emissions provides a direct estimate of the aviation sector’s contribution to climate change that complements analyses based on aviation’s traffic growth, measured in revenue tonne kilometers (RTKs).

Here’s the snapshot of the tool as of the adoption of the market-based measure on October 6. With Qatar and Burkina Faso becoming the 64th and 65th countries to signal their intent to participate in the MBM from the start, 65% of emissions growth above 2020 would be covered in Pilot + Phase 1, and nearly 80% (79%) of these emissions would be covered during Phase 2 of the program (2027-2035). Importantly, 77% of anticipated emissions growth above 2020 would be covered over the first fifteen years of the program.

The tool shows the importance of commitments to early participation by the Asia-Pacific aviation powerhouse states of Singapore, Japan, Korea, and Australia; the Middle Eastern aviation dynamos of United Arab Emirates and Qatar; Latin American states like Mexico, Costa Rica, Guatemala; and leading African states such as Kenya.

It also shows that as exempted states increase in their importance as aviation powers, participation by at least some of them will be significant for boosting overall coverage toward the goal of carbon-neutral growth from 2020. Consequently, it will be important for today’s leading aviation countries to help build MBM capacity in the anticipated aviation leaders of tomorrow.

A number of countries that are exempt under the resolution's formulas, including leading voices from the front lines of climate impacts – Burkina Faso, Marshall Islands, Papua New Guinea, Costa Rica, Guatemala, and Kenya – have announced their intent to participate, and more are expected to join.

After nearly two decades of effort, ICAO is providing global leadership, with both developed and developing countries taking the lead. Hand in hand with this week’s announcement about ratification of the Paris Agreement, that’s good news indeed.

By Dana Miller

By Michelle Mendlewicz, EDF Global Climate 2016 Summer Fellow and Dana Miller, Policy Analyst

Cattle ranching in Brazil | Photo: Scott Bauer via Wikimedia Commons

Hundreds of major consumer goods companies that have driven the demand for soy, palm oil, timber & pulp, and beef – the big four commodities that contribute significantly to deforestation – have committed to eliminating deforestation from their supply chains. However, a vast majority haven’t yet acted on their zero-deforestation commitments or reported their progress.

According to a report by Forest Trends’ Supply Change, the majority of companies do not disclose their progress on zero deforestation commitments, with only 23% to 27% of commitments backed-up by data.

An analysis by the Sustainability Consortium found similar results, with 25% to 40% of companies reporting any information on deforestation for beef, soy, and palm oil.

Cutting and burning trees adds as much pollution to the atmosphere as all the cars and trucks in the world combined, which is why it’s important that more than 400 companies, including Walmart and Unilever, that have committed to achieving zero net deforestation by 2020 actually follow through on their pledges.

Two examples from Brazil, home to the largest remaining area of rainforest in the world, show that collaboration with governments and civil society can help companies turn their zero-deforestation commitments into action.

Mato Grosso’s ambitious strategy

Brazil successfully reduced Amazon deforestation by about 75% from 2005 to 2013 while maintaining robust growth in beef and soy production. Its success can be largely attributed to joint efforts between companies, government agencies, and environmental communities.

Brazil’s experience shows it takes more than commitments from companies to accomplish zero deforestation — businesses must focus on implementation and monitoring.

An example of this collaboration is Mato Grosso’s “Produce, Conserve, Include” (PCI) strategy, launched at the Paris climate conference (COP21) in December 2015. The State of Mato Grosso contributed to 50% of Brazil’s deforestation reduction between 2005 and 2013, while increasing beef and soy production. It is the largest agricultural commodity producer in the Amazon, producing 27% of the soy, 25% of the corn, and 19% of the beef in Brazil. The PCI plan aims to simultaneously reduce deforestation in the Amazon by 90% by 2030, increase agricultural production, and promote socioeconomic inclusion of smallholders and traditional populations.

Major soy and beef merchants Amaggi and JBS, non-governmental organizations such as EDF and partners in Brazil, and the Government of Mato Grosso worked together to develop the plan and continue to collaborate on its implementation.

As PCI’s coordinator stated, the ambitious strategy is only possible because it was “embraced” by society, and due to local partners and international supporters of the initiative.

Brazil’s businesses, governments and civil society successfully reduce deforestation from beef production

Another example of collaboration between businesses, governments and civil society has already shown success in reducing deforestation from commodity supply chains in Brazil. An agreement between Greenpeace and food processing companies in Brazil, Marfrig, JBS, and Minerva, requires farmers to provide information about their suppliers. This information is then cross-checked with government agencies, including the Brazilian Institute of Environment and Natural Resources (Ibama) and the Public Prosecutor’s Office (Ministério Público), to eliminate environmental or socially harmful practices. According to Marfrig, of the 8,303 properties monitored in the Amazon region, 6,471 are approved to supply cattle, while the remaining 1,679 properties are banned.

Meatpacking companies also signed a Term of Adjustment of Conduct (TAC) with the Public Prosecutor’s Office (MPF) to stop purchasing cattle originating from properties that cause illegal deforestation, are located on indigenous territories, are not registered with the government’s system, or are featured in the Ministry of Labor’s list of labor analogous to slavery.

A study published in 2015 found that both agreements – the one with Greenpeace and the TAC with government agencies – have incentivized behavior change by companies. Ranchers supplying to these companies complied with laws to register their properties with the government’s system two years before nearby ranchers. Only 2% of purchases by JBS were with registered properties before the agreement was signed, while 96% of transactions were with registered companies by 2013. Purchases by slaughterhouses from recently deforested properties fell from 36% in 2009 to 4% in 2013. According to Supply Change, JBS and Marfrig have self-reported 100% progress on commitments to zero-deforestation cattle, among other commitments.

Implementing, monitoring and collaborating on zero-deforestation commitments

Challenges remain, however, in eliminating deforestation from beef supply chains. Marfrig, JBS, and Minerva control around half of beef slaughter in the Amazon, while companies that control the other half have no monitoring systems or commitments in place. The limited scope of the agreements can cause issues including “laundering” – when ranchers raise cattle on noncompliant properties and move the animals to compliant ranchers before selling them to slaughterhouses – and “leakage,” when cattle produced on recently deforested land are sold to slaughterhouses that do not have monitoring systems in place.

Greater collaboration between a larger number of companies, producers and governments within a region can reduce the risk that deforestation will leak to other suppliers.

Brazil’s experience shows that it takes more than commitments from companies to accomplish zero deforestation. In order to achieve real progress, businesses must focus on implementation and monitoring. By collaborating and engaging with government agencies and environmental communities, companies can overcome the challenge of traceability and advance the fight against climate change.

For more information on efforts to reduce deforestation from cattle supply chains, visit Zerodeforestationcattle.org.

By Christina McCain

Aristóteles Sandoval, Governor of the State of Jalisco, signs the 2016 Climate Action Statement during the Climate Summit of Americas. (Photo credit: Twitter @AristotelesSD)

Governors, ministers, business and community leaders from across the Americas, and the world, convened last week in Jalisco, Mexico for the 2nd Climate Summit of the Americas.

One year after the first star-studded summit held in Ontario, Canada, state and provincial governments reunited to showcase their achievements; highlight further challenges; and push further action and cooperation by states and provinces, as well as national governments.

So-called “subnational” governments have been far more visible on the international stage of global climate action in recent years, particularly in the run-up to the United Nations climate negotiations in Paris.

In 2015, California’s “Under 2 MOU” brought together a total of 135 states, provinces, and regions – representing one quarter of the world economy – to commit to reducing greenhouse gas emissions by at least 80 percent below 1990 levels by 2050.

While the summit’s purpose is to highlight subnationals, Mexican federal officials, from the newly-named UN climate chief, Patricia Espinosa, to the federal Secretary of Environment and high-ranking energy officials were there to demonstrate, once again, that Mexico takes its climate reputation very seriously.

Mexico has long been viewed as a climate leader on the international stage.

In 2010, as the host of the global climate negotiations in Cancun, Mexico’s diplomats were lauded for pushing climate talks to break the deadlock from the 2009 Copenhagen meeting. In 2012, Mexico passed landmark federal climate change legislation. And in the run-up to the Paris meeting, when building momentum through country pledges was critical to the negotiations’ success, Mexico was the first among developing economies (and only the fourth country in the world) to formally pledge to cut its emissions.

Mexico’s global climate commitments are intertwined with its national energy overhaul.

Currently the energy sector produces roughly 65% of its total greenhouse gas emissions. Building out these sectors anew after decades of federal monopoly is no small task, but one on which the country has forged ahead, also setting ambitious clean energy goals, such as a goal to source 50% of electricity from clean energy by 2025, reducing methane emissions from oil and gas by 40-45% by 2025, and aiming to set up a clean energy certificates market that will begin operating in 2018.

Bringing these pieces together with its UN targets requires a comprehensive plan that will ultimately ensure the emissions reductions achieved and drive low carbon economic growth.

Such a plan should enable Mexico to align its climate, energy, and economic development objectives – and though a suite of policies are necessary, the country has waded into discussions of a key policy tool that some of the subnational stars of the summit know quite a lot about – capping emissions and putting a price on carbon.

Mexico now has cooperation agreements with California and Quebec, which together operate the second largest emissions trading system in the world.

At the Summit, Mexican federal officials signed a joint agreement with Quebec and Ontario to work toward carbon pricing. The California agreement, signed in 2014, highlights carbon pricing and the implementation of market mechanisms for reducing emissions. The agreement with Quebec and Ontario, signed at the summit on Wednesday, envisions an eventual participation by Mexico in the Western Climate Initiative.

Mexico is aligning its opportunities.

Trade-relationships, and other ties in the Americas are distinct advantages for Mexico in a global carbon trading world. This enviable strategic advantage needs the sustained political will and resources to build a transparent and robust system, and the vision of its policymakers and entrepreneurs to make it work for Mexico.

 

Read more:

• Mexico's historic climate law: an analysis
• How Mexico’s reforms open new doors for reaching clean energy and climate goals

By Erica Morehouse

Photo credit: Joseph Thornton | Flickr.com

California made history a decade ago this month by being first in the nation to pass legislation (AB 32) putting an absolute limit on carbon pollution through 2020.

The California Legislature made history again last week by extending and strengthening those limits to 2030 (SB 32 and AB 197). SB 32 requires California to reduce pollution 40% below 1990 levels by 2030 – as ambitious as Europe’s climate policies – and provides the flexibility to use a variety of tools to accomplish this goal. The governor has announced he will sign both bills.

Legislators also passed a spending plan yesterday that will direct approximately $900 million in cap-and-trade proceeds to reduce pollution and benefit California communities, especially the most disadvantaged.  Another bill passed yesterday, AB 1550, increases the commitments of those disadvantaged communities and makes low-income communities beneficiaries as well.

California’s decision to set these new targets and establish this new spending plan was not just based on hope and necessity, but on a 10-year foundation of success and a solid understanding that this next set of targets are ambitious but achievable.

Here’s why California’s climate program has been a success, and why the new long-term emissions reduction target will help the state continue to thrive.

California’s carbon pollution is declining.

AB 32 requires California reduce its greenhouse gas emissions to 1990 levels by 2020, a reduction estimated at about 15% below where emissions would have been without regulation.  To meet these reductions, California has adopted a suite of climate policies anchored by a cap-and-trade program, which puts an absolute limit on carbon pollution, while providing cost-effective options for businesses to meet their reduction obligations.

California’s carbon pollution has steadily declined in the last 10 years. In the first two years that the cap-and-trade system was in place (2013 and 2014), California’s carbon emissions declined by an amount equivalent to taking over 1 million passenger vehicles off the road for a year.

California is ahead of schedule in meeting its 2020 goal. Emissions have been below required levels in every year we have data for. Regulators expect that in 2020 California will exceed its own requirements by an amount that is equivalent to taking 3.3 coal burning power plants off-line for one year.

California’s economy is growing.

Historically economic growth has been accompanied by a corresponding increase in emissions, but California is charting a different course. The state’s Gross State Product has increased steadily since the recession as emissions have continued to fall, as shown in this figure:

In the first two and a half years of California’s groundbreaking carbon market, the state added over 900,000 jobs, a growth rate that eclipsed the national rate.

Carbon markets are going global.

The impressive outcomes from the first decade of California’s AB 32 implementation have attracted numerous partners. States, provinces, cities and countries are taking note and action.

At the Paris negotiations at the end of 2015, California Governor Jerry Brown showcased a “Memorandum of Understanding,” bringing together states and regions committing to reducing greenhouse gas emissions to at least 80% below 1990 levels by 2050, or to less than 2 metric tons per capita by 2050. Over 100 states, provinces, and cities, representing one quarter of the world economy, signed on the agreement.

In addition, California is partnering directly with several Canadian provinces to implement joint cap-and-trade programs. It has also established an agreement to share information and work with China and Mexico on their carbon pricing efforts.

2030 target is ambitious but achievable.

Estimates suggest that after on-the-books polices are implemented, California will still have to find a way to reduce pollution another 17-29 percent to meet the 2030 target. The Air Resources Board has proposed relying on a ratcheting up of existing polices and a reliance on the existing cap-and-trade program to ensure the 2030 target is met.  Research from the Lawrence Berkeley National Laboratories shows that meeting the 2030 target is possible with a ratcheting up of existing polices

The world will be watching whether California can repeat its gold medal performance under these new targets, and all indicators seem to point in the state’s favor.

By Pamela Campos

 

Airplanes on a flooded runway at Don Muang International Airport on Nov 19, 2011 in Bangkok, Thailand. Image: 1000 Words / Shutterstock.com

Government negotiators met in Montreal last week to seek agreement on a global cap on carbon pollution from international aviation. Bilateral negotiations are continuing, and text of a draft resolution is expected to be considered at the triennial meeting of the UN’s International Civil Aviation Organization (ICAO) in early October.

In anticipation of these meetings, Carbon & Climate Law Review (CCLR), a broadly-read journal catering to climate insiders, just released a special issue on international aviation. Experts illustrate the need for and feasibility of a strong market-based measure. Here are some highlights from the special issue:

Aviation’s impact on climate is understated

Aviation’s total global warming impacts are more than double those estimated from its carbon dioxide (CO2) emissions, or equivalent to roughly 5% of total radiative forcing from CO2. Nitrogen oxide emissions and aviation’s impacts on clouds add significantly to the warming effect of carbon dioxide. Without new policies, aviation emissions could compromise the goal of the 2015 Paris Agreement to limit the increase in global temperatures to 1.5 – 2 degrees Celsius above pre-industrial levels.

Climate change increases risks to aviation safety, infrastructure, and operations

Aviation pollution causes harm to the climate, but a warming climate also creates challenges for aviation safety and operations.

According to industry experts, in high temperatures, planes can’t carry as much. Airports risk damage to runways from storm surge and rising sea levels. Passengers and crew may be exposed to more turbulence. New electronics, sensing, and communication technology may be needed to reduce the risk of exposure to severe weather.

The solution: a market-based measure

To contain aviation’s impacts on climate change, experts from industry, policy, and law call for a market-based measure to cap emissions from international flights.

A market-based measure can be established and enforced under existing law

Legal experts recommend that an MBM can be established as a set of “standard” under the existing Chicago Convention, the foundational treaty for international aviation. Compliance with existing standards is good but not perfect. The experts show how market entry conditions, domestic transportation statutes, and conditions imposed by aviation financial services and trade associations can be used to bolster compliance.

A market-based measure should provide broad coverage and deliver co-benefits

Expert contributors to the issue recommend that the coverage of the MBM be broad. They caution that exemptions from a market-based measure could distort the market and disproportionately benefit the wealthiest individuals in those countries.

Other contributors show that policies to reduce emissions from deforestation and forest degradation (REDD+) can help meet international aviation’s demand for emissions offsets, even after taking into account existing commitments and demand for offsets. Further, a “keep what you save” policy that allows air carriers to use their own fuel use reductions to reduce offsetting obligations could help resolve current debates over allocating offsetting obligations between air carriers.

This fall’s ICAO General Assembly is a critical moment for countries, and the aviation industry, to demonstrate leadership in providing safe international air travel while minimizing risks to the climate.

If countries don’t agree to the market-based measure in October, the world may have to wait until ICAO’s next General Assembly in 2019. With rapid growth of aviation pollution, that’s a delayed take-off that none of us can afford.

Click “read more” to see key takeaways from each article of the special issue of CCLR. The journal’s publisher, Lexxion, has made the special issue free to access through October 7, 2016.

 

Key points from each article in CCLR’s special issue on “A Market Based Measure for International Aviation: Need, Design, and Legal Form”:

Aviation and Climate Change: A Scientific Perspective, David W. Fahey and David S. Lee

• Aviation’s total global warming impacts are more than double those from its CO2 emissions, or equivalent to 5% of total radiative forcing from carbon dioxide.
• Nitrogen oxide emissions and aviation’s impacts on clouds add significantly to the warming effect of carbon dioxide from aviation.
• Impacts of CO2 emissions are best understood, impacts of contrails and cirrus cloud formation more uncertain.
• Climate effects of non-CO2 emissions from aviation are not uniform throughout the atmosphere.
• Use of alternative fuels results in significantly lower emissions of small soot particles which control contrail formation and could potentially reduce not just CO2 contributions, but cirrus contributions.
• Balancing short term impacts of aviation on cirrus clouds, which have regional effects, and the long term impacts of CO2, which has a global effect, poses challenging policy issues.

 

Climate Change Impacts Upon the Commercial Air Transport Industry: An Overview, Terrence R. Thompson

• Every sub-sector of the aviation industry, including airports, air carriers, air navigation service providers, and aircraft and engine manufacturers, faces risks from climate change.
• Airports may face heat damage to runways, decreased operational efficiency, increased delays, and intermittent or permanent closures.
• Aircraft may experience decreased climb performance in high heat, increased icing conditions, and impacts on design requirements for airframes, engines, and avionics and weather conditions change.
• Passenger and cargo demand may shift following changes in weather patterns.
• Passengers and crew may face exposure to increased turbulence and increased delays.
• As air carriers and airports respond to these changes, local communities may experience changes in noise, air, and water quality impacts.

 

Maintaining Aviation Safety: Regulatory Responses to Intensifying Weather Events, Herbert Pümpel

• Aviation regulators will need new safety procedures to manage risks posed by climate change.
• Aviation’s traditional risk management measures may not work in an environment of increased, and uncertain, intense weather events.
• New meteorological, sensing and communication technologies are needed to minimize risks that aircraft encounter severe weather.
• Aircraft designers need input on the “worst case” scenarios that aircraft may face in an unstable climate.
• Air carriers and regulators may need new approaches for informing consumers, and crew, about aviation safety risks.

 

Aviation and Climate: An ATAG Perspective, Michael Gill

• Aviation is a global industry that needs a global solution to reduce its impact on climate change.
• Technology, operational efficiency, new infrastructure, and a global cap are all needed.
• A global offsetting system can provide significant social benefits and enable the aviation sector to continue to grow.

 

ICAO’s Market Based Mechanism: Keep it Simple, ParthVaishnav

• Airlines’ offsetting obligations should be proportional to their total emissions.
• Exemptions from a market based measure distort the market and disproportionately benefit the wealthiest individuals in those countries.
• Action on international emissions needs to be matched by regulations to limit domestic aviation emissions.

 

Bridging the Allocation Gap: A New Proposal, Annie Petsonk and Pedro Piris-Cabezas

• Air carriers can be encouraged to reduce their fuel use if a market-based measure includes a provision allowing carriers to credit, against their offsetting obligations, carbon emissions below a set baseline.
• Determining whether flights to a particular State should be covered under an MBM is a separate question from how to allocate, between different air carriers, offsetting obligations for covered routes.

 

REDD+ in ICAO: Ready for Takeoff , Rafael Grillo Avila, Michael Wolosin, Alec Roth, Ruben Lubowski, Pedro Piris-Cabezas, Garrett Russo

• Emissions units generated under the REDD+ legal framework can satisfy aviation’s demand for offsets on a short, medium, and long-term basis, even after reserving credits to meet domestic nationally determined contribution (NDC) obligations.
• REDD+ is a well-developed framework for forestry-based offsets, and many programs already exist to implement it.
• Assessment of REDD+ credits under existing and anticipated programs shows an ample supply of offsets after reserves are established for buffers, existing commitments, and nationally determined contributions, even under high estimates for aviation’s offsetting demand.
• Supplies are even larger if jurisdictional REDD+ systems are implemented.
• An MBM for aviation can help generate demand for REDD+ offsets.

 

Designing the Legal Form of a Global Market Based Measure, Alejandro Piera

• A “standard” issued under the Chicago Convention is the most compelling, if imperfect, legal option for creating an aviation MBM.
• Establishing an MBM via a treaty would be slow and unlikely to be adopted broadly enough to take effect.
• Assembly resolutions are non-binding and thus limited as a legal form.
• An MBM could be established as an ICAO standard, but not all states comply with standards when there is an economic incentive not to do so.
• Transparency measures, reporting non-compliance to the ICAO assembly, and market access conditions could all be used to increase compliance with an MBM.

 

Legal Implementation of a Global Market Based Measure for Aviation, Pamela Campos

• Distributed, overlapping compliance measures are needed to ensure an MBM’s effectiveness.
• Strong implementing institutions, public access to data, and well-designed financial penalties are required to achieve broad compliance with an MBM.
• The Chicago Convention and many bilateral air services agreements enable States to require demonstration of compliance with an MBM as a condition of market entry.
• Aviation financial services firms and trade associations can bolster compliance by requiring clients and members to demonstrate they are complying with an MBM.

 

By Jonathan Camuzeaux

Currently, about 12% of the world's greenhouse gas emissions are covered by carbon pricing. More details about this map can be found in the Doubling Down on Carbon Pricing report by EDF and IETA.

There are a number of signs we are entering a golden age for carbon pricing. Perhaps the most important one is that many countries around the world are currently considering carbon pricing policies to achieve their greenhouse gas emissions reduction goals.

And for good reason.

A price on carbon gives emitters a powerful incentive to reduce emissions at the lowest possible cost, it promotes innovation while rewarding the development of even more cost-effective technologies, it drives private finance, and it can generate government revenue.

This spring, World Bank Group President Jim Yong Kim and International Monetary Fund Managing Director Christine Lagarde convened the Carbon Pricing Panel to urge countries and companies around the world to put a price on carbon. On April 21, 2016, the Panel announced the goals of doubling the amount of GHG emissions covered by carbon pricing mechanisms from current levels (about 12 percent, as illustrated in the map below) to 25 percent of global emissions by 2020, and doubling it again to 50 percent within the next decade.

EDF and the International Emissions Trading Association (IETA) worked together to explore a range of possible, though non-exhaustive, scenarios for meeting these goals. You can see the results in a series of maps which show how carbon pricing can be expanded worldwide.

Achieving the Carbon Pricing Panel’s goals will be a crucial stepping stone to realizing the ambition of the Paris Agreement, which aims to hold the increase in the global average temperature to well below 2°C above pre-industrial levels. Meeting that objective will require countries not only to implement the targets they have already announced, but to ratchet up their efforts dramatically in the years ahead. Carbon pricing will have to play a key role in that effort.

Explore how the world can reach the Carbon Pricing Panel’s ambitious goals.

By Erica Morehouse

The results released today from California and Quebec’s latest cap-and-trade auction show a slight rebound in demand from results seen in May, but still demonstrate the need for a continued commitment on ambitious climate action beyond 2020. The results were released minutes after members of the California Assembly voted on ambitious 2030 targets; the final legislative votes are expected tomorrow.

The August 16 auction offered more than 86 million current vintage allowances (available for 2016 or later compliance) and sold just over 30 million. Approximately 10 million future allowances were offered that will not be available for use until 2019 or later; 769,000 of those allowances were sold.

These auction results represent a slight increase in demand from the May auction, where approximately 10% of the current and future vintage allowances that were offered sold. More allowances were also offered at this auction since allowances consigned by utility participants that were not sold in May were offered again at this auction.  The number of allowances offered for sale by utilities meant that the only state controlled allowances that sold were a small number of future vintage allowances.

California state controlled allowances that were not sold in August will not be offered again until two auctions clear above the floor price, representing a temporary tightening of the cap and a way for the program to self-adjust to temporary decreases in demand.

What changed and what is the same since the May auction

After May’s auction we pointed to several major factors that contributed to low demand: secondary market allowances were available for purchase below the floor price; regulated emissions have been below the cap allowing businesses to take a wait-and-see approach to purchasing allowances in advance of a pending appeal challenging the cap-and-trade auctions in the court of appeal; and need for increased certainty about the post-2020 cap-and-trade program.

Here’s what affected the August auction results:

1. Secondary market prices have increased to right around the price of the current auction floor. This is likely the main factor contributing to the August auction’s slightly higher sales.
2. There have been no further developments on the litigation as parties wait for the court to announce an oral argument schedule.
3. There has been some movement on California’s effort to provide post-2020 certainty but not definitive action. In July, California's Air Resources Board released proposed amendments to set rules and a cap-and-trade carbon budget in-line with achieving a 40 percent reduction below 1990 levels by 2030. Final agency action is not expected until spring of 2017. The California Legislature is also considering a package of bills that would cement the 2030 target, currently in executive order, into statute. Assembly members voted today on climate targets and we will see whether legislative members will fulfill the will of over two-thirds of the California electorate by passing these targets.

California’s package of climate programs, including cap and trade, must first be evaluated based on whether emissions are going down – and the latest data from ARB in June showed that emissions do continue to decline. Selling out an auction and raising a set amount of revenue does not equate to overall success for the cap and trade program.

That said, once climate proceeds are in the Greenhouse Gas Reduction Fund (GGRF), spending them wisely to reduce emissions and benefit communities, especially disadvantaged communities, is a metric of program success. To date, about 1.4 billion dollars have been languishing in the GGRF, not creating benefits, and resulting in consequences for real Californians.

In addition to passing climate targets, Legislators should continue to act on proposals like the one Pro Tem Kevin de Leon has put forward to spend existing climate dollars this session.

By Tim O'Connor

Cropped image via Flickr/ mikeslife

California drivers, communities, and businesses have endured degraded roads, unending traffic, choking pollution, and limited transit options for years.  As the population continues to grow, so too will the problems of the transportation sector (and many other sectors) unless major investments are made.

Given the profound need to clean-up California’s infrastructure, Tuesday’s $390 million expenditure award by the California State Transportation Agency (CalSTA) and yesterday’s proposal by the State Senate to spend $1.2 billion of available dollars generated by California’s cap-and-trade auctions are important steps in reaching communities that need these upgrades most. What these critical spending plans also clearly demonstrate is that cementing 2030 pollution reduction targets into statute ensures continued investment in reducing emissions and benefiting communities.

The value of long term climate policy

It’s been no secret that a political debate is underway in Sacramento over setting long-term climate pollution targets for California. Why? Setting long- term policy will support the state’s low-carbon, prosperous economy. This process is important not just for climate change, but to ensure growth and stability in the business and investment climate that will enable our economy to flourish.

Long-term climate policy – including cap and trade and a suite of other measures – aimed at cutting pollution has been a boon to the state over the past decade, allowing the economy to flourish, resulting in massive venture capital investment, innovative products, and reduced pollution.

Within the cap-and-trade program, auctioning emissions credits has become an integral way to make the program work, though the purpose has never been to raise and maximize revenue. As a result, within the existing landscape, the auctioning of permits has allowed for additional environmental improvements through investments such as the 14 different transit projects just announced. Similarly, and as outlined by the State Senate’s proposal, the cap-and-trade program can drive myriad other investments that cut climate pollution, such as traffic flow improvements, low- carbon vehicles, energy efficiency, urban greening, and sustainable community development.

When completed, the 14 projects funded by the CalSTA will benefit nearly every major urban area in the state, transcending political boundaries, bridging economic divides, cutting air pollution, growing jobs, and reducing congestion. And, with 30 million cars on the road consuming gas at some of the highest prices in the nation, improved transit and transportation systems simply give drivers more options – saving money and creating better mobility in the long run.

The massive need to invest in California and cut carbon

Unfortunately, California has a far greater need than what this $390 million can meet (the California Transit Association projects a total need of nearly $175 billion), or what the $1.2 billion State Senate proposal would deliver. Fortunately, policies like cap-and-trade work to cut pollution through a declining cap on carbon and a price on carbon, resulting in innovation and investments in regulated businesses. As permits are auctioned, targeted investments of proceeds generated through those auctions can also produce air quality benefits while leveraging private capital and inspiring innovation.

Over the next couple weeks, Sacramento lawmakers can positively impact the long-term certainty of California climate policy and its ability to drive pollution reductions and ensure vital investments in areas like transit and improved transportation systems. The current expenditure plans and proposals — along with several billion dollars that have already been allocated — illustrate how programs such as cap and trade create real investment options that benefit people, communities, and the environment across the state.