E.1 Policy developments by country

E.1.1 AUSTRALIA

In 2010, the Australian Government announced that all new coal-fired power stations would be required to be built CCS Ready, as part of the Cleaner Future for Power Stations election commitment.

In late 2011, the Government’s legislation to introduce a carbon price, the Clean Energy Legislative Package (CELP), was given effect and the CCS Ready policy was subsequently abandoned in favour of market driven investment outcomes. The Victorian Government also made a similar announcement in March 2012 to not proceed with CCS Ready regulations.

The CELP underpins the carbon-pricing mechanism that commenced on 1 July 2012, and that will extend to 30 June 2015. Covering Australia’s top 500 emitters (those producing over 25,000 t. CO2 per year), the price starts at AU$23/t. CO2-e and rises by 2.5 per cent per year in real terms to 30 June 2015.

After 2015, the administratively fixed price will transition to a market-determined price. There is also an independent regulatory compliance and management regime in place.

On 28 August 2012, Australia and the EC announced plans to link their ETSA full two-way link, by means of the mutual recognition of carbon units between the two cap and trade systems, will commence no later than 1 July 2018. Under this arrangement, businesses will be allowed to use carbon units from the Australian emissions trading scheme or the EU ETS for compliance under either system.

To facilitate the link, the Australian Government will make two changes to the design of the Australian carbon price. These are that:

  • the price floor will not be implemented; and
  • a new sub-limit will apply to the use of eligible Kyoto units. While liable entities in Australia will still be able to meet up to 50 per cent of their liabilities through purchasing eligible international units, only 12.5 per cent of their liabilities will be able to be met by Kyoto units.

In recognition of these changes and while formal negotiations proceed towards a full two-way link, an interim link will be established, whereby Australian businesses will be able to use EU allowances to help meet liabilities under the Australian emissions trading scheme from 1 July 2015 until a full link is established, no later than 1 July 2018.

The Australian Government also released in late 2011 a draft Energy White Paper called Strengthening the Foundation for Australia’s Energy Future. The Paper outlines the Government’s reform of the domestic energy markets and the carbon-pricing mechanism. A key message in the Paper is that the carbon-pricing mechanism is now the major policy instrument for driving new low-carbon technology deployment.

E.1.2 BRAZIL

Brazil’s principal framework for climate change policy is the 2010 National Climate Change Policy (Decree No7390, implementing regulation of Law No12187), which sets a nationwide emissions reduction target. The Decree sets a deadline of 15 December 2011 for the major emitting sectors (including power generation) to submit action plans (including targets, actions, performance indicators, and proposed incentives to implement the plans) for emissions reductions. It also indicates that the adopted targets may form the basis for emissions trading.

There is no ETS in Brazil, but as a host country for CDM projects, it is often regarded as one of the main players in the global carbon credit market. A state-wide ETS covering large emitters in Rio de Janeiro was expected to have been signed into law via decree in June 2012 for commencement in January 2013.

At the time of drafting, however, the signing of the decree has been delayed. It is expected that other states will be invited into the consultation process, creating a possibility for the emergence of a national system. The scheme would have covered major emitters from the oil, steel, cement, ceramics, chemical, and petrochemical sectors. The first commitment period will be from 2013 until 2015, with subsequent periods expected to last five years.

E.1.3 BULGARIA

The principal framework for climate change is outlined in the Bulgarian National Energy Strategy until 2020, adopted by the Bulgarian Parliament in mid-2011. The Bulgarian Government estimates that about 9.2 MtCO2 will be avoided by 2030 through CCS.

Bulgaria abides by the EC’s common emission reduction targets, although trading in Bulgaria was suspended in 2010 and re-launched in early 2011. In early 2012, the EC authorised Bulgaria’s request for the continued free allocation of EU ETS allowances to their power sectors beyond this year (rather than having to purchase them on the open market).

Bulgaria’s climate policy includes supporting, both financially and institutionally, the construction of power plants with facilities for CCS by schemes and mechanisms adopted at the European level.

E.1.4 CANADA

Canada’s policy focus is primarily about providing funding support for projects. Canada agreed to only voluntary emission pledges to 2020 under the UNFCCC, and has indicated that it will not be ratifying a second commitment period under the Kyoto Protocol.

In the third quarter of 2011, the Canadian Government released the text of the proposed regulations titled Reduction of Carbon Dioxide Emissions from Coal-Fired Generation of Electricity Regulations. If passed, the regulations would come into effect on 1 July 2015, requiring all existing and new coal-fired units to meet an emissions performance standard equivalent to combined cycle natural gas (set at and fixed at 0.375 t. CO2 per MWh). A temporary exception would be provided for plants that incorporate CCS out to 2025.

The policy includes incentives for early action for existing plants that incorporate CCS prior to having to do so. The comments received and how they were addressed by the Government will be available in a Regulatory Impact Analysis Summary when the final regulations are published in Canada Gazette Part II later in 2012

Canada is also a key component of the North American Carbon Storage Atlas.

E.1.5 CHINA

China recently became the largest global GHG emitter, as well as arguably one of the largest investors (competing with the US) in clean energy with over US$55 billion in 2010. According to the Lawrence Berkeley National Laboratory, China’s anticipated peak emission point under a 450 ppm scenario will need to be realised between 2025 and 2030.

As reported last year, China has adopted in its 12th Five Year Plan (approved in March 2011) both national energy and carbon intensity targets. These intensity targets have been subsequently allocated on a differentiated basis across provinces where governors and mayors alike are responsible for their implementation and compliance. This emphasises the important role that provincial and local levels have in both the implementation of the national strategy and in the design of sub-national policies.

The national carbon intensity target is set at 17 per cent per unit of GDP by 2015 (relative to 2005) and 40–45 per cent by 2020. It is understood that China announced at the April 2012 MEF that the 2020 target is to be pushed out to 2025.

In May 2012, the energy intensity targets were tightened (from 18–21 per cent below 2010 levels by 2015) and allocated to sectors. Sector-specific energy intensity reduction targets by 2015 include 20 per cent reduction for chemicals and 18 per cent reduction for steel, non-ferrous metals, and petrochemicals.

Over the period 2006–10, it appears China has enacted all the institutional requirements to realise these targets. This includes supporting quite pro-market oriented tools over the next five years (such as pilot emissions trading schemes to commence in 2013 across two provinces and five cities) to reduce emissions.

It is also understood that the NDRC has given the pilot regions the authority to make independent choices on which sectors should be brought into the schemes (but clearly power, steel, cement, chemicals, and non-ferrous metals are likely candidates – also indicating opportunities to support CCS mitigation solutions).

Reports in the public domain suggest that the pilots are unlikely to be launched by 2013, as only Beijing has released (in March 2012) draft rules and regulations of its ETS. Design issues still include which sectors are to be covered. The two provinces of Guangdong and Hubei have publicly indicated this sort of delay.

The NDRC (which acts as China’s regulator for UNFCCC offsets) recently published rules governing China’s future domestic carbon offset market. This is very much in line with China’s preference for project-based market mechanisms, such as the CDM, in the UNFCCC. The offsets, known as Chinese Certified Emission Reductions (CCERs) will be awarded to projects that have received government approval to earn credits under the CDM, but have yet to be registered by the UNFCCC. Projects that have already earned credits under the CDM will not be allowed to produce domestic offsets (to avoid double counting).

This policy direction supplements an already quite extensive suite of demand measures (including a national electricity smart grid) and fiscal and tax regimes including a resource tax, a fuel/energy tax, and potentially a carbon tax. While a carbon tax could be implemented in parallel to an ETS, this policy discussion may be superseded by a cross-over to a national emissions trading scheme by 2015.

Another initiative is the China Coal Cap (CCC), announced by the National Energy Administration last year in recognition of having to curtail China’s dependency on coal use (which is the cheapest energy source in the country). The CCC caps coal production at 3.8 billion tonnes by 2015. China produces about 50 per cent of the global supply of coal (with its biggest imports from Australia and Indonesia). Currently 70 per cent of its energy consumption is satisfied by coal, 60 per cent is consumed by the power sector, 15 per cent by metallurgy, and over 10 per cent for cement manufacture.

The CCC is in the process of implementation and could see the national coal cap being implemented through both sectoral (power, metallurgy, cement, chemicals, etc.) and provincial/city caps. China’s high reliance on coal indicates a dependency on CCS to help decouple emissions from economic growth, as well as manage air pollution issues. China is also enthusiastically pursuing both nuclear and renewable energy sources, including binding targets for the latter.

Like many other countries in the world, China has strong reasons to explore, and is sitting on a large supply of non-conventional gas sources (coal bed methane and shale). Some 5 per cent of China’s coal, 20 per cent of its gas, and 55 per cent of its oil is currently imported.

In March 2012, the UNFCCC’s Global Environment Facility and the World Bank awarded China a grant to undertake a Climate Change Technology Needs Assessment (TNA). A report is expected in 2–3 years.

In 2012, the Global CCS Institute also struck a MoU with China’s NDRC to share information on CCS to help it plan to roll out the technology to cut emissions.

E.1.6 EUROPEAN UNION

The EU’s climate change policy is characterised by strong cooperation with the international community, compliance with the UNFCCC and Kyoto Protocol, and leadership in terms of assuming emission reduction targets and implementing mechanisms.

The EC’s common emission reduction targets include:

  • 20 per cent reduction of emissions relative to 1990 by 2020 (or 14 per cent compared to 2005);
  • 20 per cent share of renewables in total energy mix by 2020; and
  • 20 per cent increase in energy efficiency by 2020.

The EC has committed to move to a 30 per cent emission reduction target if there is a global comprehensive agreement for the post-2012 period (i.e. other developed countries commit to comparable efforts) and developing countries contributions are meaningful.

In early 2012, the EC released a paper on the policy options to drive a 30 per cent emission reduction on 1990 levels by 2020. In essence, a tighter carbon constraint could realise potentially higher revenues to be hypothecated back into low carbon developments due to higher carbon prices.

The key climate change policy instrument for facilitating emission reductions and encouraging low emission technologies is the EU ETS. It covers emitters in the power generation and other energy-intensive sectors such as steel, cement, paper, and chemicals. The third phase is due to start on 1 January 2013 and extends to 2020.

The third phase sees the fixed national emission caps cancelled and replaced by one common ceiling for the whole EU. After this, the target is set to decrease linearly every year over the period up to 2020, in conformity with the set goal of a 21 per cent emission reduction compared to 2005. It will also adopt a market allocation approach (auctioning), replacing the current administrative allocation method. The obligation on power plants will be to purchase on the open market and acquit a quantity of allowance every year equivalent to their verified emissions for the preceding year.

Every member state receives an annual quantity of allowances on the basis of their emission reduction targets. The revenues from the auction sales are collected in the national budgets of the member states and a minimum 50 per cent of these revenues must be used to combat climate change (including for CCS).

There are basically 10 countries that can apply for derogation of this rule. Bulgaria and Romania applied and were granted such derogations for the third phase.

In addition to the revenues raised at national level through auction sales, an additional 300 million allowances have been allocated under the NER300 at the European level for financing demonstration projects for CCS and renewables.

There were 13 CCS proposals received by the European Investment Bank (EIB) under the NER300 program. The EIB has completed its due diligence assessments of these proposals (which are confidential) and must monetise (sell) 200 million of the 300 million allowances (expected by October 2012) prior to making recommendations to the EC on prospective projects. The EIB is on track to do this.

Sales of the NER300 tranche of allowances as at April 2012 stand at around 99 million (about 20 million sold per month). The allowances are for use in phase 3 of the EU ETS. The average price for an allowance is about €8.

E.1.7 EU ETS PHASE III

Starting from the commencement of the third trading period (2013–20), the ETS will implement a new single EU-wide emissions cap. Individual national allocation plans for each EU member state will be replaced by one EU-wide cap on emissions amounting to around 2 billion allowances in 2013. This cap will reduce linearly and annually by 1.74 per cent of the average annual level of the Phase II cap (equalling approximately 37 million allowances each year), with a view to delivering an overall reduction of 21 per cent below 2005 verified emissions by 2020.

Auctions for emission allowances will be held by member states and will be open to any EU installation operator. The associated revenues will be collected in member states’ national budgets, and no less than 20 per cent of these will be used to encourage the use of clean coal technology (including CCS).

Furthermore, the regulations on how the allowances are allocated to individual installations are set by the EU rather than the member states. There will be no free allocation to installations from the energy sector in the third phase, with installations from industry sectors receiving free allocation based on a benchmark approach. This means that fossil fuel fired power plants will have to purchase/pay for the allowances for all the emissions they emit, unless derogations are granted (only a limited number of countries can apply, and to date derogations have been authorised for Bulgaria, Romania, the Czech Republic, Cyprus, Estonia, Lithuania, and PolandHungary and Latvia are yet to be decided).

The EC adopted a decision in April 2011 which provides for more than 50 product-related benchmarks for industry sectors.

According to EU legislation, the percentage of allowances allocated free of costs will decrease from 80 per cent in 2013 to 30 per cent in 2020. Also, a reduction factor will be applied to all industry sectors if the overall cap is not sufficient to meet the demand for emission allowances (as calculated on the basis of the benchmark model).

E.1.8 FRANCE

The basis of French climate change policy is the EC’s policy framework, including participation in the EU ETS. Climate policy in France has not changed significantly in the past 12 months, with strategies in the Plan Climate (2010) scheduled to run until 2020.

The Government established a working group in mid-2011 to explore scenarios to reduce emissions by 80 per cent by 2050.

E.1.9 GERMANY

Germany abides by the EC’s climate change policy and legislative frameworks, and it participates in the EU ETS. The Government goes deeper than the unilateral emission reduction targets by setting a domestic target to reduce emissions by 40 per cent below 1990 levels by 2020.

In mid-2011, the German Government adopted the Energy Package, which complements the 2010 Energy Concept and defines Germany’s energy policy.

In this policy document, the Government expressed strong support for CCS projects both under the EC’s Energy and Climate Package (CCS Ready) as well as its development in the domestic energy and industrial sectors. It tried doing this through the CCS Act (finally adopted mid-2012 by the mediation committee for the transposition of the EC Directive) but this Act now only allows for CCS on a test basis, restricts the amount of CO2 to be captured and stored to 1.3 million tonnes a year (up to a maximum of 4 million tonnes), and provides individual states the option to opt out.

E.1.10 INDIA

While India is taking a cautious approach to CCS developments, the central government acknowledges that a lot of India’s energy production for the next 20 years will be coal based. According to India’s 2nd National Communications under the UNFCCC, coal meets 63 per cent of India’s total commercial energy requirement (indigenous reserves are sufficient to meet India’s power needs for at least another 100 years), followed by petroleum products (30 per cent), and natural gas. Nearly 70 per cent of the power requirements in India are presently met by thermal power plants.

When this consideration is added to India’s 450 million people who do not have access to electricity, there seems an even greater need to ensure that CCS is available to countries like India, where the use of coal to generate electricity is expected to dramatically increase, especially since it will remain for some time the cheapest energy source available.

The IEA estimates that India’s emissions rose by 140 MtCO2-e or 8.7 per cent in 2011 compared to 2010. India’s principal climate change framework is its National Action Plan on Climate Change (NAPCC) 12th Plan period 2012/13–2016/17. This complements the existing Integrated Energy Policy, as well as state governments’ respective State Action Plan on Climate Change (SAPCC).

India has also set up an Expert Group on Low Carbon Strategy for Inclusive Growth to develop a roadmap for low carbon development in prioritised sectors such as electricity, industry, oil, and gas.

The Group released an interim report in May 2011 noting that the implementation of existing policies can achieve an emission intensity reduction of nearly 23–25 per cent by 2020 compared to 2005 levels. It further notes that with external development assistance and technology transfer, a 33–35 per cent emission intensity reduction by 2020 is even possible.

As at the first Quarter 2012, six of the original eight missions envisaged in the NAPCC have been approved, with the Government announcing its intention to introduce a ‘National Mission on Clean Coal Technologies’, including CCS. This will be the ninth mission under the NAPCC, which aims to minimise the emissions arising specifically from coal-fired power plants.

India has a coal levy, for which funds (estimated to be US$500 million over the financial year 2010–11) are hypothecated to a National Clean Energy Fund which will be used for funding research and innovative projects in clean energy technologies.

The 2012 Budget, announced in May, did not carry details on the scale or fate of the fund, simply announcing that imported steaming coal was exempted for the next two years from full customs duty. Bloomberg estimates the fund could yield some US$1.2 billion in 2012.

In addition to this, the IEA estimates that India invested more than US$10.2 billion in clean energy technologies in 2010.

In March 2012, industrial energy efficiency targets (with tradable instruments for over-achieving targets) were announced under the Perform, Achieve, and Trade (PAT) program, for about 480 entities; the program is estimated to save some 30 MtCO2 per annum. The power sector and steel sectors are expected to drive some 70 per cent of the savings.

The Global CCS Institute is currently working with the Energy and Resources Institute (TERI) on a CCS scoping study, which should be completed in 2012.

Interestingly, India was only one of six parties which submitted views on the UNFCCC’s CCS in the CDM process, which were formally considered in the inter-sessional meeting in May. In it they express support for a permanent global reserve of offsets, equal to 2 per cent of the total number of project offsets generated, to remedy unexpected events from CCS projects.

E.1.11 INDONESIA

Indonesia’s National Council on Climate Change, which has 17 Ministers and is chaired by the President, is in charge of coordinating Indonesia’s climate change policies and international positions. The Council is being supported by a number of Working Groups, including Mitigation, and Transfer of Technology. While the Council is exploring the establishment of a cap and trade mechanism, Indonesia does not seem to have any plans to set up a domestic carbon trading system.

In Indonesia, many of the key initiatives are embodied in decrees rather than legislation, and passed by Ministries rather than Parliament. In late 2011, the President approved a decree that obligates Indonesia to cut its emissions 26 per cent below unchecked levels by 2020, and 41 per cent if the country can secure international funding.

Most of Indonesia’s mitigation efforts are focused on the forestry sector, as the country emits well over 1 billion tonnes of CO2-e annually from deforestation and burning of peat land (80 per cent of its emissions).

Per capita electricity demand has increased nearly three-fold over the past two decades in Indonesia, spurring its nuclear program to install four nuclear power plants with a combined capacity of 4000 MW by 2025. Along with Australia and South Africa, Indonesia is one of the world’s top coal exporters (although it is planning in 2012 to introduce an export tax on coal).

The climate change decree also provides emission targets for sectors compared to expected emission levels if no further policies are implemented. The energy and transport sector must save 38 to 56 MtCO2-e.

E.1.12 ITALY

The basis of Italian climate change policy is the EC’s policy framework, including participating in the EU ETS. Climate policy in Italy has not changed significantly in the past 12 months.

E.1.13 JAPAN

The principal framework for developing climate change policy is the 1998 Guideline of Measures to Prevent Global Warming and Climate Change Law Concerning the Promotion of Measures to Cope with Global Warming (Act on Promotion of Global Warming Countermeasures). The principles surrounding the establishment of carbon pricing are underpinned by the National Fundamental Law on Energy (Basic Act on Energy Policy).

To deliver on its UNFCCC obligations, Japan has mostly relied on domestic emission reductions through mitigation and forest carbon-sink measures, as well as purchases of UNFCCC backed units (it is one of the biggest buyers internationally of these tradable units). It is understood that this is because Japan does not currently have adequate scope for GHG emissions reductions through energy conservation or energy efficiency, especially in the industrial sector, as it has been a global front-runner in these areas since the 1980s.

Japan made it clear at COP 16 that it does not intend participating in the continuation of the Kyoto Protocol post-2012, and as such will no longer be subject to binding emission reduction targets. This is because they see the framework as forcing legal obligations on certain parties only, and to limited effect, and the framework does not involve major GHG emitters such as China, the US, and India. To facilitate its long-term emission reduction target, Japan is expecting to pursue offset opportunities. In addition to the CDM, Japan is proposing a new market mechanism under a post-2012 framework called a bilateral offsets crediting mechanism (BOCM).

A key difference between CDM and the BOCM is that any UNFCCC oversight of the BOCM is minimised to the function of providing guidance for emissions monitoring, reporting, and verification (MRV) and accounting rules. The BOCM will be technology-agnostic and intends to cover a wider range of sectors and activities from transport, waste management, energy efficiency, renewable energy, and also REDD + projects. Japan also advocates that bilateral cooperation will potentially pave the way for more engagements by developing countries in emission reduction efforts in the future.

The Ministry of Economy, Trade and Industry (METI) and the Ministry of the Environment have commissioned over 100 feasibility studies to identify potential emissions reduction projects which can be implemented.

With Japan as one of the world’s biggest coal importers, coupled with continued power shortages and a curtailing of new nuclear power plants projects, this all seems to further limit its ability to achieve its stated emission reduction target.

A new energy blueprint is expected to be released in late 2012, outlining an aggressive role to play by renewables (some 30 per cent share) and supported by a feed-in tariff regime. The premium prices paid by utilities could be as high as US$0.57c per kWh.

E.1.14 MALAYSIA

Malaysia launched its National Policy on Climate Change in 2010, which provides its overarching policy framework. There have been no substantial policy announcements over the past year. In mid-2011, Malaysia released its 2nd National Communications to the UNFCCC.

Malaysia indicated in its high-level statement at COP 17 (late 2011) that its low-carbon strategy is dependent on multi-sectoral and trans-ministerial initiatives (such as National Green Technology and Climate Change Council, National Climate Change Focal Point, and National Steering Committee on Climate Change).

Delivering its 2020 emission reduction pledge (up to 40 per cent energy intensity per capita compared to 2005 levels) is conditional on technology transfer and access to international finance from developed countries, such as those potentially provided through the Technology Mechanism and the GCF.

E.1.15 MEXICO

The General Law on Climate Change (GLCC) was passed in mid-2012. There is also a permanent Inter-ministerial Commission on Climate Change comprising the Departments of Foreign Relations, Social Development, Environment and Natural Resources, Energy, Economy, Agriculture, and Communications and Transport.

The GLCC demonstrates major progress for Mexico, and leads by example for other countries to address climate change and transition to a low-carbon economy. While this law does not include concrete measures and activities, it consolidates the existing institutional structures (under the Special Programme on Climate Change 2009–2012) and tasks the Commission to encourage the development of a carbon trading scheme.

The Commission will oversee six working groups including the following two: Mitigation and a Mexican Committee for Emission Reduction and GHG Capture Projects.

In a recent submission to the UNFCCC, Mexico supports the establishment of new market mechanisms, as well as possibly sectoral approaches where countries retain sovereign capacity to decide which aspects of its economy are introduced into international markets, and which count as a contribution to the achievement of its own pledges.

It also sets the target for the electricity sector to provide 35 per cent of Mexico’s electricity from clean sources by 2024. Mexico considers CCS an important option in a long-term climate strategy, but outside of the CCS-CO2 EOR opportunities, there are no direct incentives for coal-related CCS.

Mexico is very much an international leader. Apart from hosting COP 16, it recently hosted the Group of 20 (G20) Summit, as well as a strong advocate for the creation of the Green Climate Fund. It has subsequently submitted a bid (one of six countries) to host it. The Government offered US$500,000 to support administrative expenses of the Secretariat.

To support CCS activities, Mexico, in partnership with the US DOE and Canada, recently released an atlas mapping potential storage capacity in North America. It cites Mexico’s resource as at least 100 GtCO2, compared with annual emissions of about 205 MtCO2.

The development of a National CCUS Strategy and Regulatory Framework was identified as a goal in Mexico’s National Energy Strategy 2012–2026, which was presented to the Mexican Congress in April 2012

E.1.16 THE NETHERLANDS

Like other EU member states, the Netherlands operates within the broader framework of the EC climate policy and its emissions targets.

In November 2011, the Government released its Energy Report 2011, recognising not only the inevitability of CCS use (including for gas), but also that the Dutch economy can benefit greatly from being a global leader in CCS. Its major policy focus is to support CCS via demonstration projects.

The Government is only permitting demonstration projects for under-sea storage (not on-shore storage), and is actively pursuing European funding opportunities (such as the NER300) for them. It is also adopting policy measures that encourage CCS as well as setting parameters for conventional fuels.

E.1.17 NEW ZEALAND

In mid-2011, a review panel released its findings on how the NZ ETS (which started in 2009, with liquid fossil fuels, stationary energy, and industrial processes beginning to be covered in 2010) should evolve beyond 2012. A Government consultation paper was released in mid 2012 outlining two proposals. The first limits CERs to 50 per cent fulfilment of the emission reduction obligation and the second proposes auctioning of permits.

The limit on CERs is similar to that of Australia, as the Government accords a high priority to the development of international carbon markets more generally. It is in formal discussions with Australia and Korea. It is interesting to note that only about 2 per cent of total allowances acquitted were sourced from CDM projects (noting that CERs generated from HFC-23 and N2O projects are not allowed).

NZ has adopted a 90 per cent by 2025 renewable electricity target.

E.1.18 NORWAY

Climate policy in Norway has not changed significantly in the past 12 months, and it continues to rely on its carbon tax on offshore petroleum production installations, along with its membership in the EU ETS, to reduce emissions (even though the country is not a member of the EU it is a member of the European Economic Area Agreement).

The Government released in April 2012 a White Paper on Climate Change Actions. While there are no new national measures, there is an increase to the CO2 tax rate to about €51/tCO2, a new technology fund established with up to €6.6 billion by 2016, and the intent to pass a law requiring all new gas power plants to be CCS ready at start-up.

E.1.19 ROMANIA

The basis of Romania’s climate change policy is the EC’s policy framework. Romania also participates in the EU ETS. In early 2012, the EC authorised Romania’s request for the continued free allocation of EU ETS allowances to their power sectors beyond this year (rather than having to purchase them on the open market).

Due to irregularities found in the country’s national GHG emissions inventory, Romania’s eligibility to internationally trade its surplus Kyoto allowances under the Kyoto Protocol’s international emissions trading scheme was suspended in late August 2011.

Romania’s National Emissions Registry underpinning its participation in the EU ETS was also suspended in 2011 by the EC due to unlawfully transferred allowances, and allowed to re-open in March 2012.

E.1.20 RUSSIA

According to public sources, the Russian Government released in mid-2011 a decree titled Comprehensive Plan of Implementing the Russian Federation’s Climate Doctrine for the Period until 2020.

It includes the Ministry for Energy overseeing the:

  • development and implementation of pilot projects on the construction and development of industrial exploitation in the field of energy for the capture and disposal of CO2; and
  • implementation of a set of measures to limit GHG emissions from energy generation from fossil fuels.

Russia has refused to take on a second target under the Kyoto Protocol, preferring instead to keep to its voluntary emissions cut pledge made under the Copenhagen Accord in 2009. As such, the fate of its estimated 6 billion surplus of Kyoto credits remains in doubt.

In late 2011, the Government approved a self-imposed cap (300 million) on the number of JI credits it can issue to projects.

E.1.21 SAUDI ARABIA

The principal climate change framework is the Ninth Development Plan, Chapters 14 (Environmental Management) and 26 (oil and gas); the latter indicates a preference for CCS. There has been no substantial change in policy over the past 12 months.

E.1.22 SOUTH AFRICA

Policymaking in South Africa typically starts with the introduction of a Green Paper (a public discussion document) followed by a White Paper (broadly outlining government policy). Although there is no climate change law, there has been a number of Green Papers outlining market-based approaches to facilitating mitigation. The principal framework for climate change is the Vision, Strategic Direction and Framework for Climate Policy (2008). This Policy supports CCS for coal-fired power stations and all CTL plants, and in general power plants that are not CCS Ready should not be approved. The Treasury has also been charged with studying the implementation of a carbon tax by 2018–20. It is expected that this will be considered by the recently formed CCS Interdepartmental Task Team.

In October 2011, it released a White Paper on National Climate Change Response Strategy. It recognises the potential of CCS over the short and medium term in the synthetic fuels industry, and highlights the Carbon Capture and Sequestration Flagship Programme as led by the Department of Energy in partnership with the South African Energy Research Institute. The program includes, among other initiatives, the development of a CCS demonstration plant to store the emissions from an existing high-carbon emissions facility.

It also notes that a portfolio of economic instruments, including carbon taxes and emissions trading schemes and complemented by appropriate regulatory policy measures, are essential to driving and facilitating mitigation efforts and creating incentives for mitigation actions across a wide range of key economic sectors. This will be overseen by the Treasury, and the Departments of Trade and Industry and Economic Development.

In addition to the 2010 Green Paper on a carbon tax, the 2012 Budget states that a revised policy paper on a carbon tax will be published in 2012 for a second round of public comment and consultation. The Government accepts the need to price carbon emissions and the phasing in of a tax instrument for this purpose. A phased implementation of the carbon tax by 2013 is expected, with the price starting at US$15.60/tCO2-e above a tax-free threshold (for most sectors this is 60 per cent) and would increase by 10 per cent until 2019–20.

South Africa also hosted the UNFCCC’s COP 17/CMP 7 in Durban. These climate negotiations achieved the resolution of the inclusion of CCS in the CDM with the finalisation of modalities and procedures, as well as agreement to explore a new legally binding instrument or arrangement for enhanced mitigation in a post-Kyoto world (mostly after 2020).

E.1.23 KOREA

Korea is listed as one of the top 10 largest emitters globally, driven by its energy-intensive economic activity (manufacturing). The central policy platform driving emissions and pollution management, as well as economic development in Korea, is the Five Year National Plan for Green Growth (see the Global Status of CCS: 2011 report for details). Korea, through the Presidential Committee on Green Growth (its central policy making force), has equipped its regulatory institutions to appropriately enforce these policies.

The two major objectives of this Plan are to reduce emissions by 4 per cent below 2005 levels by 2020 (as submitted to the UNFCCC), and to allocate 2 per cent of annual GDP to Green Growth investments and development projects.

The Korean National Assembly recently released the emission profiles of the country’s top 150 emitters, showing a 9.1 per cent growth year on year. This is driven by the power, oil refining, and steel sectors.

After what seems much national deliberation, in May 2012 Korea approved the establishment of a cap-and-trade scheme in 2015 (with commitment periods expected to be 2015–17, 2018–20, and 2021–26) as the major enabler of its mitigation efforts. This is in addition to the imposition in 2012 of its Emissions Target Management Scheme (ETMS) (i.e. emission reduction goals on 458 of its largest emitters ranging from factories, buildings, and livestock farms). The expected interplay between the ETMS and the ETS is that facilities producing less than 25,000 tCO2-e per year (or entities producing 125,000 tCO2-e per year) will not have obligations under the ETS, but there will be a voluntary opt-in option.

While it could take some months for the ETS design to be finalised (the promulgation of a Presidential Decree is expected by November 2012), it has been indicated that the penalty for non-compliance could be set at three times the prevailing market price (expected to be no more than US$113 per tonne). There may also be a 95 per cent free allocation of permits (and 100 per cent to trade-exposed entities) in the first and second commitment periods, as well as permission for both banking and borrowing from other commitment periods.

There are many key issues still to be decided, however, including: coverage (about 60 per cent of emitters are expected to be included), the emissions caps and reduction targets for each period, the caps on banking and borrowing, and the rules for using international offsets (such as those generated under the CDM). Korea is also reportedly in talks with both Australia and New Zealand to discuss ways of linking their respective emissions trading schemes.

Korea is showing a preference for incentive-based instruments that not only allow national industries to act in their own self-interest but in a way that can deliver efficiently on national objectives.

In a 2012 submission to the UNFCCC on Nationally Appropriate Mitigation Actions (NAMAs), Korea stated that it believed what was lacking in the international climate change agenda was a climate regime that could improve the commercial viability of investments for mitigation, and that if such a regime existed then the market will drive finance and technology to flow to mitigation actions in developing countries.

In addition to market-based instruments, the Government indicated that it will spend US$150 million over the next decade specifically on CCS, and the Ministry of Education, Science and Technology (MEST) recently publicly stated that the Government intends to enhance Korea’s R&D efforts in CCS.

Korea is demonstrating international leadership in the climate change policy agenda by being one of two countries shortlisted to host COP 18. While Qatar won the bid, Korea will host a key ministerial meeting in the lead-up to COP 18, which will be instrumental in clarifying the central issues in the weeks before a COP.

Korea has also submitted a bid to host the GCF (one of six countries to do so). It has offered support of US$2 million in 2012 for its start-up and an additional US$1 million per annum until 2019.

E.1.24 SPAIN

The basis of Spain’s climate change policy is the EC’s policy framework, including participating in the EU ETS. Spain’s National Allocation Plan (holding 2012 emissions to at most 37 per cent of the 1990 base year) ends in 2013. From this date, the EC approach will be adopted.

In late 2011, a Carbon Fund for a Sustainable Economy was established by means of Royal Decree (1494/2011) to buy carbon credits. It is administered by the Secretary of State for Climate Change, and will contribute to the fulfilment of the objectives of reducing emissions taken by Spain with the acquisition of carbon credits. Spain is the second largest buyer of UN offsets under the CDM after Japan.

E.1.25 SWEDEN

The basis of Sweden’s climate change policy is the EC’s policy framework, including participating in the EU ETS. Sweden’s National Emissions Registry, underpinning its participation in the EU ETS, was suspended early this year due to security issues and allowed to re-open in March 2012.

Climate policy in Sweden has not changed significantly in the past 12 months, although there have been increases in its energy and CO2 tax from 2011. Sweden is also developing a carbon neutral by 2050 roadmap, which is expected to be considered by Government at the end of 2012. In 2011, the Government also presented an environmental technology strategy.

E.1.26 TRINIDAD AND TOBAGO

In mid-2011, the Government of Trinidad and Tobago released its National Climate Change Policy. The document highlights that it will increase the use of cleaner technology in all sectors by developing regulatory approaches and technology standards, explore the feasibility of cap and trade schemes within and across emitting entities, and explore CCS and CCUS (among other approaches).

E.1.27 UNITED KINGDOM

In addition to the UK reflecting the broader EC climate policy framework and emissions targets, it has had several instruments directly aimed at achieving emissions reduction since the early 2000s.

The principal long-term framework for managing emissions is the Climate Change Act (2008). The Act enshrines in legislation the UK’s emissions reduction targets (at least 34 and 80 per cent lower than the 1990 baseline for the years 2020 and 2050 respectively), and creates five-yearly carbon budgets (the first four are 2008–12, 2013–17, 2018–22, and 2023–27). It also established an independent Climate Change Committee (CCC) to advise the Government.

In 2010, the CCC released, and the Government responded to, several recommendations dealing with electricity market reform, carbon price floor, and the Emissions Performance Standard (EPS), among other things.

The EPS is currently set at the equivalent of 0.45 kg of CO2 per kWh. The carbon price floor is aimed at avoiding stranding low-carbon assets due to very low international carbon prices.

The Energy Act 2011 provides for specific CCS incentives to support the construction of four commercial-scale demonstration projects in the UK, and retrofitting additional CCS capacity to these projects should it be required at a future point. It also adopts a CCS Ready policy for new fossil fuel fired power stations.

In late 2011, pursuant to the Climate Change Act, the Government released The Carbon Plan outlining its plans for achieving the first four carbon budgets (2008–27) on a pathway consistent with meeting the 2050 target.

The Plan recognises that by being an early mover in technologies such as CCS (for both fossil fuel and biomass plants), the UK could establish a long-term comparative advantage in growing global markets for these technologies.

As such, CCS forms an integral component of the sectoral plans for both industry and the power sector. The Plan also states that Scotland believes that fossil fuels – with CCS, renewables, and energy efficiency – are the best long-term solutions to its energy security.

Complementing the sectoral plans is the release of the CCS Roadmap titled Supporting Deployment of CCS in the UK.

The roadmap outlines:

  • a CCS commercialisation program (£1 billion);
  • a R&D innovation program (£125 million);
  • continued electricity market reform including long-term feed-in tariffs with ‘contract for difference’ tailored to the needs of CCS power plants;
  • development of transport and storage networks; and
  • continued international engagement.

In 2012, Scotland released its Electricity Generation Policy Statement which specified that new fossil fuel plants over 300 MW will need to demonstrate CCS readiness (previously it applied only to coal).

E.1.28 UNITED STATES

Despite multiple attempts in recent years, the US has been unsuccessful in passing federal climate legislation. In the absence of a dedicated federal scheme, US climate policy is being pursued through federal regulation under the existing Clean Air Act (CAA) and individual state initiatives.

At the federal level, the US EPA and the Department of Transportation have issued regulations establishing GHG emission standards and corporate average fuel economy standards for light duty vehicles and GHG emissions standards and fuel efficiency standards for medium and heavy-duty engines and vehicles.

EPA has also issued regulations establishing permitting requirements for major stationary sources of GHGs under the New Source Review Prevention of Significant Deterioration (PSD) and Title V Operating Permit programs. PSD (preconstruction) permitting involves a five-step top-down analysis for the Best Available Control Technology (BACT). The permitting guidance identifies CCS as an add-on pollution control technology that is ‘available’ for facilities emitting CO2 in large amounts and which should be listed as an option at step one of the BACT process for such facilities.

On 27 March 2012 the EPA issued for comment a Rule proposing that new fossil fuel-fired power plants greater than 25 MW (electric) meet an output-based performance standard of 1000 pounds of CO2 per megawatt-hour. New power plants that use CCS would have the option to use a 30-year average of CO2 emissions to meet the proposed standard rather than meeting the annual standard each year. The proposal does not apply to existing units and transitional sources that have PSD permits by the date of the proposal and commence construction within 12 months of the proposal.

Multiple states have established GHG emission targets. California, one of the world’s largest economies, enacted the comprehensive Global Warming Solutions Act in 2006 to reduce GHG emissions through a combination of regulatory and market mechanisms. Under the Act, California established a cap and trade program for major sources with enforceable compliance obligations, beginning with 2013 emissions. California is also partnering with British Columbia, Ontario, Quebec, and Manitoba in the Western Climate Initiative to develop a cap and trade program that transcends national boundaries. The Regional GHG Initiative – a cooperative effort among nine Northeastern and Mid-Atlantic states to reduce GHGs through a market-based cap and trade program – completed its first three year control period in 2011. In addition to GHG specific laws and policies, EIA reports that 30 states and the District of Columbia have enforceable renewable portfolio standards or similar laws.

In the 2013 Energy Budget, the President announced a clean energy standard (CES) is one policy option to be considered for supporting the deployment of clean energy technology (including CCS) and reducing emissions from the electric power sector. This is consistent with his 2011 State of the Union address, where he announced the goal of producing 80 per cent of electricity from ‘clean’ energy sources by 2035.

In addition, the Budget allocates US$276 million for research and development of advanced fossil fuel power systems, CCS, and CCUS.

In March 2012, the Clean Energy Standard Act was introduced which, if passed, will establish a standard for clean energy generation in the US through 2035. The Act provides for CCS facilities.

The US has agreed to only voluntary emission pledges to 2020 under the UNFCCC, and has indicated that, similar to the first commitment period under the Kyoto Protocol, it will not be ratifying a second commitment period either.

The US seems to be placing increasing emphasis on CCUS as a potential path for early-mover CCS adoption.