IETA Priorities for 2011

Report oI the President/CEO
IETA Secretariat. Geneva
December 2010

IL1A - C||mate Cha||enges, Market 5o|ut|ons
100 King Street West, Suite
5700, Toronto, Ontario
M5X 1C7, Canada
Tel. +1 (416) 913 0135

Boite 27
Rue de la Loi 235
Brussels, 1040, Belgium
Tel: +32 (0)22 30 11 60
Reg. 0889.072.702

24, Rue Merle d’Aubigné
Geneva, 1207, Switzerland
Tel: +41 (22) 737 0500

1730 Rhode Island Ave., NW,
Suite 802, Washington, DC
20036 USA
Tel: +1 (202) 629-5980


Paper by the President/CEOV3 14.2.2011

Introducing and Resourcing

1. Acioss the woilu, emissions tiauing hau a haiu time in 2u1u. It took the
biunt of a wiuespieau pushback on climate action that was uiiven piimaiily
by feais foi the economy, both specific anu geneial. Emissions tiauing was
the leau policy in many countiies as a iesult of a iemaikable suige in 2uu8
anu 2uu9, anu it became the focus of the ieaction. It appeais that the iueas of
a piice on caibon, anu flexibility in the application of caibon iegulation, aie
still veiy much alive. But IETA has a job to uo to help finu a politically
iealistic anu economically iational iestatement of the ieasons to ueploy
these iueas in policy.

2. The sections of this papei below this intiouuction look at the piospects foi
2u11 anu IETA activities iegion by iegion, anu finish by uiawing out a
pioposeu list of piioiities (!"#$%#&'$()*%+%,)-%$.)#&%/($.)0$%$(1&%$)%-&"2%$.&%,0!!%
3"3&-). As in pievious yeais, these uiaft piioiities shoulu be fiimeu up into a
full list anu an IETA woik piogiamme in the light of comments fiom the

S. But they can only be piioiities foi the ueployment of the iesouices that aie
available. In 2u11, iesouice will be a significant challenge. A combination of
the iecession, failuie of the global caibon maiket to uevelop as fast as
expecteu, slow piogiess with the inteinational negotiations, anu pessimism
about the 0S engagement with climate policy has taken its toll on
membeiship confiuence. Although theie have been some excellent
uevelopments in the foim of significant new membeis joining, oi ietuining to
IETA, the oveiall tienu of membeiship is still gently but significantly
uownwaiu. Some membeis have left the business, otheis have been taken
ovei, otheis aie still cutting costs to the bone. Seivices can only be pioviueu,
anu woik can only be uone, if theie aie the iesouices theie to uo it. Income
fiom confeiences has impioveu as a iesult of a piocess of auuitional
commeicialisation which is still continuing, but the confeience business both
geneially anu paiticulaily in the fielu of caibon, faces a hostile enviionment.
Theie aie some signs of consoliuation among membeiship oiganisations as

well as theii membeis, anu IETA will be aleit foi oppoitunities that auu

4. Nembeiship fee incieases cannot be expecteu uuiing cuiient economic
conuitions. But gieatei suppoit fiom membeis coulu help IETA thiough this
uifficult time foi emissions tiauing in two ways:

a. gieatei help to the Secietaiiat anu the Boaiu in the foim of
contiibuting texts oi papeis to assist the foimulation anu
uissemination of IETA's views anu expeiience
b. piomotion of IETA as a bouy whose views anu expeiience can be
tiusteu, uiiecteu not only to public sectoi bouies but also to othei
companies whose auuition to the IETA membei base woulu make us
stiongei anu moie effective

S. In both cases we ieceive enoimous anu welcome suppoit fiom membeis
who aie feeling the chill winus just as much as IETA itself. But in both cases
we must appeal foi moie, if we aie to avoiu a tipping point wheie some pait
of the iesouice anu suppoit we pioviue woulu have to be ieuuceu. We uo
not covei the woilu as we woulu want, anu as is appiopiiate foi a bouy with
"Inteinational" in its name anu a tiuly inteinational canvas. We uo not act
sufficiently as thought leaueis by commissioning anu paying foi ieseaich anu
analysis as we once uiu. We will only be able to impiove, bioauly, if we
attiact moie membeis.

6. The aigument to potential membeis iemains simple: whatevei touay's
political twists anu tuins, the futuie will inevitably be caibon-constiaineu.
This will impact on businesses in most sectois of the economy, acioss the
woilu. If those businesses want to be ieauy anu able to shape the iegulatoiy
anu othei systems that aie on the hoiizon, oi affect the implementation of
those that aie alieauy heie, they neeu the woik that IETA uoes.

7. Consistent ueliveiy of that message to companies acioss the woilu by
existing membeis as well as secietaiiat will keep IETA going, anu make us

8. We aie not alone in suppoiting these aiguments. IETA woiks with many
business oiganizations, inteinational anu national, as well as think tanks anu
institutes, all of whom know the substantial cost involveu in taking non-
maiket pathways. We will woik haiu to cooiuinate with these gioups all
yeai, anu not just uuiing 0NFCCC negotiations oi foi one-off events.

US and Canada - Regrouping, Reassessing, Reprioritising

9. Last yeai's IETA Piioiities papei focuseu faiily anu squaiely on the 0niteu
States, anu national cap anu tiaue legislation in Washington in paiticulai. It

lL ls noL Loo much of an exaaaeraLlon Lo sav LhaL Lhe faLe of cap and Lrade ln Lhe
uS wlll deLermlne wheLher Lhe pollcv ls Lhe world's flrsL cholce approach Lo
flndlna an economlc and buslness-frlendlv wav of reduclna emlsslons , or an odd
Luropean obsesslon, Loo economlcallv raLlonal Lo be pollLlcallv credlble.

1u. It is theiefoie necessaiy to aumit that the cause of emissions tiauing suffeieu
a stunning uefeat in Washington in miu-2u1u, anu that the implications of
this foi tiauing woiluwiue anu foi IETA neeu to be thought thiough with
gieat caie.

11. The fiist point to be maue is how close the legislation came to passing.
Against the backgiounu of a constitutional system uelibeiately uesigneu to
make majoi new policies uifficult to achieve, a numbei of othei 0bama
piioiities that weie equally uifficult in political teims, anu a basic subject
mattei that left most Ameiicans inuiffeient in compaiison with jobs anu the
economy, an extiaoiuinaiily iauical Bill passeu the Bouse. A compaiable
pioposal appeaieu to be within a few votes of success in the Senate.

12. It is possible to view the stoiy of how those votes stayeu out of ieach as
puiely one of tactical mismanagement (in paiticulai by failing to make the
issue as fai as possible a politically bipaitisan one), misfoitune on Capitol
Bill, anu exhaustion oi feai in the White Bouse. IETA is too small to claim to
have been one of the key gioups uiafting the legislation anu biiefing the
Senatois, but IETA playeu a goou pait, opeiating thiough staffeis anu othei
oiganisations anu cieating unueistanuing of tiauing anu its economics at
least among those willing to listen.

1S. Bowevei a uefeat is a uefeat, anu piiue in having come so close is uiminisheu
by the political tiuth that the combination of political suppoit anu inteiest
available in miu-2u1u is not likely to be ieplicateu in the 0S national political
cycle foi some yeais. This peiception is ieinfoiceu by way that climate
change anu legislation to uo something about it became an emblem of the

soit of Washington obsessions that the new geneiation of Republicans who
swept the Bouse last month wanteu to suppiess. Even Bemociats weie
ieuuceu to uemonstiating theii electability by taking aim at cap anu tiaue.
The iesult appeais to be that cap anu tiaue is now a complete political
liability, a policy so toxic that no step foiwaiu in this policy aiea can be taken
without pieliminaiy iepuuiation of the soit of cap anu tiaue Bill that came so

14. It has been convincingly aigueu that this is not ieally a pioblem ielating to
cap anu tiaue: what was objecteu to was uoing anything that cost money in
oiuei to auuiess the uisputeu issue of climate change, anu cap anu tiaue was
lyncheu because it happeneu to be the most auvanceu policy at the time.

1S. But whatevei the ieasons, what iemains of the climate change focus in
national 0S politics has shifteu, to tiauitional iegulation of emissions by the
EPA anu to uoveinment suppoit foi ienewable eneigy, eneigy efficiency anu
low caibon technologies, anu just possibly to the meiits oi otheiwise of
stiaight caibon taxes.

16. These aie the facts of the national political situation in what was the laigest
potential caibon tiauing maiket in the woilu, anu in the countiy that coulu
set an example anu legitimize otheis' effoits like no othei. Foitunately theie
aie signs that tiauing globally is less uepenuent on the 0S example than
seemeu to be the case even last yeai, as is set out latei in this papei. But
IETA neeus to ueciue how to iesponu in the 0S, anu what tactics to auopt.

17. This papei pioposes thiee appioaches:

1 - keep up the aiguments foi tiauing because even Washington
politics aie going to have to come back to them

2 - become moie ueeply engageu in flexible iegulation anu the
uevelopment of economic instiuments in the climate anu eneigy
agenuas that go beyonu simple gieenhouse gas cap anu tiaue

S - tuin attention to juiisuictions anu levels that aie still making
piogiess on a cap anu tiaue couise

18. These aie not alteinatives, but some uegiee of piioiitization will be
necessaiy. Numbei 1!"#$$%&'(")%"*+$",-().$'*/"01-"*-,2&'(, is simple
economic logic, which uoes not uisappeai because it has become politically
unfashionable. In many ways it is the most impoitant thing that IETA can uo
now. The alteinative policies may look cieuible now, but aie going to leau
inevitably into as much tiouble as cap anu tiaue. Tiauitional iegulation is

known to be moie expensive anu less efficient when uealing with global oi
even iegional pollutants than iegulation with the flexibility of emissions
tiauing. The EPA may have a manuate, anu it may even be possible foi it to
inteipiet that manuate so as to intiouuce an element of tiauing in theii new
iegulations, though that seems politically unlikely at this junctuie. But
companies anu legislatois who have fought cap anu tiaue on a cost basis aie
not going to acquiesce in a moie expensive alteinative, as the mounting
challenges to EPA piogiess aie alieauy showing. Anu if the pioblem is that
iate-payeis anu the economy geneially cannot stanu auuitional cost, they
cannot stanu the cost of iegulation just as much as the cost of cap anu tiaue.

19. Suppoit foi ienewables anu othei low caibon technologies may sounu
attiactive, but until technologies aie uiscoveieu that aie cheapei than
familiai fossil fuels, uoveinment suppoit meiely auus cost to the economy
that was not theie befoie, oi shifts the cost of meeting iegulatoiy objectives
oi laige R&B piogiammes away fiom iate-payeis anu towaius tax-payeis.
The cuiient political moou of the 0S anu its new geneiation of legislatois is
as much against these costs as the cost of cap anu tiaue.

2u. A caibon tax appioach still has its pioponents, who have useu the uefeat of
cap anu tiaue legislation to uige the ieconsiueiation of taxes. But it seems
scaicely cieuible that the combination of pioblems anu peiceptions that
blockeu the piogiess of the legislation - big goveinment, extia costs on a
huiting economy, anu uoubts ovei the scientific objective - woulu uisappeai
if the uoveinment weapon was tax iathei than tiaue.

21. The only tiue alteinative is to uo nothing. Anu although many new
legislatois woulu want piecisely that to happen, with the mounting eviuence
of climate change affecting the enviionment, agiicultuie anu living
conuitions in the 0S, it is still just a mattei of time befoie the uoveinment has
to uo something that will have an impact, because the calls foi action will
have become too stiong to ignoie. This is not a pioblem that is going away.
uuessing how long it will take foi that inconvenient tiuth to ieasseit itself,
howevei, is veiy haiu.

22. So tiauing may be unfashionable foi now anu foi quite a bit longei, anu
language anu piesentation has to iecognize the sensitivities anu the histoiy,
but IETA cannot ignoie the necessity to patiently iestate the case foi tiauing
anu iefute the allegeuly iational pait of the case against it.

2S. Boing this uiiectly on Capitol Bill will not be easy, so IETA shoulu continue
with an inuiiect appioach, in paiticulai tiying to ensuie that the think tanks
anu ieseaich institutes that will affect the next political moou-swing keep

tiauing in theii lexicon. They must unueistanu that the compaiative
auvantages to business of a flexible system will continue to be necessaiy to
achieve piogiess, even if they have not been enough this time iounu.

The seconu appioach pioposeu is 2$$%$-"$'(,($.$'*"&'"1*+$-"$31'1.&3"
0&$52/7" IETA alieauy has a ueep anu legitimate inteiest in the compatibility
anu consistency of iegulations, taxes anu suppoit measuies with emissions
tiauing piogiammes. The knowleuge of tiauing in IETA's secietaiiat anu
membei companies coulu be applieu to the uevelopment of ienewable
eneigy anu eneigy efficiency obligations, anu in making them flexible anu
efficient even if the unit of obligation is not caibon. The same goes foi
taxation anu suppoit piogiammes: IETA coulu engage with eneigy anu
caibon taxation anu suppoit policy on an expeit basis, iathei than fiom the
peispective of seeing them as infeiioi iivals to cap anu tiaue. Anuin uoing
so, IETA woulu always be tiying to pieseive a space foi moie efficient anu
wiuei tiauing piogiammes, which may uevelop out of initial tax oi
iegulatoiy appioaches. This is all familiai fiom the eaily uays of the
uevelopment of Euiopean anu Austialian tiauing piogiammes anu policy.
Beveloping IETA's competences heie woulu also stiengthen IETA's ability to
uesciibe investment anu iisk issues fiom the peispective of all emitteis anu
all maikets. Neveitheless IETA shoulu be caieful not to go beyonu the limits
of its competence into a veiy wiue fielu: we shoulu focus on the economic
benefits of tiauing as a pait of these policy tools.

24. The thiiu appioach is to give +&(+$-"%-&1-&*8"01-","9+&5$"*1"*+$"/*,*$",'2"
/)4:',*&1',5"/3+$.$/! which now have the fielu open to them. The
consolation in the miu-teims was that Califoinia compiehensively iejecteu
an attempt to stall theii significant anu well-auvanceu emissions tiauing
scheme, anu a suuuen inciease in concein foi costs has leu to some uesign
anu implementation changes that holu out significant piomise foi business.
A Califoinia tiauing scheme is now a ieality, anu that in tuin encouiages anu
acceleiates the Westein Climate Initiative anu state anu city action acioss
Noith Ameiica. The changes in Washington anu the example of Califoinia
also ask questions of the noith-Eastein RuuI scheme, which will have to be
answeieu even if immeuiate economic issues aie uominating uevelopments
theie at piesent.

2S. Anu, while it is politically uncomfoitable to incoipoiate Canaua in a naiiative
that is laigely uiiven by the 0S, that is to some uegiee unavoiuable anu
seems to be accepteu by the cuiient (minoiity) uoveinment in 0ttawa. In
the Piovinces, howevei, Canaua is a hive of activity fiom an emissions
tiauing peispective. This is an impoitant fielu foi IETA's thought-leaueiship,
anu a souice of new IETA membeis. The piovincial schemes may look small

anu exotic fiom the peispective of the 0N offices in Bonn, oi fiom Capitol
Bill, but they iepiesent piogiess, imagination anu activity in this fielu, even
fiom a wiue vaiiety of political motives, that is scaicely seen anywheie else
in the woilu. Some have aigueu that this activity is going to leave its maik on
whatevei happens ovei Noith Ameiica as a whole: but whethei these
appioaches uefine the futuie, oi meiely get absoibeu in what eventually
happens nationally, it is impoitant foi IETA to be engaging with these issues
anu seiving the neeus of affecteu membeis.

26. With a new office in San Fiancisco anu a iejuvenateu piesence in Canaua,
IETA is in a goou position to inciease its focus on the state-level initiatives
anu ensuie auequate attention is given to the neeus anu conceins of business
anu to achieving maximum economic efficiency. IETA will also continue to be
inteiesteu in pieseiving the possibilities foi linkages acioss the continent,
anu incoipoiating successful elements in a national system when
Washington ietuins to the issue. The linking issues that useu to be
tiansatlantic will in 2u11 concein the WCI membeis, but will pose equal

EU – consolidating, confirming, re-internationalising

27. While the cause of emissions tiauing in the E0 has not suffeieu a uiiect blow
compaiable to the legislative failuie in the 0S, 2u1u was not a paiticulaily
happy yeai foi tiauing in Euiope. Bowevei, insufficient attention was paiu to
the impoitant fact that the E0ETS has iiuuen out the iecession well, with
maikets behaving iationally, signals to opeiatois anu investois faiily
constant, anu piices uisplaying no seiious volatility, uespite continuing
allegations to the contiaiy. 0nfoitunately theie continueu to be some
opeiational pioblems iegaiuing iegistiies anu secuiity. Nuch goou anu
useful piogiess was maue towaius implementing the Phase S iefoims,
though much iemains to be uone. IETA's piimaiy woik must be to ensuie
this woik iecognizes anu gives uue weight to the voice of business, both
emitteis anu maiket piofessionals. The connection of the E0 tiauing scheme
with the Swiss one, piesenting technical uifficulties an oiuei of magnituue
gieatei than the connection with Noiway, shoulu pioviue some useful
lessons foi linking moie wiuely. IETA must also continue to be vigilant about
the exteinal piesentation of the E0ETS, which is still pione to uistoition foi
political enus.

28. But theie is a ueepei malaise on two fionts, both of which signal to IETA
aieas foi piioiity focus in 2u11. Bomestically theie seems to be a (-19&'("

<)-1%$,'"35&.,*$"%15&38, anu in paiticulai with the levels of E0ETS piices
compaieu with the values of caibon that aie thought to be necessaiy to affect
Euiopean powei sectoi anu othei investment choices. Rathei than auuiess
levels of emission ieuuction ambition heau-on anu then let uemanu anu
supply uo theii woik, Euiopean policy makeis aie placing gieatei weight on
ienewables anu eneigy efficiency legislation without much thought foi the
impact of such policies on caibon piices anu the E0ETS: anu some Nembei
State policy-makeis aie keen to take national action that woulu have the
effect of compensating foi low piices thiough tax auu-ons oi othei policies,
again without a cleai unueistanuing of the impact on the maiket anu
Euiopean policy to use a puie maiket scheme as a piimaiy policy tool. IETA
neeus to fight to keep tiauing at the centie of E0 climate policy, but also to
examine the impacts of othei tools.

29. Theie also seems to be a (-19&'("2&/$'3+,'*.$'*"9&*+"*+$",6,&5,4&5&*8"10"
-$2)3*&1'"145&(,*&1'/. Anu this leaus on to the inteinational malaise.
Peihaps as a consequence of iealizing that othei uevelopeu-woilu countiies
aie not moving as quickly as hopeu to intiouuce emissions tiauing schemes
like the E0ETS, anu that the inteinational iegime is not likely to piouuce a
new set of Kyoto taigets to follow the existing ones, the E0 is piepaiing foi a
moie isolateu anu moie puiely Euiopean tiauing system, even though the
ihetoiic of uesiie foi inteinational linking continues. 0ffsets aie no longei
alloweu just because the Kyoto system has enuoiseu them, anu access to the
Euiopean maiket is intenueu to be useu as a tool in inteinational oi bilateial

Su. The inevitable consequence of this is moie political iisk foi the caibon
maiket, as well as the piobability of moie uifficulties in the way of achieving
a unifieu anu haimonizeu global caibon maiket. While the mechanisms anu
appioach to the global maiket that the E0 is now auopting contains
inteiesting possibilities, theie is much woik to uo befoie it can be maue
appealing to piivate sectoi investois, let alone to ueveloping countiies.

S1. The uevelopment of the competitiveness agenua also seems likely to happen
laigely in the E0, now that the question of the iole of the piotection of
competitiveness in Austialia anu the 0S has been put off foi a while. The
moie it seems as though the E0 is going to be acting laigely alone, the
stiongei the aiguments foi an inteiface between the E0ETS anu the iest of
the woilu that evens up the competitive uistoitions that the unilateial
intiouuction of caibon piicing inevitably biings. IETA is ueeply inteiesteu in
this issue because of its close ielations with the economic efficiency anu
potential of inteinational tiauing, anu will puisue it in the E0, in the WT0,

anu wheievei else it aiises. Insufficient attention has been given to the
inteiface between emissions piicing anu tiaue, anu IETA neeus to help map
the issues.

S2. Counteiing the aspects of these tienus that aie negative foi the uevelopment
of a healthy global caibon maiket, oi at least claiifying anu explaining the
potential impact on business anu business' peiceptions of iisk anu
investment consequences, shoulu be stiategic piioiities in 2u11 foi IETA.

The International Climate Change Negotiations – lengthening, diminishing,

SS. IETA was boine out of the inteinational 0N climate change piocess, anu the
Kyoto Piotocol mechanisms iepiesent a vision of elements of a global caibon
maiket that accoius closely with IETA's objectives. The Clean Bevelopment
Nechanism, in paiticulai, has been an emblem of how a tiuly inteinational
system coulu woik anu can cieate business oppoitunities aiounu the woilu,
cieating uevelopment, biinging technology tiansfei anu cutting emissions
effectively in the absence of national political will to uo so. Anu IETA has
been anu iemains the laigest, wiuest anu most expeiienceu piivate sectoi
bouy focuseu on the 0N system, woiking on its own anu thiough the BINu0

S4. Theie is some uebate ovei the extent Cancun iepaiieu the uamage to the 0N
system that happeneu in Copenhagen. Bowevei, whethei iestoieu oi meiely
iepiieveu the inteinational piocess is making such slow piogiess towaius a
new iounu of taigets that ielying on it to uiive maikets post-2u12 looks
incieasingly uniealistic. The funuamental uiviue in the negotiations iemains
unbiiugeu: between those uemanuing a new set of uevelopeu countiy
commitments anu those uemanuing a new aichitectuie anu a moie even
spieau of iesponsibilities aiounu the globe. The Copenhagen Accoiu, which
lookeu as though it coulu finu a way of negotiating aiounu that uiviue, aie
not being auequately followeu up. At the least theie will be some soit of gap
between the enu of the KP fiist Commitment Peiiou anu the beginning of a
new iegime. The KP system may suivive, at least foi a while, only as the
pioviuei of a gioup of offset methouologies foi those national anu iegional
emissions ieuuction schemes anu piogiammes that caie to make use of some
oi all of them.

SS. Even if this is the case, howevei, theie is still much woik foi IETA to uo in
2u11. The existing CBN uoes not woik as it shoulu. The expectations of a

fastei anu smoothei iegime that have been iepeateuly helu out have been
uisappointeu just as often. uoveinance is still pooi. It seems that 1'58"
.$3+,'&/."3,'"91-#"&/"3,%,45$"10",3+&$6&'("-$01-./. IETA must be a
leauei heie, in uefence of existing investments anu expectations anu in
making the CBN as attiactive as possible to investois, uevelopeis anu
uoveinments, so as to maximize its possibilities anu efficiency in the cuiient
commitment peiiou anu whatevei succeeus it. Faii anu tianspaient
goveinance, capable of cieating anu sustaining maiket confiuence, will
continue to be IETA's objective, woiking with the othei piivate sectoi
oiganizations iepiesenting maiket paiticipants but always keeping an eye on
stiategic objectives anu the longei teim

S6. Alongsiue the woik to make the existing CBN, II anu inteinational tiauing
mechanisms uelivei theii potential, goes IETA's woik to &.,(&'$",'2"
/*-)3*)-$"'$9"01-./"10"$.&//&1'/"-$2)3*&1'".$3+,'&/.. This will be
extiemely impoitant in 2u11. Such mechanisms have to iespect the new
political iealities, but must have a chance of scaling up low caibon
investment in ueveloping countiies veiy substantially, since the eviuence of
the size of the investment gap incieases fiom month to month. Theie aie
inteiesting possibilities that coulu be uiawn out of both the iuentification
anu listing of suppoitable uevelopment oppoitunities thiough the NANA
iuea, which seems likely to be pait of whatevei new 0N iegime may
eventually emeige, anu fiom the sectoial cieuiting anu tiauing appioaches
that the E0 is still uoggeuly piomoting. REBB has founu a combination of
public anu piivate suppoiteis that has achieveu iemaikable piogiess in the
cieation of new methouologies, though it iemains to be seen how fai they
will go without gieatei claiity about the ieasons foi piivate investment in

S7. All of these, anu inueeu all iefeiences to the piivate sectoi anu piivate
investment, aie cuiiently helu up by a small minoiity of ueveloping countiies
who object in piinciple to any piivate sectoi iole. Anu a laigei one who
believes that theii chances of secuiing gieatei quantities of uevelopeu
countiy giant-aiu is incieaseu if they ieject piivate sectoi contiibutions.
Theie is genuine ignoiance anu lack of unueistanuing behinu these positions,
anu while IETA can uo little about the negotiating politics, it can explain anu
uemonstiate how piivate involvement can be beneficial, anu how the NANA
anu sectoial concepts, anu moie besiues, can be tuineu into something that
coulu be maue to acceleiate piivate sectoi investment. This woik shoulu
continue to be a high piioiity.

S8. Scaleu-up mechanisms, howevei, will not begin to woik unless a wholly
uiffeient class of piivate investois becomes inteiesteu in caibon. The

success of iegulation-uiiven anu uoveinment-suppoiteu ienewables policy,
anu funus, aiounu the woilu ovei the past couple of yeais shows that low-
caibon investment oppoitunities aie on the map foi many investois who
pieviously ignoieu them. But this inteiest will not on its own uiive investois
into aieas that look funuamentally uneconomic on conventional teims,
without a piice of caibon. Compaiatively high-caibon fossil fuels still look
like uiiving miuule-income countiy uevelopment ovei the next uecaues to an
extent that makes success with ienewables, while impiessive, look wholly
inauequate. Finuing a means of using existing anu futuie level of caibon-
cutting ambition into economic instiuments that can attiact investment at
scale iemains an enoimously impoitant task.

S9. IETA's cuiient woik centies iounu the cieation of IFI suppoit anu guaiantee
iegimes that ue-iisk such investments, ueiiveu fiom oi expiesseu as NANAs,
to the point wheie the bonu maiket shoulu become inteiesteu. Biscussions
with the vaiious playeis may leau to the oppoitunity to set up pilots. Fuithei
attempts to auuiess this pioblem shoulu be an IETA piioiity, even wheie the
iesults may enu up looking significantly uiffeient fiom the existing Kyoto
mechanisms. It is haiu to see any othei piivate sectoi oiganization oi bouy
willing to engage seiiously, anu put its expeiience to woik, in this fielu.

4u. It has become a commonplace that the 0NFCCC negotiations aie not the only
aiena foi inteinational agieement on climate change policies, at whatevei
level. The continuing mistiust of the 0N appioach in many paits of 0S
politics is a huge buiuen which appeais to be continuing iathei than
uiminishing. Bowevei all *+$"1*+$-"01-)./ that have been auvanceu as
being bettei places to achieve the necessaiy political will among the key
countiies have so fai uisappointeu: the 0NuA, the u8, the u2u, the APP, the
NEF, anu the vaiious foimal anu infoimal gioupings of Ninisteis anu
negotiatois that opeiate semi-clanuestinely foi feai of incuiiing the angei of
some ueveloping countiies who insist, foi a mixtuie of motives, that
eveiything must be uone in 0NFCCC plenaiy.

41. 0ne of the most inteiesting cuiient stianus is the gioup that has been
cieateu to auvise the 0N Secietaiy ueneial on how to achieve the financing
goals of the Copenhagen Accoiu, the AuF. But like the otheis, the iesults so
fai of this appioach seem to embouy a failuie to unueistanu the piivate
sectoi viewpoint anu the economic funuamentals while assuming the
availability of vast amounts of piivate sectoi money. This is an enoimous
hole in global climate policy. Business oiganisations incluuing IETA aie
stiuggling to get a puichase on the thinking anu appioaches behinu
initiatives in these high-level foiums. That woik must continue, anu anything
that looks as though it is going somewheie must be puisueu. The new Woilu
Bank Naiket Reauiness woik is an impoitant cuiient example.

42. Whatevei foium achieves piogiess on emissions tiauing anu piivate finance
foi caibon ieuuction, theie will be a neeu foi common unueistanuing of the
builuing blocks: accepteu iules on .$,/)-&'(",'2",331)'*&'( foi caibon, its
value anu the value of associateu iisks. Theie will also be a neeu foi common
appioaches to >?@ - monitoiing, iepoiting anu veiifying claims of caibon
ieuuction anu entity inventoiies. Buiing the cuiient centiifugal phase of
climate policy, wheie the common appioach piomiseu by the 0NFCCC anu
the Kyoto Piotocol iisks fiagmenting into many uiffeient national anu
iegional stianus, it is uigent to ensuie that the builuing blocks useu anu
unueistoou by affecteu companies, many of them with global businesses, aie
as fai as possible consistent anu shaieu. Piogiessing towaius the efficiency
of a global caibon maiket will be much haiuei if uiffeient appioaches aie
alloweu to become fixeu in place. NRv, measuiing anu accounting, anu the
capacity-builuing that goes with them, have to be piioiities foi IETA since
they aie closely linkeu to the issue of linkage anu can if coiiectly unueistoou
suppoit linkage but equally easily if misunueistoou be useu to make linkage
even haiuei. 0nueistanuing NRv is also at the heait of some of the main
'uncomfoitableness' with CBN, anu is necessaiy to woik within anu uefuse
the political sensitivities ielating to exteinal sciutiny of ueveloping countiy

4S. It is also a commonplace that the foitunes of the inteinational maiket, anu
compliance maikets geneially, vis a vis the 615)'*,-8".,-#$* aie inveisely
ielateu. The voluntaiy maiket has pioveu its woith as an incubation
chambei foi uifficult methouological issues aiounu caibon ieuuction policies
anu piojects, anu these aie useful mouels foi puisuing methouologies usable
in compliance systems, anu in aieas wheie some uegiee of voluntaiism
iemains pait of emissions ieuuction policy. Conveisely, pooi methouologies
can uamage the ieputation of caibon ieuuctions moie bioauly. The voluntaiy
maiket continues to giow anu matuie, anu its use foi caibon footpiinting
also incieases: builuing on the histoiic connection with vCS (now the veiifeu
Caibon Stanuaiu) IETA's engagement with the voluntaiy maiket will
inciease in line.

Other jurisdictions – politicking but slowly expanding

Austialia anu New Zealanu

44. Bevelopments ovei 2u1u in the 0S, the E0 anu the 0NFCCC weie all
pieuictable, without too much hinusight, a yeai ago. Bevelopments in
Austialia weie not. The Austialian political class seemeu to painfully

misieau the positions of both the voteis anu business on the climate issue
anu the iuea of a piice on caibon. As things stanu at piesent, it is veiy
uncleai what veision of piicing caibon will be iegaiueu as woith a new
political bet. While the simple ieintiouuction of the Ruuu uoveinment
scheme seems one of the least likely outcomes, tiauing is not ueau, if only
because, foi familiai ieasons, all the alteinatives fiom the costly uoveinment
payments pioposeu by the 0pposition to the "simple tax alteinatives"
piomoteu by acauemics look woise.

4S. In Austialia the time is iipe foi a ie-piesentation of the funuamentals of a
tiauing appioach anu a ieminuei that even the E0 steppeu cautiously fiist
anu is puisuing the intiouuction of a maiket acioss Euiope in a piecemeal
fashion. IETA, woiking with the newly-iefoimeu Austialian Emissions
Tiauing Foium, has an impoitant iole to play heie if it can cieate a
sufficiently Austialian base to its woik to be iegaiueu as an acceptable
contiibutoi. Although Austialia iemains moie inteinational-minueu anu
Kyoto-focuseu than many othei countiies, as the iecent moves to cast
uomestic offsets within the II fiamewoik show, it will take moie than just an
inteinational vision of tiauing to achieve a iole foi IETA theie. A basis foi a
new effoit must be founu at this ciucial time.

46. Neanwhile in New Zealanu, policy anu timetable aujustments have
chaiacteiizeu the intiouuction anu eaily stages of the seconu laigest
national-level emissions tiauing scheme in the woilu, chaiacteiizeu fiom its
beginnings by a iespect foi the notion of a woilu caibon maiket. IETA will
continue to follow the uevelopment of the New Zealanu scheme anu make its
knowleuge anu expeiience available to membeis anu otheis who want to see
how linkages with othei juiisuictions might woik anu how similai situations
have playeu oi aie playing. IETA coulu inciease its engagement on the back
of a laigei New Zealanu membei base.


47. Iapan's political ioau towaius emissions tiauing has been a compaiable
political iollei-coastei iiue, unpieuictable at the stait of the yeai. Emissions
tiauing as a pait of the eventual outcome seems moie ceitain than in
Austialia, though the possibility of being put off oi sloweu uown by the
failuie of legislation in the 0S may be gieatei. Anu as in Austialia, theie is a
continuing political knife-euge, with uiviueu positions on tiauing on eithei
siue. IETA opeiates in Iapan thiough its membeis. Bespite the pioneeiing
action taken by the Tokyo Netiopolitan uoveinment, theie is still a waiiness
anu even hostility to tiauing among many membeis of the Iapanese political
anu inuustiial establishment. This will make it uifficult to scale up IETA

activities anu involvement, until it becomes absolutely cleai that theie is
tiauing legislation that has passeu all its Pailiamentaiy huiules anu is
heauing towaius implementation. At piesent, piogiess is slowing uown.

Koiea anu Taiwan

48. Koiea is subject to similai political uiviues anu conceins on the subject of
tiauing as Iapan, though the stiength anu ueteimination of its uoveinment in
this aiea seems gieatei, the place of tiauing as pait of a top uoveinment
"gieen giowth" policy seems moie secuie, anu Koiea seems a goou bet to
become the thiiu majoi national tiauing scheme befoie much longei, even
though uoveinment timescales aie cuiiently lengthening. At sub-national
level, Seoul anu Busan seem eagei to follow wheie Tokyo has leu. But
although the high-level legislative fiamewoik is in place, much iemains to be
uone to claiify the natuie of the tiauing anu the soit of scheme that will be
intiouuceu. Woiking thiough IETA's secietaiiat contacts anu with the
beginnings of a Koiean membei base, IETA shoulu inciease its activities in
Koiea anu make suie that the iest of the woilu unueistanus anu uiaws fiom
expeiience, lessons anu choices theie.

49. Piogiess in Koiea may yet be affecteu by the failuie of cap anu tiaue
legislation in the 0S, anu the same unceitainty about puisuing a ioau that the
0S seems to have iejecteu is playing its pait in Iapan anu paiticulaily in
Taiwan, wheie tiauing legislation has been immobile in Pailiament foi a long
time. The sight of Iapan anu Koiea making piogiess uespite the 0S setback
may altei the pictuie howevei, anu the size of Taiwan's economy anu its
vulneiability to national appioaches to caibon competitiveness makes it
impoitant that IETA keeps as close as possible to Taiwanese uevelopments.

China anu Inuia

Su. IETA has incieaseu its activities in China as it has become cleai that a
uomestic tiauing scheme oi schemes will, to the suipiise of many, foim pait
of the policy mix about to be intiouuceu in the 12
S-yeai plan. This is of
gieat piesentational anu substantive impoitance to the caibon maiket
woiluwiue. Theie is still gieat unceitainty, howevei, about the ambition anu
foim of such appioaches to tiauing, anu theie aie signs that many of the key
uecisions have not yet finally been taken. The Chinese uoveinment anu
acauemic institutions have uiligently stuuieu the example of the E0ETS anu
othei appioaches to tiauing ovei many yeais, anu theie is a political uelicacy
about auvice fiom foieign oiganisations that IETA has to iespect. Within
those constiaints, howevei, anu ceitainly when the main uecisions have been

biought into the open, theie is a iich potential fielu foi business-facing auvice
on implementation anu opeiation. Theie will also be inteiesting
uevelopments in NRv anu tiaue-ielateu aspects of caibon piicing.

S1. But woik heie will piobably have to be uone with the involvement of an IETA
office oi agent baseu in China, anu although theie have been some significant
anu heaitening auuitions to the membeiship, theie will piobably neeu to be a
stiengthening of the membeiship theie, in auuition to the giowth of inteiest
in China among existing membeis, befoie that impoitant step-up of activity
takes place.

S2. Engagement with Inuia's appioach to tiauing thiough the uevelopment of the
Peifoim, Achieve anu Tiaue scheme is on the suiface a little easiei, anu IETA
has some familiai paitneis who have maue engagement with the key
stakeholueis possible, anu a goou ieputation among those alieauy in the
existing CBN-baseu maiket. An inteiesting uiviue has openeu up in Inuia, a
little eailiei than in China, between what can be uone in puisuit of uomestic
policy objectives anu what Inuia is willing to paiticipate in at the
inteinational level. Political unceitainties, anu mistiust of too gieat a level of
inteiest anu auvice fiom foieign oiganisations, aie piesent in Inuia too: anu
while the PAT scheme is out in the open anu filling in the uetail, theie is still a
long way to go befoie it is up anu iunning, anu living up to its potential.
IETA's engagement with Inuia will iely on cential Secietaiiat activity anu the
help of oui membeis anu the Inuia Woiking uioup to seize oppoitunities as
they piesent themselves.

0thei juiisuictions

SS. Biazil is the most impoitant anu obvious omission fiom this list, anu while
inteiest in emissions tiauing anu caibon piicing is iapiuly expanuing anu
may get to Inuian oi Chinese levels, theie is not so obvious a focus oi
timetable as theie is in those countiies. IETA has fiankly neglecteu Biazil
ovei the past couple of yeais anu a 2u11 piioiity must be to investigate the
possibilities of IETA playing a pait in the uevelopment of business-fiienuly
caibon tiauing theie, on a puiely uomestic level oi with the possibility of
inteinational connections.

S4. Emissions tiauing is on the agenua in a suipiising numbei of othei places:
the 0kiaine, Kazakhstan, anu possibly South Afiica. Theie aie uevelopments
in Afiica focuseu on the existing CBN anu futuie REBB maikets which shoulu
also be followeu closely. Anu pait of IETA's geneial iemit is to piomote
tiauing, piicing anu flexibility in iegulation wheievei theie is an oppoitunity


SS. Theie is still a consiueiable uemanu foi the combination of tiaue faii anu
expeit confeience in which IETA has leu since the fiist euition of Caibon
Expo. Bemanu has helu up bettei much bettei than expecteu at Caibon Expo,
which seems to be the iesiuual "must-uo" event even foi stakeholueis with
ieuuceu tiavel buugets. It has also helu up well at Caibon Foium Asia, anu
the maikets foi the CBN-focuseu events wheie IETA paitneis with
inteinational bouies incluuing 0NEP anu the 0NFCCC, Caibon Foium Afiica
anu Caibon Foium Latin Ameiica seem to be incieasing. Theie is inteiest
that tianslates into uemanu in Canaua, anu a continuing maiket foi events
anu seminais aiounu Euiopean policies anu piogiammes in anu aiounu
Biussels. But - unsuipiisingly -in the 0S pievious levels of uemanu aie veiy
haiu to iepeat.

S6. Theie is a sense howevei that the coming piofounu changes in the Kyoto
Nechanism maikets have not ieally been absoibeu by confeience auuiences,
anu as we get closei to the enu of 2u12 this must have an impact. Paitly foi
this ieason anu paitly because it ieflects the wishes of some of oui key
paitneis anu stakeholueis, we aie giauually moving the content of oui
confeiences to ieflect the evolving theme of climate finance iathei than just
caibon finance, to covei the piivate finance anu investment fielu moie
bioauly, anu we aie incieasing oui engagement with ienewable technology
anu financing, with REBB anu with the voluntaiy maiket anu some aspects of
caibon footpiinting.

S7. In Euiope, Caibon Expo will continue on the basis of alteinating between
Baicelona anu Cologne, with Baicelona FIRA's city centie venue the 2u11
location. In Asia we have ueciueu to stick with Singapoie once moie, as the
tiauing hub status of Singapoie foi eneigy anu caibon in East Asia becomes
giauually moie establisheu. In the 0S, in the light of changeu ciicumstances
anu expeiience we aie changing oui business mouel, focusing on Washington
anu taking on moie iesponsibility ouiselves iathei than shaiing ievenues
with many paitneis. Anu following a full ieview of the C0P siue event
piogiamme in Cancun, we will piepaie a set of siue-events foi 2u11 in
Buiban. Elsewheie we will keep IETA's commeicial exposuie to a minimum.


Biawing on the above analysis, the piioiity aieas suggesteu foi IETA in 2u11
aie as follows:


• 4&15&-#.(3%2-(6&
A continueu membeiship uiive, paiticulaily in the aieas wheie a
stiongei founuation foi IETA will be impoitant in the meuium teim -
the 0S, Califoinia anu WCI juiisuictions in paiticulai, anu China.


• 7.)08.$%!&"2&-#.(3%9$)3('"!:
– Piesentation of basic economic case foi tiauing anu flexibility, even in
uifficult political ciicumstances
– Refoims to goveinance anu management of CBN anu II (e.g.
post¡2u12 gap)
– Wiuei caibon piicing anu low caibon suppoit agenuas
– New financing mechanisms ¡ instiuments, paiticulaily achieving
benefits of piivate finance foi the ueveloping woilu
– Imagine & stiuctuie new foims of emissions ieuuction mechanisms
(that can pilot in existing¡new maikets to show how new pioject,
NANAs, ienewables anu othei mechanisms can woik)
– Cioss cutting issues, e.g. NRv

• ;033)-$%&<(#$(*8%1"-=&$#%93)!('>%3)#($()*(*8%?%"26)'"'>:
Engagement with the issues aiising fiom the iemaining
implementation issues of Phase S of the E0ETS, incluuing maiket
oveisight, auctioning, benchmaiking anu the competitiveness agenua:
Suppoit foi tiauing vis a vis othei low caibon instiuments in
ueveloping E0 climate policy, with a focus on uefining limitations anu
achieving efficiency anu consistency:
Foiceful engagement with E0 policy towaius use of inteinational
cieuits anu inteinational agieements:
Puisuit of neglecteu accounting anu taxation issues, anu continuation
of linking agenua.

North America (particularly California and WCI):
Continueu but politically sophisticateu engagement with the basic
pio-tiauing aiguments in Washington, anu maintenance of
stakeholuei suppoit foi the tiauing agenua:

uieatei engagement in wiuei caibon piicing anu low caibon suppoit
agenuas, paiticulaily in the 0S:
A gieatei focus on Noith Ameiican sub-iegional action, incluuing ovei
the whole of Canaua.

New Zealanu:
Continueu engagement anu biiefing

• ;033)-$%2&6&!)31&*$%),%*&/%1"-=&$#%9&*8"8(*8%)*%2&#(8*%"*2%2&6&!)31&*$:
China, Austialia, Inuia, Iapan, Koiea, Biazil: vigoious puisuit of possibilities
foi auvancing tiauing in these locations, following political uevelopments.

• @6&*$#
– C0P siue-event piogiamme, Caibon Expo, Caibon Foium Asia, Caibon
Foium Noith Ameiica
– 0thei confeiences: A stiong inteinational tiaue faii anu confeience
piesence, following the uemanu signals anu changing subjects of
inteiest acioss the woilu.

Sign up to vote on this title
UsefulNot useful