Negotiators in Paris must agree robust global standards for measuring national goals ahead of fostering international carbon trade, an EU official said Tuesday, stressing that market proponents should seek credit demand sources outside of Europe.
“What is important is countries around the world are embracing carbon pricing (and) the international market as an important complement of their effort post-Paris,” said Mary Veronica Tovsak Pleterski, the European Commission’s director for European and international carbon markets.
“Every country is expected to first make their own contribution, and then of course it’s important to ensure the (trade) flows are being set up and the demand is created,” she told an event in the EU Parliament in Brussels.
Over 150 countries covering around 90% of global emissions have submitted INDCs ahead of December’s UN talks in the French capital, and at least 70 nations are at least considering using markets, according to data compiled by Carbon Pulse.
The vast majority of those are developing nations, with many seeking to deepen their post-2020 unconditional emission reductions pledges with targets conditional upon selling carbon credits to help finance them.
Dirk Forrister of carbon market lobby group IETA, which hosted the event, is urging the EU to take a more aggressive approach and push for more wording in the Paris agreement to encourage international trade, which he says will unlock those conditional efforts.
“If we don’t get this job done we won’t see that additional level of ambition,” he said.
The latest Paris draft text includes just a single line on markets in the core agreement, with other references only appearing in a supplementary section that are intended to be built upon in future negotiations.
Daniele Agostini of Italian utility Enel feared that if a provision for markets wasn’t properly set out in the main text this year then it could struggle to emerge in future.
“We need the concept of transferability. If we cannot get it in the text now, it’s going to be very hard to get it back in later,” he said.
German official Franzjosef Schafhausen told Carbon Pulse his country wanted more detail in the text, but this was at the mercy of other nations at the UN talks.
“We would like to see more on markets, but we need consensus amongst the 196 countries, so it’s up to them,” he said on the sidelines of BNEF’s Future of Energy Summit in London.
The EC’s Tovsak Pleterski said two things were important to get right on markets in Paris.
“Firstly that we have accountability right. We make it globally clear how we count the efforts and we make that transparent. Secondly, we need to build on experience of the Kyoto mechanisms,” she said, referring to the CDM and JI.
The Kyoto markets channelled over $300 billion towards carbon-cutting projects. Despite Kyoto’s relatively strict accounting practices over half of the 1.8 billion resulting credits were from project types criticised for lacking environmental integrity.
Tovsak Pleterski stressed that any market mechanisms must be fit for a new treaty where all countries would contribute something on mitigation, rather than Kyoto where rich nations could tap markets to offset their emissions.
The EU’s own INDC does not foresee use of international markets, but IETA is keen for the bloc to not rule them out as a way to ease compliance costs for domestic businesses and to more actively drive international carbon trade.
Regardless, Tovsak Pleterski suggested market proponents look elsewhere for carbon buyers.
“The EU proposal is talking about domestic effort, but nevertheless there are other potential demand sources we see emerging,” she said.
She noted that aviation body ICAO’s work on a global offsetting mechanism “may be one important source of demand for the future.”
By Ben Garside and Mike Szabo – email@example.com