FACTBOX: Carbon trading schemes around the world

(Reuters) - Companies and governments are turning to emissions trading as a weapon to fight climate change, in a carbon market that analysts expect to rise to over $100 billion this year.

Cap-and-trade schemes force participants, often energy-intensive industries, to buy permits to emit greenhouse gases such as carbon dioxide, which is produced from burning fossil fuels.

On Tuesday, Japan launched a voluntary carbon market based on companies' pledged emissions cuts and hopes thousands of firms will sign up to what could become a forerunner of a mandatory cap-and-trade scheme.

Earlier this month, two U.S. democratic lawmakers released a discussion draft of climate legislation which aims to cap emissions at 6 percent below 2005 levels in 2020, rising to 80 percent below in 2050.

The draft, proposed by Congressmen John Dingell, chairman of the House of Representatives Energy and Commerce, and Rick Boucher, chairman of the Energy and Commerce Subcommittee on Energy and Air Quality, would see a cap and trade scheme start from 2012 and cover an estimated 88 percent of all U.S. emissions.

Australia's plans to launch a carbon emissions trading scheme within two years will not be derailed by the current global financial crisis, Prime Minister Kevin Rudd said last week.

Australia's leading climate expert Ross Garnaut last month said the Australian government should aim for emissions cuts of at least 10 percent by 2020 (based on 2000 levels), or up to 25 percent if a tougher target is adopted.

He also recommended that Australian carbon prices be pegged at A$20 ($16) a metric ton from 2010, with only marginal increases for the first two years.

The 27-nation European Union launched its cap-and-trade scheme in 2005, while Canada, fresh from an Oct 14 election which saw the incumbent Conservative party bolster their minority government, is set to launch a federal market in 2010.

In another type of carbon market, countries and companies can trade carbon offsets under three U.N.-led Kyoto Protocol schemes.

A full list of established and proposed schemes follows.

INTERNATIONAL SCHEMES

KYOTO PROTOCOL (United Nations) (1)

Launched: 2005

Mandatory for 37 developed signatory countries

Target: 5 percent reduction in 1990 emissions by 2008-2012

Contains three sub-schemes to help signatories meet targets:

1- Clean Development Mechanism (CDM): Developed countries can invest in clean energy projects in developing nations

2- Joint Implementation (JI): Rich countries can invest in clean energy projects in former communist countries or "economies in transition"

3- Assigned Amount Units (AAUs): Signatories can trade surplus emissions rights among themselves

First commitment period expires in 2012 and governments scrambling to negotiate a successor agreement

EU ETS - European Union Emissions Trading Scheme (2)

Launched: 2005 (Phase 1: 2005-2007, Phase 2: 2008-2012, Phase 3: 2013-2020)

Mandatory for 27 nations in EU

Covers around half of all EU emissions

Target: Reduce EU ETS emissions by 21 percent by 2020 compared to 2005

Worth $50 billion in 2007

PROPOSED NATIONAL SCHEMES

UNITED STATES (3)

Democratic Congressmen Dingell and Boucher, released a discussion draft which calls for a cap and trade scheme to start from 2012 and cover an estimated 88 percent of U.S. emissions.

The legislation, which would eventually cover transportation fuels, aims to cap emissions at 6 percent below 2005 levels in 2020, 44 percent below in 2030, and 80 percent below in 2050.

It proposes distributing permits through free issuance, auctioning with revenues earmarked for cleantech and 'green' job creation and by using credits as incentive for investing in CO2 capture and storage.

The proposal also sees 5 pct offset use allowed at the start, rising to 35 pct in the later years, and would preempt existing regional schemes like RGGI.

A previous mandatory cap-and-trade bill proposed under the Lieberman-Warner Climate Security Act was rejected by the U.S. Senate in June, but many observers expect either presidential candidate to introduce new climate legislation within first six months of their presidency.

CANADA (4)

Launch: 2010

Mandatory for all 10 provinces and three territories

Target: Reduce 2006 emissions by 20 percent by 2020

Scheme covers 50 percent of Canada's emissions

Potential problems: Alberta already has a provincial scheme and several provinces have joined U.S. regional schemes

JAPAN (5)

Government currently trialing a voluntary scheme which may evolve into a mandatory program

Target: Cut emissions by 14 pct below current levels by 2020

JVETS (voluntary scheme) - Launched: 2005

Target: Cut emissions from a 2002-2004 average, using government-subsidized clean energy equipment

AUSTRALIA (6)

Launch: 2010

Mandatory - to cover 75 percent of Australian emissions

Target: First cap (2010-2012) to cut emissions to 8 percent above 1990 levels (Australia's Kyoto target). Medium-term caps could be 10-25 percent below 2000 levels by 2020, while long-term targets "should reflect increasing levels of ambition" and move country toward an eventual goal of reducing 2000 emissions by 60 percent by 2050.

To protect industry, government may peg prices at A$20 from 2010, with marginal increases in the years following.

NEW ZEALAND (7)

Launch: Obligations start in 2008, trading starts in 2009

Mandatory - includes forestry in 2008, electricity in 2010, transport fuels (16 pct of total emissions) in 2011 and agricultural waste (47 pct of total emissions) from 2013.

Target: To be announced

Participants will receive permits representing 90 percent of 2005 emissions between 2013-2018. Free permits will then be phased out from 2019 to have full auctioning by 2029. Importing HFC and PFC offsets to be restricted until 2013, and using AAUs for compliance will only be allowed between 2008-2012.

Sources:

(1) UNFCCC

(2) European Commission

(3) Van Ness Feldman

(4) Environment Canada

(5) Japanese government

(6) Australian government

(7) New Zealand government, Barclays Capital

(Compiled by Michael Szabo; Editing by Sue Thomas)