CLIMATE CHANGE - FINANCE NORWEGIAN PROPOSAL

KEY POINTS ● Cap and trade systems create assets ● The size of the asset is decided by the Cap ● The value of international allowances are substantial ● A small percent in auction suffices to finance adaptation ● Administration can be very simple

GENERAL ● Financial needs > “ public money ” = involve market ● International incentive system – carbon market ● New and additional - PPP

NORWEGIAN PROPOSAL ● Withhold and auction (small) portion from national quota allocation (AAUs) ● At international level ● For Adaptation and/or other purposes

FEATURES ● Predictable ● Reliable/sustainable ● Adequate/upscaleable ● Administrative simplicity

PREDICTABILITY ● Design for funding needed ● Independent from national budget process (”domestic revenue problem”)

RELIABILITY ● Decisions at international level = reliability in proportion to what is politically desirable or manageable at international level

ADEQUACY ● Partcipation by all with legally binding commitments ● The larger the base, the lower % for a given outcome ● Scale of system determine income possibilities ■ Global carbon market need lower % than regional or current KP ■ Allocation in a global system > big earner for DCs

ADMINISTRATION ● Simple (in principle) (AFB?) ● International financial institution – tender? ● Governance? ● % ? – Fixed Number ? – Decision process ? – Combination ? %

SOME NUMBERS ● 2% Annex I emissions 17,6 GtCO 2 e ● Current carbon price → USD 14 billion ● All Annex I – 30% – carbon price USD 100/ton → USD 23,2 billion

IN PRINCIPLE: % or number of allowances to be auctioned can be set to generate the amount of funding needed for the purpose in question. Hence need for more accurate estimates of funds needed for adaptation