 My institute is Climate Policy Initiative, so what we do, we are a non-profit think-tank, research think-tank, and we look at policies, energy and climate policies that are working or that are not working, so we do try to gather empirical evidence in order to understand what we can learn from the wide range of policies that are out there going beyond the carbon market, so having the ETS of one of the instruments that we see there. And what I've been asked to do today is kind of start off the discussions with the broader picture, kind of showing where the carbon markets are in the overall flow of climate finances, we call it an overall support to implement energy and climate policies on the global scale. And so I'm going to start off with some more bigger numbers and then try to come back to introduce you, to give you an introduction and overview of the ETS, where we are now, what is it, what is the early lessons, the achievements that we can identify, and then kind of start putting some of the questions and then kind of setting up the discussions that we will have later with the panel with all of you. So what we think is really important to understand is what's the type and the magnitude of support that is being made available to address climate change, and how the support is matching the needs of countries, and also how effective the support is in actually addressing some of the overall goals. And for this purpose, what we did is last year, and this is a very complicated picture here, we call it our spaghetti diagram, not only because we are based in Venice, but that obviously is one of the reasons, what we did last year is kind of providing an overall overview of what are the climate finance flows that are currently out there on a global scale, and how finance is flowing from the sources, from carbon markets, carbon taxes, tax revenues, offset markets, private, obviously very important, the global capital markets through the intermediaries, which are public and private banks or agencies, through the instruments that are being applied, ranging from offset flows, but grants, loans, different types of instruments to the actual end users, really both the technologies and also the different countries and the sectors where the money is going to. And the idea is really to get an overall understanding of how much money is currently being spent on climate change and addressing both adaptation and mitigation in order to understand what is working and where do we see gaps and where do we see additional need for action. And what we find here in this last year's first study is that on average 97 billion US dollars are currently being spent on climate change mitigation and adaptation, and this is for 2009 to 2010 numbers. And we're currently updating these numbers, but I do want to use this broader framework of understanding what's this, as we call it, the landscape of climate finance to show you a little bit the role of carbon markets and then also the role of the EUETS in this context. So some of the key findings of this kind of landscaping exercise that we've done is, first, obviously we do all know that in order to achieve the broader climate change goals, we need significant investments and really significant investments. What we see in the good news from the work that we've done is that money is flowing. But what we also know is that it's still far short of what is actually needed in the global context, so far short of the global financing needs. And there are some interesting new insights coming from an update that we're currently doing on the really important of domestic flows, and I think again there can learn a lot both within Europe but also in other emerging economies. And as I said in general, also in general the good news is that there is some money. What we also see is that in order to address the overall need for an upscale of investments, the public sector is not, alone cannot kind of address this problem. So the public sector alone cannot finance the transition that we need in order to achieve our goals. And we see that private capital certainly is essential to kind of get us on a low-carbon climate resilient pathway. And in this context, however, we have seen the importance, again, of the public sector standing behind the private flows in form of policy frameworks, of the right policy instruments, but also in terms of other types of kind of subsidies that are given in the beginning in order to bridge the gap to some kind of, when there is an economic technologies out there. We've also seen that it's really important to learn from the actors in the market. And again, what we've seen here, that there is agencies and banks involved in delivering the finance that have really a special knowledge of what is going on on the ground in the market. And this is really essential to unlock some of the investments that are needed in order to get us to scale. Finally, just in terms of the overall kind of the information that we have, and that's also something, context of the UTS, which has always been critical, is that there is, in general, a better information of what is the climate finance on a global scale, but we still have significant reporting gaps that hinder a good understanding of what is the scale and the magnitude and the nature of flows that are out there. So let me now put that a little bit in context of the carbon markets. And I think here, in the short term, what we see is that out of the 97 billion average US dollars that are currently being provided, carbon markets play only a very tiny little role. So on average, it's just about 2 billion out of the 97 that are currently being provided through carbon markets. And that obviously stands quite at odds with the high ambitions that we had when QT protocol was being signed. Within this picture, however, we can see that there is improvement. And this year's update actually shows that the carbon market is increasing a little bit in importance. We can also see that the UTS remains the engine of the kind of overall carbon market, also by sharing the lessons with other emerging carbon markets. We can also see from the landscape what is needed is certainly that we put a price in carbon. So it's just been said before, and as I said, the UTS is certainly an excellent kind of laboratory to share some of the lessons and the new achievements. We have a number of experiments around the world where you try to test some of these lessons in a very specific context and apply it to a very specific national circumstances. But we also see at the moment we do have a fragmented carbon market, so we don't have a global carbon market inside in the short term. If you look at that then in the longer term, and again I do want to stress it very strongly, is this 97 billion is important because it shows that money is being spent on climate change. But if you put it into perspective of what's needed, it is just a little tiny drop and you really need to upscale that significantly in order to get us on a low carbon climate resilient pathway. And so here first I do want to make the point that this 97 billion should not be compared to the 100 billion that is currently being discussed in the international negotiations. These are different types of definitions. We really look at everything which is out there. We don't look if it's necessarily additional or whether it's only north houses. It's really an overall picture of what is currently being spent. As I said even more importantly, if you look at what are the overall infrastructure investments, not only kind of climate related but the overall infrastructure investments in the world. We have the world economic outlook database of the IMF that projects that by 2015 you need about 10 trillion US dollars for annual investments in developing countries. And in order to make those green or sustainable, you probably need another 500 billion US dollars and that just shows you the scale of the problem and what really is needed in order to get us there. And certainly we all know that in order to get us there we do need a stronger carbon price signal. However it is being transmitted by the carbon price is an essential element to get us to an upscale of these numbers. So let me get you know to the ETS finally but I do think it is important to have this broader picture of the framework and I won't go into detail I know here the audience, everyone will know what the ETS is about. It's the largest market for greenhouse gas emissions in the world. It is what I think needs to be stressed every time it's a true multinational system. We do have 27 sovereign member states that are within the system and I can therefore provide very important lessons due to this structure. We do have links to non-European Union, European countries like Norway, Iceland and Liechtenstein and we have this linking directive that provides this link to the global carbon market. The face approach is also something that I do want to stress is an important element of the overall ETS. I do think it has shown that we can learn in faces and like it is important to learn lessons as we go ahead and have the possibility to feed the lessons into the evolving structure of the policy instrument. So I think the pilot phase that we've had where we've learned lots of lessons that then have feed inside the overall restructuring of the ETS has been really important. So again here this is just to give a kind of the overall picture where we are the ETS has obviously been designed in light of the over broader European policy objectives and also of the overall international kind of objectives that are out there. The main features of the ETS it is a classic cabin trade system. So we have a classic kind of trading scheme that has been put in place but what is different from the kind of the classic approach that is implemented highly decentralized so which is again something which can provide lessons for other kind of emerging systems. We're covering electric utilities and heavy industry. We have aviation from 2012 and the sequential multi-year period with the declining cap I think is something which is really a very promising feature and shows again that you are kind of incorporating the lessons from the early phase into the evolving policy design of the ETS. Obviously a big question here is always whether the kind of the declining cap is something which has credibility in the overall kind of framework of the ETS so whether people really believe that this is something which is going to have more time. There is the use of offsets again to use more flexibility and really have it as a kind of a typical and classical market-based instrument. It's allowed up to 13 percent of the emissions currently only from CDEM and GI mechanisms but this obviously is also one of the discussion points and also again learning from the early experiences that the principle for the distribution of allowances is evolving into full auctioning over time but again this is still quite a long way probably to go but it is again something that we can learn from the early lessons. This all here is kind of just reflecting what I just said the overall picture of the emissions and the caps as there are currently so you can see the black-bold line is actually the actual ETS emissions as we have them. You can see that after introduction of the pilot phase of the ETS there has been a decrease in emissions from various factors but certainly you can see that the emissions have also decreased as compared to the counterfactual emissions which we did actually a study and tried to understand what would have happened without the ETS and so you can see that there has been a change and you can see here obviously the different declining cap over time as we go ahead if everything is kind of staying as it is at the moment and I'm sure we'll have discussions about that later on. Before kind of concluding with some questions I do want to make a few lessons or surprises as we had them when kind of studying the ETS in the first phases. I think the first surprise that we've had is that we have actually found in the pilot phase already when there was a very modest cap and actually really the ambition mostly to learn lessons on whether it's working and what is working. You've actually seen that there was a bateman in the pilot phase so we have seen that due to a number of reasons a significant carbon price in the first half of the pilot phase rising GDP still and also rising out in the ETS sectors and also other factors like weather and relative prices in fossil fuels and have led to a situation where we did have as you've seen on the previous graph actually lower emissions than the counterfactual. Obviously there might be other reasons as well but the CO2 price is a very likely explanation for this and while it was kind of a modest abatement I still want to stress that this is important just to show that a carbon price can set the right signals and can actually stimulate behavioral changes in throughout kind of the actors. And I think another point I want to make here is just to keep in mind whenever you see the large surpluses and the large numbers and the surpluses of allowances that a long position per se is not an indicator of overallocation. Abatement is also reducing the overall need for allowances so there are a number of factors that need to be taken into account before making a judgment of whether that the kind of overall number of surpluses of allowances actually can tell you whether there's been only overallocation or whether there have been several behavioral changes as actually would be the objective from the ETS itself. I think the second surprise that we've had again is related to the offset use where we've had lots of discussions on what should be the quantity of offsets allowed in the system and while we've had only a couple of years of observations and this is based on a paper by Daniela and Rafael Trotignon, you've seen that actually only 4% of the ETS emissions were covered by offsets and if you look again it's only used by about 20% of installations mainly among industrials and we can also see that if you look at what is the type of offsets that whereas are the offsets coming from it's very similar to the kind of the big supplier so it's in line with where the supply is coming from which is China, mostly China, India and some other countries like South Korea and Brazil and again this is just to again, you know it makes sense to take a step back, look at the available and critical evidence and try to understand whether we are actually just talking about the threat of offsets or whether we actually are using and what their incentives are in the system itself. And the third surprise I just want to mention here is certainly related to economic effects which was a big discussion, particularly in the beginning of the design of the ETS in Europe here there were great fears of macroeconomic and trade effects and what we've seen again from the kind of empirical evidence we've looked at it and Neil obviously is here has done an excellent work on this as well we have had actually no really chance to detect any real effects in this context so we've had, what we've seen also is that it actually is really just one price amongst many and so it does have, it might have obviously a different impact if carbon prices were higher or it will become higher in the future but still we do have now several years of experience here and you can see that people are actually using that kind of considering this YouTube price just as one additional price factor to be considered in making the business decisions. So let me stop with a few early lessons again some of them I've already said I do think the pilot phase that we've had here was extremely important it helped to build the kind of infrastructure and also the experience that then could be fed into the kind of evolving design of the ETS and also certainly it also showed the importance of data and the importance of kind of credible data behind the design of such a system. The sad limited impact so far on competitiveness that might change over time but still it is important also to share business emerging systems in other countries. Also seen it's been a major driver of the global carbon market still without the ETS we probably would have a quite different situation of the global carbon markets and the international kind of of the trades that are out there. And in addition I think the most important point I do want to make is that we do have a real carbon price now. Yeah it's not as high as we have thought but we have a real carbon price that covers about 10% of the global emissions today and it has actually induced as I said before a batement. It's still modest but this is also because of the changing framework conditions that we're in and what has happened over the last years but it gives a signal for an investment and innovation and it is modest but it takes time also for a carbon price to sink in and actually for investments to bear fruit. What is also important thing is that we do have a mechanism in place for achieving further greenhouse gas emission reductions. We've had the ETS is certainly a perfect example of where you're learning the lessons and continuing to kind of improve the overall design and I think having something like the ETS in place in a region like Europe is amazing. It gives us really a head start on kind of having a very good future mechanisms for reducing emissions over the next decades as is needed and it's certainly much more than any other country or region has done. It's something to keep in mind. This has been a big policy experiment and finally it is a laboratory for the other systems and for a multinational system of course. So we all know the recession and I really want to emphasize here the recession not other factors that kind of the factors around the ETS actually have changed and have created this EU ETS crisis while I do think that also if you look at the design as it has evolved over time that actually the policy design was ready to kind of provide a good signal it's being kind of the circumstances that have changed. So we need to obviously need to take that into account when now thinking about fixes whether they're needed or what is needed. And so we're next I think just to make the point again we need a price signal if we want to address the overall challenge that we have ahead of us we need to internalize this EU ETS costs. Market instruments are important. They are essential. I do agree that there is other instruments out there as well and certainly the ETS is not as we've seen also is not adequate for all sectors or all types of gases. So there are, you will need a combination of instruments but ETS certainly has proven to be a key instrument in order to address this challenge. We see slow process but there is progress. I want to stress again we do have a common price signal that industrial players are actually now taking into account industrial energy. Utilities obviously are taking into account. We do see on the international scale some signals for a stronger global common greenhouse gas markets. I put the question mark because I'm not that sure how quick that will actually develop but there are certainly signals from the different regions like China and Brazil that there are serious efforts there on going in order to kind of learn the lessons from the ETS and kind of test them in a different context and over time maybe also link them as we've seen with the Australian ETS if we have this very recent news that there will be a link between Australia's and Europe's emissions training system. And to the final point here, we certainly need to think about how we can strengthen the ETS but I think we really need still to understand what is happening. I don't think that we know yet fully perfectly what is happening in the market. We all know the ETS. One of the also kind of I say characteristics and advantages of the ETS is that it is a cyclic instrument. So when there is a crisis, the prices fall which is something which should help players in the market in order to address in addition to the recession also kind of the difficulties with high carbon prices. Obviously we've now come to a situation where we have kind of a serious difficulty with the prices but I still think we need to understand how we can address what's happening at the moment. We have not yet understood perfectly what's going on with the so-called banking in the market. I do think that there are actually lots of signals that lots of the current allowances are being banked for the future as well and we've had some anecdotal evidence of that but we do need to have some better and purely understanding of what is actually going on. We've seen a little bit in the past but I just really want to stress that before we think about how we can change everything again we need to understand what's happening and we need to see whether the instrument that we have in place actually needs to be significantly changed or whether we just need to understand how we can actually strengthen the positive sides of it and really make it come back and get us on the pathway of a higher carbon price obviously that then will address the overall kind of need for a transition to a low carbon climate resilient future. Is that I'm going to look... I'm really looking forward to the discussions here and seeing what will be the solutions what are the solutions but I really just want to stress again let's understand what's really happening and let's really look at the data that's out there before we make any decisions that would again also hurt some of the confidence of the players in the market. Thank you.