U.S.-FocUSed Biochar report - BioEnergy Lists

Biochar relevance in GHG markets in:Carbon Market Implications for BiocharCarbon Market Basics: The What And The Whyadam Reed, JDAdam.Reed@Colorado.eduA carbon market is a trading system where entities – individuals, corporations, or governments – tradeentitlements to emit climate-forcing greenhouse gases such as carbon dioxide. A carbon market developsbecause a group of entities agrees to collectively limit, or “cap,” their total emissions of greenhouse gases(GHG) in order to mitigate global climate change. Realizing that reducing emissions may be lower cost for someentities than for others, the agreement permits trading of emissions entitlements – also known as “carbon allowances”or “carbon credits” – so that entities with high emissions reduction costs may purchase entitlements fromthose with lower costs. In this way, “cap & trade” carbon markets are thought to drive down the costs of reducingemissions, because entities with aging, expensive-to-retrofit equipment may purchase emissions reductionsfrom entities with more liquid capital that invest in cleaner technology. Carbon markets also act as a means oftransferring wealth from entities using “dirtier” equipment and practices to entities using “cleaner” equipmentand practices, both through the trading itself and through the initial auctioning of allowances, which generatesrevenue that governments may then redistribute to other activities. (CBO 2009, IEDC 2009).Carbon markets may be mandatory or voluntary. A carbon market created by a government or group ofgovernments, and which requires all emitters within particular sectors to play in the market, is known as a “compliancemarket.” Examples include the Kyoto Protocol to the United Nations Framework Convention on ClimateChange (hereinafter “Kyoto”), the European Union Emissions Trading System (EU ETS), and the Regional GreenhouseGas Initiative (RGGI) in the Northeastern United States. (Lokey 2009, IEDC 2009, CBO 2009). Marketscreated by other entities that do not require economy-wide participation are known as “voluntary markets.” Examplesof these include the Chicago Climate Exchange (CCX), the Voluntary Carbon Standard (VCS), and theClimate Action Registry in California. (CBO 2009). Compliance markets command significantly higher pricesfor emissions entitlements than do voluntary markets, because failure to meet one’s obligations in a compliancemarket often comes with regulator-imposed penalties. (Lokey 2009).Carbon markets are often “nested” within each other. Compliance markets in particular tend to alignthemselves according to a series of coordinating authority levels. States will “nest” domestic compliance marketswithin an international market in order to simplify compliance for covered entities and in order to allow itsentities to sell emissions entitlements on a global carbon market. Thus the EU ETS is an EU-wide market thatis designed to allow the member states to meet their goals under the Kyoto Protocol. (Lokey 2009). In the eventthat the United States Congress were to pass the American Clean Energy & Security Act (ACESA), which would66U.S.-Focused Biochar Report:Assessment of Biochar’s Benefits for the United States of America