According to a source with knowledge of the matter, the United States is putting forward a proposal for the establishment of international carbon-trading markets. This proposal comes in response to the United Nations climate talks’ failure to set rules for such a system. The U.S. aims to create a coalition of nations and regions willing to adopt market standards to meet their domestic climate targets, serving as a fallback option if the anticipated UN-negotiated climate deal in Paris lacks such measures or if progress is deemed too slow. The source, requesting anonymity due to the discussions’ confidential nature, disclosed this information.
Under the UN agreement, all countries will have emission limits beyond 2020, necessitating a new method for calculating the environmental value of trade relative to each nation’s climate commitments. Nearly 200 countries are currently convening in Bonn for the final round of climate talks before the Paris conference in November, where delegates aim to finalize a global agreement to limit emissions.
Allyn Brooks-LaSure, a public affair official at the U.S. State Department, declined to comment on the matter when reached by phone.
If the UN negotiations make substantial progress in establishing the necessary market rules, the smaller markets group’s regulatory intervention would not be required. The coalition may develop the rules and seek endorsement from the UN Framework Convention on Climate Change process.
Some nations, including Bolivia and Venezuela, oppose carbon markets in order to protect the climate. Bolivia has called for the “eradication of commodification of nature” and opposed carbon markets that contribute to the enrichment of “climate millionaires” in its pledge to the UNFCCC.
The draft text for the Paris meeting includes an option to create a market “to support sustainable development” after 2020, building upon the existing program established under the 1997 Kyoto Protocol. However, UN Certified Emission Reduction credits, which developed countries utilize to offset domestic pollution by investing in green projects elsewhere, have declined by 97% since reaching their peak in 2008, as nations have failed to promote their purchase.
The climate agreement should incorporate regulations to prevent countries from counting the same emission reduction toward separate pledges when trading carbon units, according to the European Union. Ensuring the principle of no double counting is crucial and should be enshrined in the agreement, as stated by Sarah Blau, a Luxembourg envoy representing the EU. Blau emphasized the need for a detailed work program until 2020 to ensure the new agreement can be implemented on schedule.
To accommodate different types of pledges, such as absolute emission limits or reductions relative to a “business-as-usual” scenario, new trading rules are necessary, according to the source familiar with the U.S. proposal. Third-party reviews of trades would be required to ensure transparency and environmental credibility.
In January, the World Bank proposed a system for rating emission-reduction credits and allowances, allowing carbon markets and renewable-energy programs to trade with each other. The rating companies would evaluate the extent to which emission reductions should be discounted or risk-adjusted before international trading occurs. However, the governance of such a system is still to be determined, as stated by the World Bank.
