AgCert™ GHG Emission Markets
There are presently three types of greenhouse gas markets. Click on the markets below for more information.Regulatory Markets
A regulatory market has emission limits set be the governing body, and issues allowances to emitters as a "right to emit" a certain amount of emissions. Emitters must turn in the same amount of allowances as their actual emissions at the end of the compliance period or pay the penalties set forth by the regulation.AgCert is currently active in two regulatory markets:
Kyoto Protocol
The Kyoto Protocol sets legally binding limits on greenhouse gas emissions in industrialized countries who have committed to reduce their GHG emissions during the 2008-2012 first “commitment period”. In addition to promoting the reduction of on-site GHG emissions, the protocol envisages market-based flexible mechanisms aimed at keeping the cost of curbing emissions low:
- Emissions trading
- Joint implementation projects; and
- Clean development mechanism projects
Emissions Trading
Under the Kyoto Protocol, GHG emissions are quantified according to tonnes of carbon dioxide equivalent (CO2e). One tonne of CO2e will be known as an Assigned Amount Unit. Each ratifying Annex 1 country will be subject to a maximum number of AAUs equal to the maximum permissible amount of GHG emissions for that country. Countries will be able to trade AAUs in order to comply with their GHG emission reduction targets under the Protocol.Joint Implementation (JI)
Joint Implementation projects allow Annex 1 (developed) countries to invest in GHG emission reduction projects in other Annex 1 countries (ratifying countries subject to GHG emission reduction targets from 2008 onwards), provided those projects result in real, measurable and long-term climate change benefits. The investing party is awarded “Emission Reduction Units” (ERUs), which can be used for its own emission reduction target, or sold to third parties. However, JI ERUs may not be used for compliance until the first commitment period of the Kyoto Protocol, commencing in 2008.Clean Development Mechanism (CDM)
Joint Implementation and CDM programs are driven by the understanding that climate change is a global problem, and therefore it does not matter where the emissions reductions are physically achieved. The key consideration is that they occur and are achieved in the most cost- effective way. In addition, Joint Implementation and CDM will also transfer environmentally sound technology to help countries move onto a sustainable path of development.
Clean Development Mechanism projects also allow Annex 1 countries to invest in GHG emission reduction projects. These projects take place in developing countries without GHG emission reduction targets. In order to promote sustainable, environmentally friendly development in developing nations, the Certified Emission Reductions (CERs) earned by CDM projects can be used to meet GHG reduction requirements in the European Union Emissions Trading Scheme (EU ETS) starting in 2005, as well as requirements under Kyoto.-
EU ETS European Union Emission Trading Scheme
2005-2007: Phase 1 of The European Union Emission Trading Scheme (EU ETS)
The European Union (EU), having ratified the Kyoto Protocol (Kyoto), has voluntarily imposed stricter commitments than those under Kyoto, and has committed to reduce its GHG emissions to 92 percent of 1990 levels by 2012. As a result, it has implemented a trading system for GHG emission reductions known as the EU ETS, which came into effect on 1 January 2005 and is the first regulatory enforced commercial market for certified emission reductions (CERs).
Under the EU ETS, as under Kyoto, GHG emissions are quantified according to tonnes of carbon dioxide equivalent (CO2e). One tonne of CO2e is known as a European Union Allowance (EUA). In order to reduce GHG emissions, the EU ETS will impose caps on the amount of EUAs permissible in any EU member state. In turn, each EU member state must draft a National Allocation Plan (NAP), which must be approved by the European Commission, setting out how the maximum annual volume of EUAs in that EU member state is to be divided between the various sectors of GHG emitters, and setting limits on individual emitters. These caps will be deliberately challenging, so as to encourage GHG emission reduction and the development of a trading market in emission reduction credits.
To reduce their emissions in order to comply with the caps, emitters can either invest in technologies that will result in reducing emissions, purchase reductions from emitters who have emitted less GHG than they were allowed and thus have a surplus to sell into the market, or purchase GHG emission reductions to ‘offset’ against their GHG emissions. The technology option for most big emitters has proven to be cost prohibitive. In addition, most emitters affected by the GHG reduction commitments are not expected to be in a surplus situation. The emitter’s most cost effective solution is to purchase GHG emission reductions, hence accomplishing two key goals: 1) allowing the emitter to meet its GHG reduction commitment and, in the case of CERs, 2) contributing to the social and economic benefit of developing countries or countries in transition.
The EU ETS will be implemented in two stages: Phase 1 (2005-2007); and Phase 2 (2008-2012) which corresponds with the first commitment period of Kyoto. During phase 1, any emitter exceeding its GHG emission cap under the NAP in any given year (after taking into account any emission reduction credits they have purchased to offset their emissions) will be subject to a fine of €40 per tonne of GHG emitted in excess of that cap, will have to purchase corresponding EUAs to correct the excess in the following year, and will be publicly named on the European Commission’s web site. During phase 2, the fine will be increased to €100 per tonne in excess of the cap. There is therefore a strong incentive for emitters to purchase emissions reduction credits to offset their emissions and avoid these harsh penalties.
As mentioned above, the NAPs for each EU member state impose annual caps on emissions. Any installation with a surplus number of EUAs for any year may carry that surplus over into the next year. The surplus may be used to offset GHG emissions in that year, or may be sold to other emitters. Such banking of allowances is permitted during phase 1 of the EU ETS only — any surplus at the end of phase 1 will be lost. The only emission reduction credits that may be used to offset emissions or banked throughout phase 1 and phase 2 of the EU ETS are CERs arising from CDM projects.
2008 – 2012: Phase II EU ETS, First Commitment Period Kyoto Protocol
2008 will see further development of the global GHG emission reductions market. The EU ETS will enter phase 2, with tougher fines and no option of banking EUA allowances from phase to phase. Also, the first commitment period of the Kyoto Protocol will commence, with all ratifying industrialized nations being subject to GHG emission reduction targets. As a result, the market for GHG emission reduction credits is expected to grow due to the forecasted increase in demand from capped emitters. ERUs from JI projects will be available for trading in this period as well. Regional Greenhouse Gas Initiative (RGGI)
Cap & Trade program for power plants in Northeast U.S. states. The model rule was issued in August 2006. RGGI allows for domestic and foreign credits as part of compliance.AB32 - California, United States
The bill enacts the California Global Warming Solutions Act of 2006, to require the State Board to adopt regulations on or before January 1, 2008, establishing a program to require the reporting and verification of statewide greenhouse gas emissions. Statewide greenhouse gas emissions limit equivalent to 1990 levels to become effective in 2020.
Voluntary Market
A voluntary greenhouse gas (GHG) emission reduction market is one which exists outside of any regulatory mandate. Currently, the United States, Canada, Japan and others operate in a voluntary market. However Canada and Japan have ratified the Kyoto Protocol and therefore will be in a regulatory market in 2008.
Emitters in a voluntary market reduce their greenhouse gas emissions or invest in GHG emission reduction projects for a variety of reasons. |
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It’s the right thing to do |
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They believe a regulated market is in their future and want to be prepared |
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Their shareholders have filed resolutions in regards to climate change risk |
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In response to information, scientific consensus or pressure by environmental groups |
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Positive public relations |
There are no emission limits in a voluntary market. There are increasing demands for transparency and verification of emission reductions offered to voluntary programs and the market has seen increased interest in 2006. Many emitters in voluntary markets actually prefer regulation because then they know exactly what reduction targets to reach. They also know that an emission reduction that is approved by the regulatory body is what they need to meet their requirements, simplifying their purchasing decisions.
Consumer MarketGreenhouse gas emissions from consumers are produced in several ways: Driving your car, electricity use in the home, and flying are just a few. AgCert™ has developed DrivingGreen.com to make it easy to offset the greenhouse gas emissions they are responsible for by driving, flying, and even offer event offsets. Do your part! Visit DrivingGreen.com to calculate and offset the emissions of your vehicle, flights, and events. |
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When you offset your emissions at AgCert™'s DrivingGreen.com, you will recieve a T-shirt, a Greenhouse Gas Neutral 
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