Miles Austin took the reigns as the new director of the Carbon Markets and Investors Association (CMIA), this month. Prior to joining CMIA, he served as head of European regulatory affairs at EcoSecurities. He spoke with Environmental Markets Newsletter Editor Jim Kharouf about his start in the industry, how the emissions markets are doing today and dealing with climate skeptics.
Q: How did you get started in the emissions markets?
A: I got started via the Imperial College ICET MSc where I specialized in global environmental change and policy. That got me into the whole idea of carbon trading. I did my dissertation at Point Carbon and lived in Oslo for just short of a year.
Q: As the new director of the Carbon Markets and Investors Association, (and a longtime member and participant in the organization) what does the organization do?
A: There are about 50 companies in the CMIA which range from those that invest and develop projects in the Kyoto Protocol, to large financial institutions that trade EUAs and CERs. There are a lot of legal firms, consultancy firms and technology providers as well. Most are based in the UK and mainland Europe but we’re also gradually building our North American presence as well. We’re co-sponsoring Carbon TradeEx America in September in Chicago.
Q: What are your goals for CMIA?
A: Right now, we’re working on the various things that the organization has to prioritize for this coming year. We’re working on our position with regard to the executive board of the UN Clean Development Mechansim (CDM) on issues that came out of the UN meeting in Copenhagen. The guidance to the executive board contained a lot of potential. There are a number of issues surrounding the European Union Emissions Trading Scheme such as how Phase 3 will run, potential changes in the status of EUAs (European Union Allowances) with regard to European market legislation. We’ll also be watching what is happening in the U.S. And we’ll be watching what’s happening on the road to the [November-December] UN meeting in Mexico and contributing on how the CDM can be approached, or how new mechanisms can be approached. There will be a large conversation around the funding that was approved and how it will be forthcoming.
Q: The UN’s Clean Development Mechanism, which has been criticized for being inefficient and inconsistent in its offset approvals, is pretty important to the carbon market, isn’t it?
A: It is. We’ve asked, as an industry association, along with other associations for a lot of reforms which fell by the wayside last year. This year, we haven’t gotten the full set of reforms we were asking for but we did get more moves toward greater transparency and accountability, as well as moves toward an open dialog between the regulator and the regulated firms. Potentially, there is an appeals process as well, plus there is a move toward benchmarking. It’s really a question of how it will be implemented and that’s something we’ll be engaged in.
Q: EU ETS is now five years old, having officially commenced in January 2005. Two questions: how is the market working, and is it doing what it was intended to do – set a price for carbon that ultimately would help drive carbon emissions down?
A: The market is working well. The price has proven resilient to the recessionary pressures. Is it doing what it should be doing? In my opinion, yes it is. At the end of the day, the environmental benefit of a cap-and-trade comes from the cap. The trading part does two things. First, it allows you to achieve the cap in the cheapest possible manner. The second thing it does, that a command and control or tax approaches don’t, is that the price indicates the difficulty of achieving the cap [emissions targets]. In Phase 1 when the system was over allocated, prices collapsed. In Phase 2, it has fallen as a result of the recession but its still in the €13 to €15 ($17.65 to $20.37) band which is pretty good. A further benefit of course is that the cheaper it is to implement emissions reductions the more ambitous regulators can be, so the cap under cap and trade will lean more towards being set in line with environmental requirements rather than being stymied by economic and political concerns.
Q: In the U.S., cap-and-trade currently appears to be facing further delays. It may be scaled back to just the utility sector, as is being suggested by some in Congress. Would that limited market work, in your opinion?
A: It can work but you lose the range of abatement opportunities that are available to a broader market. If the utility-based market would allow offsets from all over the world then that would open different abatement opportunities. The optimal approach is to take in as many large emitters from the economy as possible, put them under a cap and then open up trading opportunities. You can’t be aware of all the potential ways to reduce emissions as a legislator and you are only really aware of them if you’re on the ground and looking at things from the perspective of abatement versus compliance costs.
Q: Do we need a comprehensive U.S. market in order to bring a post-Kyoto/post Copenhagen international agreement forward?
A: If the U.S. chooses to use a market-based approach, it will be cheaper. It would cost the American tax payer far less than if it was done by a tax or command and control. We kind of do need it, because the cheaper it is, the more ambitious you can be, scientists say we need to be ambitious at the moment, cap and trade will be cheaper and that can make the required level of ambition politically and economically more acceptable.
The ultimate goal would be to set up a global cap-and-trade scheme but we’re quite a long way away from that. A reasonable intermediate step would be to have series of separate cap-and-trade schemes that either directly link or indirectly link with the UN’s Clean Development Mechanism. That patchwork can happen in two ways: under an overarching international agreement or without one.
Q: No doubt, you’ve heard or met climate change supporters and climate skeptics. What do you tell skeptics who simply say they don’t believe the science, especially after the latest problems with the scientists data or “Climategate” and UN Intergovernmental Panel on Climate Change (IPCC) report errors?
A: Climategate was basically an argument between a couple scientists over whether or not a report should be included in the IPCC report, and in the end, they didn’t actually squash anything. Regarding the information about Himalayan glaciers melting from the World Wildlife Fund, which is not a scientific body, IPCC definitely dropped the ball. They were using research from the World Wildlife Fund and its not a scientific body.
Having said that, there is a huge amount of compelling evidence supporting that climate change is happening. And there are visible things happening. I used to live in Germany and the glacier on Germany’s highest mountain, the Zugspitze, is expected to be gone fairly rapidly. It is being covered in summer with a tarp and the range of activities allowed has been reduced in order to prolong its life span. If you look at the polar ice caps the North Pole, it may be ice free in the summer in this half of the century, Greenland’s ice cap is melting more rapidly than in the past and Siberian tundra is melting fairly rapidly. All of these are happening and they are visible and they are due to warming. We also understand the physics of carbon dioxide fairly well and know that we are releasing millions and millions of tons of stored carbon dioxide into the atmosphere at a rate that haven’t been done before.
It’s not a great leap.