Carbon Trading Schemes

Neither the Woodland Carbon Code itself - nor Forest Carbon's activity under the Code - is involved in any formal carbon trading scheme such as the EUETS (see below) where all greenhouse gas-reducing projects must be of the compliance variety.  Clients buying our credits through their sponsorship of UK woodlands do so only to retire them. The following is for information only:

The European Union Emissions Trading Scheme (EUETS)

The European Union Emissions Trading Scheme (EU ETS) began in January 2005 and is the largest emissions trading scheme in the world, covering 12,000 installations in 25 countries and accounting for businesses that emit 40% of EU CO2.

The ETS is based on a cap and trade method (see Glossary), similar to Kyoto’s International Emissions Trading. The total number of allowances (these are in reality permits to allow the emission of CO2) are less than the total of previous emissions, so emissions will have to be reduced., and are allocated by the EU to member states. Countries, once in receipt of the allowances (the ‘carbon credits’ – called European Union Allowances, EUAs), then allocate them to companies within the country. The allocation of EUAs to companies is done on a ‘grandfathering’ basis: they are issued free of charge based on previous levels of emissions (less a bit). This has caused some controversy, and has on occasion given windfalls to businesses whose output has dropped due to reduced consumption and not anything they have done.

In 2009 the total value of EUA transactions rose 18% to US$118.5 billion. This growth was in spite of the fact that the average EUA prices fell 42% to US$18.7 compared to US$32.5 in the previous year.

The EU ETS scheme has been able to reduce overall carbon emissions by 2-5%  (World Bank, 2010) which is equivalent to 40-100 million tonnes CO2 annually. As a result of the ETS, European power companies have begun to fully integrate the cost of carbon into their investment decisions and include more low-carbon technologies, such as combined cycle gas turbines, high-efficiency coal and renewable energy (e.g., wind) in their future plant mix.  The ETS provides assurance to utilities that there will be a long-term carbon price, helping drive the shift to lower CO2 emitting technologies. Europe’s ETS has promoted the development of low-carbon projects worldwide by creating a framework that allows the utilization of credits generated through the Clean Development Mechanism (CDM) and Joint Implementation (JI) for compliance purposes within the ETS. The ETS has created a cost-effective, scalable infrastructure of registries, accounting methods, and monitoring, reporting and verification systems that will be ready to serve the ambitious emissions schemes of the future. These successes show that a multi-national emissions trading scheme can exist despite significant differences among participating nations, and provide a viable model for a potential global trading regime for the reduction of GHG emissions.

New Zealand Emissions Trading Scheme

On November 25, 2009, New Zealand’s Parliament passed the Climate Change Response (Moderated Emissions Trading) Amendment of 2009, ending a year of uncertainty on the future shape of New Zealand’s carbon regulation. New Zealand’s ETS, which had covered forestry since 2008, is now the first mandatory, economy wide scheme outside Europe. International entities have already been major purchasers of New Zealand’s forestry carbon assets.

 New South Wales Greenhouse Gas Reduction Scheme

The NSW Greenhouse Gas Reduction Scheme (GGAS) commenced on 1 January 2003 and was one of the first mandatory greenhouse gas emissions trading schemes in the world. GGAS aims to reduce greenhouse gas emissions associated with the production and use of electricity. It achieves this by using project-based activities to offset the the greenhouse gas emissions arising from electricity generation.

GGAS establishes annual greenhouse gas reduction targets, and then requires individual electricity retailers and certain other parties who buy or sell electricity in New South Wales to meet targets based on the size of their share of the electricity market. If these parties, known as benchmark participants, fail to meet their benchmarks, then a penalty is applied.

Participants can offset their emissions through energy efficiency projects for consumers, through generating power more efficiently, or though forestry carbon capture.