The EU has called on the Paris global climate deal to include clear provisions for how countries can use international carbon markets, stepping up its previously low-key backing as talks resumed this week.

“Clear provision on use of international markets is needed,” the bloc said in a five-page submission to the UNFCCC dated May 29.

This represents a considerable shift from the EU’s previous position in February, which said provision for markets could be made in UN meetings after Paris and relegated any mention of them to an annex published alongside its main 16-page vision for a Paris deal.

“Provision clarifying how Parties can count the use of international markets towards commitments could enhance ambition by facilitating cooperation between parties,” the EU said in its latest submission.

Without this clear provision, the Paris text would undermine the ambition and environmental integrity of the agreement “as well as the transparency of contributions and the accountability of Parties, and therefore confidence in the international regime,” it added.

WELCOMED BY BUSINESS

The paper was welcomed by carbon trading business association IETA, which has been critical of the bloc’s previous lack of specific market provisions.

“IETA is encouraged that governments are highlighting market-based mechanisms to raise ambition in cutting emissions,” said Jeff Swartz, IETA’s director of international policy.

The paper re-iterated the EU’s call to encourage use of international markets, which it defined as “a situation where a Party uses a mitigation outcome in another Party towards its commitment”.

It said this should be done by ensuring the Paris Agreement includes:

• Enabling emission reductions in one country to be claimed in another via robust accounting rules;
• Providing a market mechanism under the UNFCCC for use towards commitments for countries that choose to make use of them.

THORNY ISSUE

UN climate talks generally require the consensus of all nations to reach agreement, and progress on markets has been limited in recent years as some Latin American countries doubt they lead to effective emission cuts and sustainable development in the developing world while allowing richer states to offset their own greenhouse gas output.

The use of markets is also sensitive because, unlike the previous global regime that only required commitments in developed nations, all countries are expected to contribute. Some observers fear that unfettered use of markets could enable more savvy nations to cherry-pick cheaper emission cuts and saddle poorer nations with the more difficult abatement.

Despite its upgraded role for markets, neither the EU nor the US has provision for using international credits in their respective INDCs, with the EU apparently ruling this out unless a deeper goal is set on the basis of ambitious commitments among other major trading partners.

The EU has driven the idea of carbon markets to tackle climate change over the past decade by creating the world’s biggest carbon market – the EU ETS – and allowing companies regulated under it to buy the majority of UN-backed carbon credits issued to date.

But since 2012 it has restricted access to new projects from only the poorest nations in a bid to encourage emerging economies to pay for more of their own emission cuts.

Appetite among EU policymakers for allowing more international credits has faded as environmental campaigners have questioned the environmental and sustainable development benefits of UN credits, and the EU ETS’s massive surplus of carbon units under current rules.

By Ben Garside – ben@carbon-pulse.com