U.S.-FocUSed Biochar report - BioEnergy Lists

create a US-wide compliance carbon market, the US would almost certainly seek to align the targets and goalsof ACESA to an international agreement, likely the successor to the Kyoto Protocol, which expires in 2012. Voluntarymarkets may also nest themselves within compliance markets. The CDM Gold Standard, for example, isa voluntary carbon offset market that enforces higher sustainable development criteria than the general CDMcompliance market, and demands a higher price for its offsets, which are sold to discriminating buyers. (GoldStandard 2009). A party could purchase a CDM Gold Standard credit and use it for compliance purposes, withthe added ability to publicly state that its purchases are supporting sustainable development as well as emissionsreductions. Other voluntary markets, such as the CCX and VCS, exist independently of compliance markets, andspecialize in the trading of credits that are not yet recognized or available through compliance markets. (Lokey2009).Nuts And Bolts: What Gets Traded In A Carbon Market, By Whom, And When?Nearly all emissions entitlements share the same fundamental identity: 641 emissions entitlement = 1 metric tonne of carbon dioxide equivalent (tCO 2 e)Different markets have different terms for an entitlement. Kyoto uses Assigned Amount Units (AAUs) for developedcountry allowances, and Certified Emission Reductions (CERs) for offsets generated in developing countriesthrough the Clean Development Mechanism (CDM). The EU ETS trades EU emission Allowances (EUAs),which are quantitatively equivalent to AAUs. CERs may count as EUAs as well, provided the country in questionhasn’t exceeded the number of CERs allowed for use under its “supplementary clause” in its EU ETS agreement.Other regional markets have similar arrangements. (Katoomba Group 2010).Like any other market, a carbon market consists of buyers and sellers. Buyers “bid” (suggesting prices atwhich they would purchase a right to emit) and sellers “ask” (suggesting prices at which they would sell a rightto emit). If a bid matches an ask and both parties agree to move forward, a price is set and a transaction is made,either for the entitlement itself or for the right to transact at a future date at a set price (an “option”). The pricethat the parties agree to and subsequently transact using at a given point in time is known as a “spot price.” Ingeneral, buyers are either parties that need to purchase emissions entitlements to satisfy their carbon obligationsor traders attempting to profit from a future rise in the price of entitlements. Sellers are either traders, partieswith excess emissions that they do not need to meet compliance obligations, or developers (funders, operators,aggregators, or a host of other sub-parties) of carbon offset projects. Many exchanges on a carbon market arefacilitated by carbon brokers, who are analogous to stock market brokers, but have specific expertise in carboncommodities. (e.g., Brokers Carbon 2008).Emissions entitlements may be traded at any time, but all capped entities must hold a sufficient numberof emissions entitlements to account for actual emissions at the end of a compliance period. Thisvaries by market. Parties to Kyoto, for example, must hold the correct number of allowances at the end of 2012.The EU ETS has two compliance periods, one from 2005-2007, and another from 2008-2012. The CCX’s latestcompliance period ends in 2010. RGGI has a compliance period that ends in 2014, and annual compliance periodsfor 2015-2018. (Katoomba Group 2010). The end of a compliance period can result in dramatic spikes or fallsin the price of entitlements, as entities must make last minute purchases or sales in accordance with their actualemissions. (Lokey 2009).Carbon Offsets, An Important Subspecies Of Emission EntitlementCarbon offsets are tradable emission entitlements created by entities that are not subject to GHGemissions limitations. Offsets exist for two reasons. First, it is prohibitively expensive for regulators to directlytrack and limit emissions from certain kinds of distributed sources: farmland, forests, livestock operations, vehicles,and many others which, despite their small size individually, contribute mightily to overall GHG emissions.62 Some carbon markets use multiples of this identity. The CCX, for example, uses the Carbon Financial Instrument (CFI), whichequals 100 tCO 2 e rather than 1 tCO 2 e.Biochar relevance in GHG markets in: Carbon Market Implications for Biochar67