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The Climate Trust, a mission-driven nonprofit that specializes in mobilizing conservation finance for environmental benefit, announced its third annual prediction list of 10 carbon market trends to watch in 2016.

The trends, which range from climate change playing a larger role in federal decision-making to increased carbon market linkage and momentum in conservation finance, were identified by The Climate Trust based on interactions with their diverse group of working partners—government, utilities, project developers and large businesses.

“The trust pays close attention to market signals throughout the year, identifying areas where we can have the greatest impact,” Sean Penrith, executive director for The Climate Trust, said. “Each year, we look forward to putting together our team’s collective knowledge and sharing our industry insights.”

1. Carbon pricing will play a key role for many jurisdictions worldwide as they plan to meet their emission reduction targets from the Paris negotiations.

Roughly one-quarter of the world’s emissions now fall under some form of carbon pricing system. In the aftermath of the Paris negotiations, this percentage is only expected to grow, as countries will be examining low-cost, high-impact options to comply with the nationally-determined emission reduction goals that they have submitted to the UN. Several jurisdictions worldwide have expressed interest in cross-border emissions trading, to lessen the potential economic risks from acting unilaterally. The Carbon Pricing Leadership Coalition, launched on the first day of COP21 in Paris, brings together key governments along with nearly 90 global businesses and NGOs to strengthen and expand carbon pricing worldwide. We expect to hear many more announcements of national carbon pricing initiatives in the coming year, as well as announcements of interest in linkages to and among existing systems. In addition, countries are confronting—for the first time—how setting and keeping emission reduction goals can be made easier by coordinating all their domestic climate policies in service of these goals; therefore, we expect to see more academics, industry groups and government coalitions weighing in on these opportunities for “complementary” policy.

2. In Oregon, policies related to clean energy will take center stage in 2016.

Importers of transportation fuels will be under obligation to comply with the state’s Clean Fuels Program in 2016. This program is designed to reduce the carbon intensity of transportation fuels 10 percent by 2025, by integrating more low-carbon fuels (like ethanol and biogas) into the fuel supply. In addition, the 2016 ballot is very likely to contain initiatives that would increase Oregon’s acceleration of a clean energy transition, including phasing out the use of coal-fired electricity and increasing the state’s renewable portfolio standard. Finally, carbon pricing will remain a topic of discussion during the 2016 legislative short session, as bills advance which could add enforceability to our state’s emission reduction targets by capping emissions from various economic sectors. We predict passage of at least one clean energy-related ballot measure this year. Carbon pricing in Oregon is still at least a year away, as even if a legislative bill were to pass in 2016, the state would need time to design and implement its optimal strategy.

3. Climate risk will get real for private industry.

Beginning with the groundswell at Climate Week in New York City in September 2015 and becoming more strident at the Paris climate summit, it is clear that the era of managing and disclosing a corporation’s exposure to climate risk has arrived. Nothing could have sent a clearer signal to the business community—Mark Carney, the Governor of the Bank of England, announced the establishment of the new Task Force on Climate-Related Financial Disclosures at COP21 in Paris. Their chief aim will be to evaluate how well the financial markets disclose their exposure to climate risk. Carney commented that this effort was in response to the current “market failure” of providing appropriate information to investors, insurers and lenders. Corporate leaders are realizing with stark clarity that a changing climate will have profound effects on business. Companies will continue to act with increasing velocity in 2016 to not only manage for risk but to monitor for opportunity.

4. Addressing climate change will play a larger role in federal decision-making and political platforms in 2016.

With the energy created by the COP21 gathering in Paris still buzzing around us, a presidential campaign well underway and a little more than a year left for members of the Obama Administration to leave their full mark on history, it seems clear that 2016 will be a year of climate action. Obama’s Clean Power Plan and his recent rejection of the Keystone XL pipeline paint a clear picture of how the 44th president wants to be remembered with respect to climate change. In June 2015, the U.S. Department of Agriculture announced it will take additional steps to integrate climate change adaptation into its programs and operations. Sec. of Agriculture Tom Vilsack has a little over a year left to make good on this promise. The Democratic candidates for president have also clearly indicated that climate change is an important part of their respective campaigns. On a state level, California is working to extend the Global Warming Solutions Act beyond the current 2020 deadline with major decisions expected in 2016. Legislators in Oregon are hoping to implement a similar cap-and-trade program. In the Northeast, states participating in the Regional Greenhouse Gas Initiative are also seeing success—A Duke University led study suggests that emissions would have been 24 percent higher without the Regional Greenhouse Gas Initiative and an article published by the Energy Collective claims that early adoption of the Regional Greenhouse Gas Initiative puts northeastern states ahead of the curve with respect to Obama’s Clean Power Plan.

5. U.S. carbon market linkage will increase as states prepare for the Clean Power Plan.

The final draft of the U.S. Environmental Protection Agency’s (EPA) Clean Power Plan was released in 2015, with 24 states filing a lawsuit against the plan questioning EPA’s authority. The lawsuit is unlikely to succeed. In fact, many of the states involved in the lawsuit are still drafting compliance plans. 24 other states launched a countersuit in support of the plan and George Bush’s EPA chief reminds the states that EPA’s authority has been upheld by the Supreme Court twice before. The plan allows states to choose a mass or rate based approach to compliance. Many states will likely elect a mass based approach, because it allows for interstate trading, making compliance efforts more efficient. New York Gov. Cuomo announced October 2015 that the state would explore the possibility of linking the Regional Greenhouse Gas Initiative—a cap and trade program comprised of nine Northeastern states—and the California/Quebec program, as these programs will likely be leveraged to comply with the Clean Power Plan. New Jersey is seeking to re-enter RGGI after Christie elected to remove the state from the initiative. We anticipate that in 2016, the opposition to the plan will fail, states will seek a mass based approach to compliance and the use of carbon markets across the U.S. will grow as a result.

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