IETA: Carbon markets need to matter more in Lima

Delaying work on the role of carbon markets in a 2015 climate deal is foolish, argues international trade body

(PIC: UNFCCC/FLICKR)

(PIC: UNFCCC/FLICKR)

By Jeff Swartz

The first week of the UN climate talks is always fraught with tension.

This usually heightens in the second week when ministers arrive amid a scramble to walk away with something agreed.

Usually, it is the first time that countries have gathered at the UN for almost six months to discuss climate change, and there is always a sense of boundaries being pushed and a loathing to give up anything too soon.

Lima has been no different so far.

This is disappointing, given the excitement and announcements from September’s climate summit in New York, agreement on the EU’s 2030 energy and climate targets, November’s announcement from the US and China that the world’s two largest emitters will cooperate on climate change (a peak year on emissions for China, and a 26-28% reduction for the US), and the $9.7 billion in pledges so far to the Green Climate Fund.

Instead, this week has seen stalemate on just about every issue – and efforts to close down negotiations on all things market until there is the mandate to do so by the negotiating body for the 2015 climate deal, known as the ADP (which stands for the Ad Hoc Working Group on the Durban Platform for Enhanced Action).

Currently, market negotiations have been progressing on a mandate from the COP – as have those under the ADP.

LIVE IN LIMA: Friday’s developments as they happen

Those trying to delay the markets talks have a point, to a certain extent: as yet, there is nothing in the ADP texts that indicate that markets will definitely have a role in the future climate agreement.

In that sense, they are right to call for a mandate. At the same time, it is foolish to press pause on preparatory work – especially when, as UN climate chief Christiana Figueres said on Wednesday at an IETA side event, there’s nothing there to say that markets won’t be allowed.

What needs to be remembered is that markets require a lot of technical infrastructure that can’t just materialise overnight; elements such as registries, emissions unit tracking software, emissions accounting standards and safeguards are essential for robust, efficient and, most importantly, credible carbon markets.

These critical pieces of architecture could all emerge via the UN climate process, if negotiations continue – and if not, they will happen elsewhere.

Global emissions trading systems (ETSs) covering some $30 billion-worth of emissions in 2013, according to the World Bank’s State and Trends of Carbon Pricing report, and even more markets are set to come online in the next few years.

Momentum

As an example: on 1 January next year, South Korea will formally begin the first year of compliance under its carbon market.

There is a growing ‘coalition of the willing’ when it comes to carbon markets. Even China has announced plans to expand its seven regional pilot ETSs to a national programme from 2016 – which will be the world’s largest ETS once it is fully operational.

Governments agreed at the Durban COP in 2011 that the 2015 agreement will see all countries take action to curb emissions, irrespective of economic status: translating to developed countries needing deliver even deeper emissions cuts and developing countries needing to leapfrog the carbon-intensive development phase and instead pursue a more carbon-neutral path.

Markets are the best way to deliver on these objectives, to spur the technological innovations needed, to cut emissions without hindering competitiveness, to drive countries forward on a sustainable development pathway.

The longer the negotiations on market matters are delayed, the longer it will take to build up the necessary architecture, and the longer it will take to reach our emission reduction goals.

 Jeff Swartz is International Policy Director at the International Emissions Trading Association (IETA)

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