The Global Carbon Markets Informal Consultation took place on 19 April, 2010. It was attended by approximately 30 participants, including several OECD delegations and non-governmental participants. The aim of the Informal Consultation was to advance discussions of new issues and players in carbon markets post-Copenhagen, and begin to explore how countries can prepare for and navigate the current “patchwork” approach to carbon markets.
To explore new issues in carbon markets, three papers were distributed for discussion at this workshop. The first paper, written in-house, is a spin-off from the joint ENV-ECO project on the economics of climate change mitigation, and analyses the impact of linking emission trading schemes directly and through the use of offsets:
Towards Global Carbon Pricing: Direct and Indirect Linking to Carbon Markets (July 2010)
By R.B. Dellink, S. Jamet, J. Chateau and R. Duval
Emissions trading systems (ETS) can play a major role in a cost-effective climate policy framework. Both direct linking of ETSs and indirect linking through a common crediting mechanism can reduce costs of action. We use a global recursive-dynamic computable general equilibrium model to assess the effects of direct and indirect linking of ETS systems across world regions. The analysis in this paper shows, however, that the potential gains to be reaped are so large, that substantial efforts in this domain are warranted.
Two additional papers were commissioned from outside experts - one examines how voluntary carbon markets can contribute to climate policies, and one explores the prospect of voluntarily cancelling allowances from an emissions trading system:
Voluntary Carbon Markets: How can they serve climate policies?
By Pierre Guigon, BlueNext
This paper aims to examine how voluntary carbon markets can provide a valuable contribution to strengthening domestic and international climate policies. The research shows that the several carbon project certification schemes that have emerged in the voluntary carbon market have developed potential innovative solutions to deal with some of the issues faced by compliance markets.
Buying and Cancelling Allowances as an Alternative to Offsets for the Voluntary Market: A Preliminary Review of Issues and Options
By Anja Kollmuss and Michael Lazarus, Stockholm Environment Institute
In recent years, businesses, local governments and individuals have set goals for reducing their emissions of greenhouse gases. In addition to directly reducing their own emissions, many of these entities have purchased carbon offsets to help achieve their mitigation goals. Yet establishing offset quality can be difficult, due to issues such as additionality, measurement, leakage, permanence, and verification. This paper explores scenarios under which, as an alternative to offsets, voluntary buyers could instead buy and cancel allowances from compliance markets.
Global Carbon Markets – Informal Consultation
Monday 19 April 2010 § OECD, Paris
Facilitator: Jan Corfee-Morlot, Acting Head, Climate Change Biodiversity and Development Division, Environment Directorate, OECD
Session I. Assessing the impact of Copenhagen on carbon market development
Participants discussed the impacts of Copenhagen on the carbon market, including what actions are needed to reinvigorate markets. Concern was expressed over the lack of ambitious and binding goals and the weak policy signals for the markets. That said, the carbon market in 2010 remains robust in part due to the stability of the European Union Emission Trading System (EU ETS) framework.
- Abyd Karmali, Bank of America Merrill Lynch; Carbon Markets and Investors Association
- M.J. Mace, Negotiator for Federated States of Micronesia
Session II. First stages of setting up a carbon market, the policy mix, and impacts on technological innovation
Participants discussed the impact of emission trading systems and mechanisms on technological innovation. Discussions highlighted the importance of clear price signals to stimulate innovation, the role of tradable permits to bring forward market-ready technologies (as compared to other instruments that can advance technology breakthroughs). On the issue of technology transfer, discussion underscored the role of absorptive capacity, knowledge transfer and the Clean Development Mechanism.
Session III. Navigating multiple markets
Participants discussed a draft paper exploring the option of cancelling allowances from compliance markets as an alternative to voluntary offsets. Discussions focused on the tradeoffs of various approaches to tighten emissions levels in compliance markets.
Session IV. Outlook on agriculture, forestry and REDD-plus offsets
Participants discussed the potential for Reducing Emissions from Deforestation and Forest Degradation (REDD) and REDD-plus to develop and play into the carbon market. Discussions focused on the elements of the first stage of REDD-readiness, including national strategy development, local stakeholder engagement and monitoring.
Session V. Scaling-up from project-based approaches.
Participants discussed the opportunities and challenges of scaling-up offsets from project-based approaches, including sectoral approaches and expanding the role for cities.
* Denotes that the presentation was kindly provided by the author(s) despite being unable to attend the event due to airports closure.
Financing Climate Change
Economics of Climate Change Mitigation
Documents on Reducing Emissions from Deforestation and Degradation (REDD)
OECD work on Project-based Mechanisms (JI & CDM)