Introduction Emissions Trading Systems Main Objective Kyoto Protocol 1990 - 2017 Mechanisms How it works Implementation challenges Monitoring and controlling process Political challenges Market manipulation Efficiency Conclusion

1. Emissions Trading
Adam Skafi MBA SS17 D
Image source: energydesk.greenpeace.org

2. Emissions Trading
2
Introduction
• Emissions Trading Systems
• Main Objective
• Kyoto Protocol 1990 - 2017
• Mechanisms
• How it works
Implementation challenges
• Monitoring and controlling process
• Political challenges
• Market manipulation
• Efficiency
Conclusion
Content
Adam Skafi MBA SS17 D

3. What are Emissions Trading Systems/Scheme (ETS)?
Emissions Trading
3
Introduction
Adam Skafi MBA SS17 D
► A market-based approach to control pollution.
► Countries agreed on Assigned Amount Units (AAUs).
climate.nasa.gov. Own comparison
► Controlling & reducing Greenhouse Gases (GHG). Global warming < 2°C
►19 ETS cap-and-trade systems are in force to date. EU ETS is the biggest.
► Pollution permits are tradable. Countries can sell excess capacity.

4. First emissions trading market and Kyoto Protocol 1990 - 2017
Emissions Trading
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Introduction
Adam Skafi MBA SS17 D
►1990
First emissions trading market was established in the U.S. by
the Clean Air Act to reduce the acid rain.
►1997
The Conference of the Parties (COP) / (Paris Agreement) held
a meeting in Kyoto, Japan. 150 nations agreed on the first
international treaty on controlling and reducing (GHG).
►2001
Participants from 178 countries, met in Bonn, Germany, and
adopted the Kyoto Protocol, the U.S didn't participate.
►2004 The Russian Federation ratified the protocol.
►2005 The Kyoto Protocol entered into force. Currently 192 parties. Bonn Conf. nfccc.int
Kyoto Conf. syskool.com.
UNFCCC (United Nations Framework
Convention on Climate Change) .

5. Mechanism
Emissions Trading
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How it works?
Adam Skafi MBA SS17 D
 Countries have accepted targets for limiting or
reducing their emissions.
 Emission quotas "Assigned amounts“ agreed on.
Reduce the overall emissions by certain %.
Parties calculate and track their AAU in terms
of Tones of CO2. 1 AAU = 1 Tone CO2.
This information must annually submitted to
UNFCCC (United Nations Framework Convention on Climate Change) .
Countries with spare units can sell excess
capacity to countries that are over their targets.
 This makes the emissions trading permitted units
tradable.
Unit Types
AAUs: Assigned Amount Units RMUs: Agricultural and forestry sector.
ERUs: Joint Implementation (JI) CERs: Clean Development Mechanism. Developing countries.

6. ►In 2001 in Bonn, Germany. The U.S. didn't
participate.
Emissions Trading
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Implementation Challenges - Political
Adam Skafi MBA SS17 D
►In 2011, Canada had officially withdraw from the
protocol, saying the protocol's goals are unworkable as the
United States and China never agreed on the protocol.
► In 2015, Paris Agreement, is a separate
instrument under the UNFCCC. It’s not an
amendment of Kyoto Protocol.
Carbon markets is characterized by criticism for not delivering real emissions reductions
► In 2017, Donald Trump announced to pull the US out of
Paris Agreement.
mshcdn.com. Paris agreement 2015

7. Emissions Trading
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Implementation Challenges – Controlling Problems
Adam Skafi MBA SS17 D
Carbonssolutionsgloba.com
►Complexity of different rules (comprehension of allowance types )
► Companies made fake claims and sell away $$ their credits.
► Process influenced by many groups (e.g. polluters).
► Carbon credits do not represent a physical commodity.

8. Emissions Trading
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Implementation Challenges – Failure & Fraud
Adam Skafi MBA SS17 D
Fraudulent manipulation of
measurements
Climate activists protest near the International
Emissions Trading Association (IETA)
headquarters in Brussels, on November 29,
2010
"The truth about the ETS is
that it has completely failed"
Raoul Ruparel, deputy director of the Open Europe thinktank
illegal activities within emerging carbon markets that are potentially/
proven, vulnerable include:
Sale of carbon credits that either do
not exist or belong to someone else
False carbon market investments.
Projects don’t exist. Computer hacking/
phishing to steal carbon credits
Exploitation of weak regulations
money laundering, securities
or tax fraud

9. Emissions Trading
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Implementation Challenges – Failure & Fraud
Adam Skafi MBA SS17 D
Climate activists protest near the International
Emissions Trading Association (IETA)
headquarters in Brussels, on November 29, 2010
Facts & Numbers
2010 in Europe, a group of traders stole $4 million by setting up a
fake–but official looking–website.
The false scheme forced the German Emissions Trading Authority
to suspend trading. 250,000 permits/tones were already sold.
Tax fraud associated with carbon trading cost $6.5 billion over 18
months. Some countries up to 90% of total trading volume.
New analysis in 2016, shows the industry across Europe has
earned a €24 billion windfall from 2008 to 2014

10. economist.com
Emissions Trading
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Implementation Challenges – Efficiency?
Adam Skafi MBA SS17 D
March 2017 was the second warmest March in 137 years Nasa.gov economist.com

11. Emissions Trading
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Conclusion
Adam Skafi MBA SS17 D
Climate activists protest near the International
Emissions Trading Association (IETA)
headquarters in Brussels, on November 29, 2010
There is no one emissions trading system that can fit the needs of all nations.
Systems should be tailored to fit variety of economics and markets across all the continents.
A need for proper monitoring and enforcement processes to ensure environmental and
financial integrity.
ETS have been failed to certain extent, so maybe it’s the right time to create
new systems!

12. Emissions Trading
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Thank you!
Questions & Discussions
Adam Skafi MBA SS17 D

13. Emissions Trading
Sources
13 Adam Skafi MBA SS17 D
•Wikipedia: Kyoto Protocol (no date), https://en.wikipedia.org/wiki/Kyoto_Protocol, (accessed 2017-
06-06, 20:36 CET)
•WIREs Clim Change 2013, 4:107–119. doi: 10.1002/wcc.208.
•Ralf Antes, Bernd Hansjürgens, Peter Letmathe, Emissions Trading, 2008, p. 195.
•Interpol: Guide to Carbon Trading Crime (2013), https://www.interpol.int/Media/Files/Crime-
areas/Environmental-crime/Guide-to-Carbon-Trading-Crime-2013, (accessed 2017-06-05, 13:50
CET)
•Toronto sun: Call it cap-and-fraud (2016-07-23) http://www.torontosun.com/2016/07/23/call-it-cap-
and-fraud, (accessed 2017-06-08, 10:30 CET)
•Edward A. Page, 2012, The hidden costs of carbon commodification: emissions trading, political
legitimacy and procedural justice, Democratization, 19:5, p. 932-950.

14. Emissions Trading
Sources
14 Adam Skafi MBA SS17 D
•ICAP: Emissions Trading Worldwide (ICAP) Status Report 2017 (2017),
https://icapcarbonaction.com/en/?option=com_attach&task=download&id=447 , (accessed 2017-06-
05, 11:18 CET).
•Forbes: Cap-And-Trade Is Fraught With Fraud (2015-10),
https://www.forbes.com/sites/judeclemente/2015/10/01/cap-and-trade-green-climate-fund-are-fraught-
with-fraud/2/, (accessed 2017-06-05, 10:35 CET).
•CNN: Kyoto Protocol Fast Facts (2013-07-26) , http://edition.cnn.com/2013/07/26/world/kyoto-
protocol-fast-facts/index.html, (accessed 2017-06-02, 16:10 CET)
• NASA: Global Temperature (no date), https://climate.nasa.gov, (accessed on 2017-05- 01, 06:10
CET).
•Theguardian: What is emissions trading? (2011-07-05),
https://www.theguardian.com/environment/2011/jul/05/what-is-emissions-trading, (accessed 2017-06-
06, 18:00 CET).