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RioPlus Business Focus: Carbon Price Floors – a vital tool but no silver bullet

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Politicians make the policy. But it’s often left to business to implement it. For this reason RioPlus Business is featuring submissions from the private sector across the globe in the lead up to Rio+20. The aim is to demonstrate how Sustainable Development is becoming a reality in every continent, country and city. By Charles Purshouse Charles Purshouse, Vice President, Carbon Services, Camco North America explains why it is vital the price for carbon is managed effectively if it is to incentivize green growth. The oversupply of allowances in the EU Emissions Trading Scheme (EU-ETS) and the recession has resulted in a significant reduction in the market price for carbon allowances and carbon credits. Project developers, and governments within Europe, who were hoping to see a steadily rising price of carbon incentivize the adoption of new technologies are looking at other policy approaches to encourage the development of clean energy and low-emissions projects. A carbon floor price mechanism – either enforced by setting a floor price for the auction of allowances or by some kind of central carbon bank removing allowances from the market when prices drop below a certain level – is in place in the Regional Greenhouse Gas Initiative (RGGI) in the U.S. and is proposed for California’s and Quebec’s cap-and-trade programs due to start in 2013, and for Australia’s in 2015. As a project developer, Camco see floor prices, particularly in the early years of a program, as helpful in underpinning forward price discovery and greater confidence to project investors that carbon revenues [...]

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