Module 3 provides a review of international agreements and domestic policies for mitigation climate change. In particular the Kyoto Protocol and the Paris Agreement under the United Nations Framework

Review Solutions Week 8 ECO3CCE Page 1 CLIMATE CHANGE ECONOMICS AND POLICY Respond: (a) The Kyoto Protocol assigned emission reduction responsibilities among countries based on historical emissions. Can you think of som e other alternative ways to allocate emission responsibility among countries? The assigned emission reduction responsibilities of Annex I countries under the Kyoto Protocol were criticised as these were not linked t o an economic or environmental objective. So alternatives could include: An economic objective such as maximising the net b enefits from mitigation actions, or minimising the costs of mitigating clim ate change An environmental objective such as limiting temper ature increases to a ‘safe’ level e.g. the 2 °C limit of the Paris Agreement (b) What are the flexible mechanisms which are bu ilt into the Kyoto Protocol? The flexibility mechanisms of the Kyoto Protocol include:

Emission trading as an instrument to reduce emissi ons The Clean Development mechanism whereby developed countries (Annex I) can undertake projects in developing (Annex II) to redu ce emissions. These can be verified as Certified Emissions Reductions (CERs) a nd traded within an ETS to meet obligations Joint implementation where projects between Annex I countries can be created and verified as and emission reduction units (ERU) (c) Distinguish between CDM and JI.

The CDM is for projects between developed and devel oping countries and the emissions reduction units are CERs and countries an d JI projects are between developed countries and the emissions reduction uni ts are ERUs (d) How will the target of 2 °C of the Paris Agreement be achieved?

The target set in the Paris agreement is to be achi eved through individual countries Intended Nationally Determined Contributions. These are to be increased over time to meet the 2 °C goal (e) What were the main features of the former Austr alian government’s carbon pricing policy? (i.e. the carbon ‘tax’) The carbon pricing policy underlined in “Securing a Clean Energy Future” (2011), included a period with a fixed price of carbon (car bon tax) to transition into an emissions trading scheme with a flexible price. The scheme’s coverage included the stationary energy sector and industrial process. Un der the flexible price period the scheme was to include a price ceiling and floor and be linked to the EU ETS. The revenue from the scheme was to be recycled to fund tax cuts and increases in welfare payments as well as assistance to trade exposed ind ustries. (f) List the main features of the Emissions Reduction Fund? The main feature of the ERF is to subsidise firms t o abate emissions compared to business as usual emissions. The program is a compe titive tender process whereby the government funds the least cost proposals for e missions reductions.