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FINANCE & INVESTMENT087Below: SamanthaSmithPhoto: WWF-Canon/Richard StonehouseBali Action Plan under the UNFCCC, as well as throughArticle 4 of the UNFCCC and Article 2.2 of the KyotoProtocol. FOR EXAMPLE: A SYSTEM FORMARITIME TRANSPORT Out of the Bunker: Time for a fair deal on shippingemissions, a new report from WWF and Oxfam releasedin early September (,spells out how to reach agreement on a carbon pricingmechanism for shipping that can raise up to US$25billion, with minimal impacts on the cost of goodsshipped - estimates are around 0.2 per cent onaverage. The report notes that a large part of thisrevenue - at least US$10 billion but potentially muchmore - can be used for action on climate change indeveloping countries. The WWF-Oxfam reports spell out how to overcome thelong-standing impasse over the competing principlesof the International Maritime Organization (IMO) andthe Climate Convention (UNFCCC). Since ships canchange owners, operators and flags easily, the IMOinsists that ships of all flags should be treated equally.The UNFCCC has the principal of "common butdifferentiated responsibilities and respectivecapabilities (CBDR)", and calls on developed countriesto act first in reducing their emissions. To protect the economies of poorer countries (wheresmall price increases could cause greater hardship),the WWF-Oxfam report proposes a system of rebatesfor developing countries related to their share of theglobal shipping, to ensure that there is "no netincidence" or cost burden on developing countriesresulting from a global carbon pricing system. DECISION NEEDED NOWThe UN climate conference in Cancun last yearcreated a "bank" for global climate finance: the UNGreen Fund. This bank now needs reliable andsufficient sources of funding. The current pledges forfast-start finance expire at the end 2012, so thequestion of where finance will come from after thatmust be answered in Durban. IMO and theInternational Civil Aviation Organization (ICAO) are thetechnical bodies that will likely implement anymeasures to address emissions from the maritimetransport and aviation sectors in practice. However,they need further guidance from the UNFCCC on howto proceed in tackling greenhouse gas emissions. Theupcoming climate negotiating session in Durban,South Africa this December is the best opportunity forthe global community to resolve these key outstandingissues. If countries have the will, they can decide tomove forward with addressing emissions frominternational aviation and shipping, and fund urgentneeds for climate finance. As the WWF-Oxfam paperdescribes, the pieces appear to be falling into place fora solution that respects the principles and practices ofthe various conventions, and addresses the concernsof developed and developing countries. Progress inaddressing the rapidly growing emissions from theseinherently global sectors would be a milestone in thebattle against climate change and in generating thefinancing needed to support action, especially in thepoorest countries and those most vulnerable toclimatic disruptions. A strong outcome on financingefforts at the Durban climate summit can put us on apath to avoid the worst consequences of climatechange. Reaching an agreement on a market-basedapproach to pricing unregulated carbon pollution frominternational shipping will help reduce global carbonemissions and help developing countries deal with theimpacts of climate change. In Durban, world leaderswill get a chance to make progress on climate financeand show that they can be bold and ambitious in bothword and deed. nABOUT THE AUTHORSamantha Smith leads WWF's Global Climate andEnergy Initiative. Through the Initiative, WWF workstowards a low-carbon, safe and sustainable future forall. Previously, Ms Smith held senior roles in the NewEnergy division of Statoil where she developed windpower and CO2 projects. Prior to this, she wasdirector of WWF's International Arctic Programme.Ms Smith started her professional career as acorporate litigation attorney in the USA, with anemphasis on finance and environmental matters. Ms Smith has degrees in history and law from theUniversity of California, Berkeley. For moreinformation on WWF's work on climate finance,please go to:

ountries participating in the EuropeanEmissions Trading System (EU ETS) willsoon be facing significant changes tocurrent regulations. Under the current scheme, based on internationalagreements, all companies operating "installations",i.e. technical units the exploitation of which can leadto emission of harmful substances, are obliged toreport their CO2 emissions annually and to surrender acorresponding number of allowances held. Up until now, each participant would receive anallotted amount of free emission allowances accordingto a pre-agreed plan of allocation based on capsnegotiated by governments of the EU Member States,with a secondary market running smoothly in parallel.Companies that wish to purchase additionalallowances can obtain them on the spot market or inthe form of derivatives such as futures or options.Additionally, some stock exchanges allow auctions,where the number of allocations placed on the marketin individual transactions tends to be very high inrelation to the daily turnover.From next year until the end of 2020, participants of theEU emissions trading system will have to face theimplementation of amended EU Regulations. The mostsignificant changes concern the way in which allowancesare registered and placed on the market. From thebeginning of 2012 the current, decentralised system ofemission registers is to be replaced by one consolidatedEuropean Union register (EUTL - European UnionTransaction Log). This means that, among otherrequirements, company owners will need to undergothe registration process all over again and learn new ITsystems, while administrators of the system will be ableto monitor registrants more closely than ever before. When the new rules come into force, administratorswill have the power to request that members of theboard of a future account holder, or its representativeswho are to be given access to the register ofdeclarations, submit a declaration confirming that theyare not subject to legal proceedings relating toembezzlement of CO2 emission allowances or otherunits created in line with the Kyoto Protocol,introducing into circulation money from illegal orundisclosed sources, financing terrorism or otherserious crimes, thus ensuring that the account will notbe used for those purposes. Those criteria, along with an obligation to ascribe toeach account an additional authorised representativeso that each transaction on the account is authorisedby at least two people, will undoubtedly enhancecredibility and safety of the whole system. At the sametime, however, more stringent rules can contribute tocreating entry barriers for companies wishing to takepart in the trade system, for whom the participation inthe EU ETS is not currently mandatory. The resultingconfusion caused by those changes can lead to adecrease in the volume of transactions compared tocorresponding periods in previous years.Another important change to be introduced after 2012is the way allowances are placed on the market. From2012 onwards, carbon market will be divided into theprimary shares market, primary free emissions marketand secondary market, already in place. This meansthat auctions will not be the only way to obtainallowances, hence interested parties will be able tochoose whether to take part in them at all. Accordingto European Commission estimates, auction sales willconstitute over 50 per cent of the total volume ofallowances for the years 2012-2020. (The auctioningprocess is regulated by the provisions of theEUETS-PURCHASING EMISSIONS ALLOWANCES IN2013-2020088CARBON FINANCEMACIEJ WISNIEWSKI, PRESIDENT, CONSUS S.A.C