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IETA's Forrister discusses future of U.S. climate diplomacy, carbon trading

On the heels of President Obama's final State of the Union address in which he highlighted climate change as an urgent challenge, what is the future of U.S. climate diplomacy? During today's OnPoint, Dirk Forrister, president and CEO of the International Emissions Trading Association, discusses the challenges ahead for global carbon markets and emissions trading. He also explains how a new U.S. president could impact international climate discussions.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Dirk Forrister, president and CEO of the International Emissions Trading Association. Dirk, always nice to have you here. Thanks for coming on the show.

Dirk Forrister: Thank you, Monica. Great to be back.

Monica Trauzzi: Dirk, on the heels of Paris, President Obama placed a major focus on climate change in his final State of the Union address this week. The White House says that the U.S. is leading the fight against climate change with the most ambitious global climate agreement ever. Is it fair to say that the U.S. is leading on this?

Dirk Forrister: Well, I believe in giving credit where credit's due and in these things I think the U.S. did have a very forceful presence, a very mature, they'd done their homework, they knew where they wanted to go and I think they were a leader, but I don't think they were the only ones because for those of us on the ground, we hadn't seen the kind of leadership out of the host country at quite this level of gravitas before. So having Laurent Fabius chairing these negotiations so effectively made a tremendous difference.

You also have to give the rest of the European Union and China their due credit for it, but I do think the U.S. was the right kind of face for our country in the negotiation.

Monica Trauzzi: In his speech the president laid out a vision for climate and energy. Where do you see that vision going under a Republic administration if a Republican were to win the presidency in November?

Dirk Forrister: Well, so I'm really going to be eager to see how the debate amongst the competing parties plays out in the coming months because I do think the world has changed on this.

This was one thing Obama was right about in his remarks is that we haven't seen this level of consensus in climate change internationally. I think there was only one disgruntled country that was trying to get the floor at the end. Usually there are a handful that are upset about something, but this was a real show of force from the international community.

If a Republican administration completely reverses course, they're going to be out of step with everybody. I don't think that's in the U.S.'s diplomatic interest long term, its security interests long term, certainly its environmental and energy interests long term.

So I personally think it's harder to turn around than some would have you believe, but it all, of course, depends on who that candidate turns out to be.

Monica Trauzzi: So let's talk about the Paris outcome. Looking at what was actually agreed to, would you consider it an overall success?

Dirk Forrister: I would. I think for the era that we're in, a pledge-and-review system, which is what it is, is the right structure to have. It's got a meaningful way to assess progress over time, to increase the ambitions over time and certainly for my organization what we cared about the most was assuming those things were going to fall into place, was there a path forward for business to have the flexibility to make the transition it needs to make in a cost-effective way. That means cross-border trading of emission units for those that are interested.

That piece, it didn't come together until the final hours, but it did come together.

Monica Trauzzi: What was left unclear though? What are the key things that you'll be working on in terms of markets and trading as the agreement is implemented?

Dirk Forrister: Well, so a lot of the magic of markets is in what happens at home in the domestic programs. So to what extent do those domestic programs, be it in Canada or California or Mexico, what do they say about allowing for international transfers, what type of standards do they envision?

All of this needs to plug into an international framework. That piece is going to take a couple years I suspect on what the rules of the road are going to be. We've got a lot more history behind us now on how it can be done, but it basically comes down to clear accounting principles so that imports and exports are not double-counted.

The other is that there will need to be some rules around the international offset mechanism that's been created. It's there, but the rules of how it would operate would still need to be elaborated.

That's going to be an important tool for U.S. companies that operate abroad. Now the U.S. may or may not turn out to be a buyer of those things, but for U.S. industry interests that are active all over the world that's going to be a very, very important component of this agreement, and we need to make sure that it works right. So a lot of work on the details of that.

Monica Trauzzi: The IMF in a new report has called on countries to place a price on carbon. Is that the way to bolster the success of the Paris agreement?

Dirk Forrister: I think it is. IMF, the World Bank have been tremendous in offering a vision of what countries ought to do on this. There have been countries stepping forward to support the call for pricing through the Carbon Pricing Leadership Coalition at the World Bank, something that we've been very supportive of.

I think the countries are there, the CEOs are there, but it's all about the follow-through, which tends to involve a lot of other people in actually implementing the policies. So I do think that's where the action shift. The spotlight has been in Paris. It's going to shift now to Beijing. We're going to see this year what the contours of the national trading program would look like for China. It's supposed to start next year so it's only a year to get some rules in place.

That process is going to be replicated in many other places around the world.

Monica Trauzzi: What do you believe the future of U.S. climate diplomacy is and how have Paris shifted the game?

Dirk Forrister: Well, they sort of have given themselves a regular routine now where they're going to be doing assessments and then they're going to be following those with pledges that are in line with what each country's share ought to be.

So I think we know now that it'll be like 2018 we'll be doing the assessment. In 2020 we'll be looking at what the next round of pledges are going to look like, and that drumbeat will continue far into the future.

I think in terms of the type of agreement and the kinds of cooperation that are envisioned, some of the things have been moved to other forums. So the Green Climate Fund is now one of the central elements looking at climate finance. There's a Climate Technology Centre and Network that focuses on the technology elements.

Now there's going to be a market element at U.N. for those that are interested in use of offsets. So I think some of the expertise moves to those other fora. So in that sense it's a slightly more complex picture that allows for more specialization that I think can be useful.

Monica Trauzzi: You mentioned China earlier. Which countries are you watching most closely to see if they'll be able to stick to the pledges they made in Paris?

Dirk Forrister: Well, I think there'll be many that are focused on the United States because of our track record in the past, but I think this time there's a pretty realistic target that's been proposed. Analysts argue about just how tough it's going to be to meet, but the U.S. is one. I think Canada is one where the initial pledge was by a former government. So there might be more coming from Canada.

I think Australia is also under a spotlight of sorts. It's a key player in the Asia region in offering leadership. It also has new leadership. So maybe there's more to come there.

But then I think it's China and I think it's some of the other leaders in Asia that are going to be important from an emissions vantage point. Indonesia is important. India is important.

So I think all of those. I've got to include Brazil in it because Brazil's also been a major player who's very influential. South Africa. So all of those I think get their fair share of time on the stage to show their opportunity to follow through on what they've committed to do.

Monica Trauzzi: All right, Dirk, we'll be watching. Thank you for coming on the show. Nice to see you.

Dirk Forrister: Thanks Monica.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]

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