The webinar discussed how to save the planet on a budget through green finance. It covered paying the cost of carbon through policies like carbon pricing, taxes, and cap-and-trade systems. Speakers from organizations like the Environmental Defense Fund and the British Columbia Ministry of Environment discussed experiences with carbon taxes and cap-and-trade in Europe and British Columbia. They addressed the impacts on emissions reductions and costs to the economy as well as challenges around price volatility, windfall profits, and fraud. The webinar emphasized using market-based policies and pricing carbon to drive low-carbon innovation.

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2. How to Save a Planet –
On a Budget
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#GreenFinance

3. About this Webinar
How you can share:
• Submit your questions in the GotoWebinar presentation window
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#GreenFinance

4. About Our Moderators
Gernot Wagner is an economist at the Environmental Defense Fund, where he works on market-
based solutions to a wide range of environmental problems. He also teaches energy economics as
adjunct faculty at Columbia’s School of International and Public Affairs, and is the author of But will
the planet notice? How smart economics can save the world.
Marc Gunther is a writer and consultant whose focus is business and sustainability. Marc is a
contributing editor at FORTUNE magazine, a senior writer at Greenbiz.com, and a leading blogger at
The Energy Collective. Marc is the author or co-author of four books, including Faith and Fortune:
How Compassionate Capitalism is Transforming American Business.
Jesse Jenkins is Director of Energy and Climate Policy at the Breakthrough Institute, and is a leading
energy and climate analyst and advocate. Jesse's work and analysis has been featured in many
media outlets, and he is recently the co-author of Bridging the Clean Energy Valleys of Death:
Helping American Entrepreneurs Meet the Nation's Energy Innovation Imperative
Robin Fray Careyis CEO of Social Media Today, which publishes The Energy Collective, Sustainable
Cities Collective, and eight other B2B social communities that connect leading thinkers with other
professionals and business influencers. Robin co-founded the company in 2007 and is a veteran of
the print media world.
#TECLive
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5. How to Save a Planet – On a Budget
Hour 1 (9:15 – 10:15 EST):
• Paying the Cost of Carbon: A Conversation about
Carbon Pricing
• Can Carbon Markets Drive Green Innovation?
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#GreenFinance

6. About Our Speakers
Janet Peace is the VP of Markets and Business Strategy at the Center for Climate and Energy
Solutions, managing the Center's engagement with corporate community, its economics program and
its analysis of market-based policy options. Previously, Dr. Peace held the same role at the Pew Center
on Global Climate, C2ES's predecessor organization. Dr. Peace holds an M.S. and Ph.D. in Economics
and an undergraduate degree in Geology.
Lee Thiessenworks for the British Columbia Ministry of Environment as the Executive Director of
Climate Policy in the Climate Action Secretariat. This Secretariat is responsible for developing and
coordinating policy, and its implementation, across the BC provincial government. The policy is aimed
at helping the province progress towards its greenhouse gas targets and adapting to the impacts of
climate change.
Lucas Merrill Brown is a Rhodes Scholar at Oxford who researches consumer behavior around
cleantech adoption. He has worked as a research intern for climate change economics for
Environmental Defense Fund, as Regional Field Director for Virginia Congressman Tom Perriello, as a
budget aide for D.C. Mayor Adrian Fenty, and as a programmer for ILoveMountains.org.
Gernot Wagner, moderating,is an economist at the Environmental Defense Fund, where he works on
market-based solutions to a wide range of environmental problems. He also teaches energy
economics as adjunct faculty at Columbia’s School of International and Public Affairs, and is the
author of But will the planet notice? How smart economics can save the world.
#TECLive
#GreenFinance

7. Paying the Cost of Carbon
Janet Peace
November 30, 2011

8. Emitting GHG Is Typically Free

9. Climate Change Has A Cost

10. •is the point—to make the cost of emitting carbon explicit, so that it becomes part of the everyday decision making process.
Accounting For Cost
The point is to make the
cost of emitting carbon
explicit – so that decisions
and investments factor in
this cost

11. Policy Options
• Command and Control (direct regulation)
• Subsidies
• Cap-and-Trade
• Carbon Tax
• Cap and Dividend
• Clean Energy Standard
All with multiple variations….
Cap-and-trade and Tax are the two most often
market based policies discussed

12. The Basics

13. Comparing C-T and Tax
• Simplicity
• Emission Reductions
• Cost
• Cost Effective
• Market Risk
• Technology and Innovation

14. For More Information
www.C2ES.org
Janet Peace
Center for Climate and Energy Solutions
(formerly the Pew Center on Global Climate Change)
PeaceJ@C2ES.org

15. Carbon Tax in
CLIMATE ACTION IN
British Columbia
BRITISH COLUMBIA
November 30, 2011
www.livesmartbc.ca
www.livesmartbc.ca

16. Carbon Tax Objectives and Features
• Tax objective is to reduce provincial GHG
emissions via financial incentive
• All carbon tax revenue is recycled through tax
reductions
• Tax rate started low and increases gradually
– 2008: $10/T CO2e 2012: $30/T
• Tax has the broadest possible base, given data
• Tax is one of various other climate measures
16

17. Broader Actions: BC’s Climate
Action Plan
• Provincial-wide approach to adapt to
impacts, reduce emissions, and promote
low-carbon economy
– Legislated targets
– BC Adaptation Strategy
– Revenue neutral carbon tax
– Western Climate Initiative
– Industry GHG reporting
– Carbon Neutral Government 2010
– Local governments GHG targets
– LiveSmart BC housing incentives
– Green Building Code
– Renewable and Low Carbon Fuel
standards
– Landfill gas collection standards
17

18. BC’s GHG Targets and Distribution by
Sector
07 Baseline 68MT
Interim
2012 64MT (-6%)
B.C. Greenhouse Gas Emissions - 2009
Total: Approx. 66 800 kilotonnes CO₂e
Residential Other
Interim
2016 56MT (-18%) and Industry
Commercial 19%
11% Agriculture
Legislated 3%
2020 46 MT (-33%) Waste
6%
Electricity
2%
Transportation Net
35% Deforestation
5%
Fossil Fuel
Production
19%
2050 Legislated 14MT (-80%)
18

19. BC’s Revenue Neutral Carbon Tax
• Applies $30 per tonne of CO2e in 2012 to
combustion of fossil fuel
• Non-combustion GHG emissions not covered
• BC has tailored tax benefits to balance costs Tax covers ~70% of emissions
$1.5 billion
Other
$1.2 billion $226 Personal income tax cuts
Process,
$182 Low income tax credit venting
etc.
$85 Northern and Rural Fossil Fuel
Combust.
Homeowner Benefit
$1,001 Business tax cuts
*Projected total
revenue and
Carbon tax Tax reductions* reductions for fiscal
revenues* 2012/13 19

20. Selected Carbon Tax Rates by Fuel
Type
Fuel Units Tax Rate Tax Rate Current BC 2011 Tax as
2011 2012 Market Percent of
($25/T ($30/T Price (ex Market
CO2e) CO2e) carbon tax) Price
Gasoline Litre $0.06 $0.07 $1.25 5%
Diesel Litre $0.07 $0.08 $1.35 5%
Natural gas Gigajoule $1.24 $1.49 $8.50 15%
Thermal Tonne $44.30 $53.16 >$100 <44%
Coal
20

21. Greenhouse Gas Impacts
• No historical attribution has been done because
of limited data
• Effects must be modeled since many variables
affect GHG emissions
• Projected reduction of current tax: 3+ MT by
2020 or about 1/10 of emissions gap to target
• Expectation of carbon tax rates affect energy-
related investment, especially in industry
21

22. Carbon Tax Discussion
• Carbon tax main purpose is influencing
decisions, unlike most other taxes
– Revenues of tax can be seen as co-benefit
• Carbon tax and cap and trade can be
complements or substitutes
– Tax can help prepare economy for C&T
• Design simplicity and administrative capacity
in implementing carbon tax
22

23. The EU Emissions Trading
System
Impacts and Lessons Learned
Chemrec, biofuel
from pulp-and-paper

24. Outline:
Whirlwind tour of the EU ETS
1. Disclaimer:
– Views are my own and only my own
2. Acknowledgments:
– Denny Ellerman, Bonnie Greenfield, Alex Hanafi
3. Emissions reductions
4. Costs
5. Impacts of the recession
6. Price volatility
7. Windfall profits
8. Theft and fraud
9. Low-carbon innovation

25. Emissions reductions
• 2005, 2006, and 2007:
– Between 120 and 300m tonnes of CO2
– 2–5% fewer emissions than BAU
• 2008 and 2009:
– Roughly 350m tonnes
– 8% fewer emissions than business as usual
• 470m tonnes is more than Mexico or
Australia
• On track to meet and beat Kyoto targets
Source: Ellerman, Pricing Carbon, and unpublished manuscript.

26. Emissions reductions
Source: EU Emissions Data: A. Denny Ellerman, unpublished manuscript. EU GDP data: World Bank.

27. Costs
• Minimal:
– Roughly 0.01% of Europe’s GDP (Ellerman)
– Back of the envelope: 0.02% of EU GDP
– Minimal effects even on power, steel, pulp &
paper (McKinsey, IEA)

28. Impacts of the recession
• The ETS is responsible for a larger share
of emissions reductions than the economic
recession
• Over-allocation:
– Projected and unverified emissions data
– Net long by roughly 2.5%
Sources: New Carbon Finance 2009, Ellerman 2010, Frank Watson 2011, Anderson and DiMaria 2011

29. Price volatility
• Phase I permits were not “bankable”
– Thus Phase I was forced to end either in deficit
(high price, met by CERs) or surplus (zero price)
– Price went to zero
• “Bankable” Phase II permits maintained stable
value

30. Price volatility

31. Price volatility
• Since 2007:
– Oil prices: 19% more volatile than EUAs
– Coal prices: 25% more volatile than EUAs
Source: Black-Scholes calculations by the author, price data: World Bank, Point Carbon.

32. Price volatility

33. Windfall profits
• Phase I:
– €11.4 billion for coal, gas, oil power
– €7.9 billion for renewables, hydro, nuclear
• EU utilities market: €730 billion in total
• Will be eliminated by auctioning
Source: Ellerman, Pricing Carbon.

34. Windfall profits
• Concentrated in countries with:
– Fewer regulations controlling end-user prices
– High-carbon peak electricity supply
• The carbon intensity of the marginal cost plant is
crucial
• For instance:
• German utilities have windfall profits/kWh four times
larger than Spanish utilities
• German utilities have ETS-induced price increases four
to thirteen times larger than French utilities
• Implications for California and others
Sources: Ellerman, JosSijm, Point Carbon/WWF.

35. Theft and fraud
• Theft:
– €50 million
– Approximately 0.06% of annual value
– EU credit card theft: 0.12% of annual value
• VAT fraud:
– Europol: widely repeated projection of €5 billion
• World Bank argued this cannot be true
– VAT fraud on other EU commodities: €100 billion/yr
– Not possible in jurisdictions with harmonized tax
regimes
Sources: European Commission, Nilson Report, Ernst & Young, World Bank, Joshua Chaffin.

36. Theft and fraud
• Spot markets account for 10% of ETS carbon
trading
• Futures markets stayed open and maintained
stable prices
Source: Joshua Chaffin.

37. Low-carbon innovation
• Patent data
• Renewables in Germany employ 367,000
people
– Net gain of 70,000 to 90,000 jobs
• Of the 500 largest companies in the
world, those focused on low carbon growth
experience double the financial return
Sources: Dechezleprêtre 2011, German Federal Env’t Ministry, PricewaterhouseCoopers

38. Questions welcome!