do we need carbon markets? a role for them in post-kyoto março 2014
TRANSCRIPT
Do we need Carbon Markets? A role for them in post-Kyoto
Março 2014
Short Answer: no
They are just A tool for the development of climate policy.
They are one of many tools: regulation, taxation, information and communication policies, education, adaptation policies (e.g. infrastructure climateproofing).
As a policy tool, they present challenges that are in some ways similar or more daunting than those raised by taxation or other instruments:
So why bother?
NO ONE NEEDS CARBON MARKETS
Information PolicyAdministration
Longer answer: do we have anything better?EVERY SINGLE POLICY OPTION HAS DRAWBACKS
Taxation?
Regulation?
- Well-designed
- Transparent rules
- Predictable rules
- Predicated on sound market dynamics (liquidity, solvency)
- And backed by very very good regulation
Carbon markets can help, if
The world post-Kyoto
- Will be more diverse in commitments/contributions/whatever you want to call them
- quantified emission commitments- Policy-based commitments- Conditioned on finance?
- Will be more flexible in its architecture
- Less of a Annex I/non-Annex I distinction- More diverse set of national circumstances- More tools (hopefully) at disposal of countries engaging in
WYWCT
-All good things, right? Wider participation, flexibility, diversity?
Kyoto accounting system provided very little flexibility on
- The shape of commitments (CO2e-based, base year 1990, economywide goals)
- The tools (Kyoto only provided three additional tools to whatever countries had already at their disposal – the flexiblity mechanisms)
- Kyoto additionally provided flexibility in accounting for land use and forestry
ERGO
- There is very little that countries can do under Kyoto to shape further their commitment (to ease their burden)
- i.e. Kyoto provided an accounting standard and required modalities
Not so if at the cost of system credibility
Because carbon markets, amongst other things, are informational tools and they are predicated, as all markets, on the transparency of the generation of assets.
So, I, as a trader engaged in buying and selling carbon assets (offset generated credits from CDM, NMM, VCS or allowances generated in the Mexican or Ruritanian market) need to understand the environmental equivalence of these units. Is a unit reduced from a baseline-and-credit project in a steel mill in Colombia equal to the reduction obtained by a company under the Swiss emission trading system?
I, as a policy-maker, need to make sure (even if no trading is happening) that the units that are used for compliance are of good quality and of the same environmental equivalence.
So we need a solution.
Why is this relevant for carbon markets?
We need standard setting mechanisms
Standard for allowance trading:
- akin to the Assigned Amount Unit under Kyoto Protocol, could easily be derived from the national inventory systems of committed countries; we therefore need a set of rules on how such units can be generated
- and finally we need a Standard for Offset unit generation- From projects- From sectoral initiatives
Let’s not re-invent the wheel though….
Two standards are needed in a quantified commitment world
We could start from somewhere…
Just a suggestion, of course
