Carbon pricing sidelined in draft climate agreement

7th October 2015

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Benjamin Stone

The draft climate change negotiating text contains few provisions supporting the use of carbon markets, despite many businesses calling for any deal to include carbon pricing.

The UNFCCC published a shortened version of the draft negotiating text on Monday. The so-called non-paper was drawn up by the co-chairs of the working group tasked with coordinating the draft agreement after a request from countries involved in the negotiations to speed up the process.

The document consists of a nine-page draft agreement and a 10-page draft decision document. It contains elements of a new international climate deal including mitigation, adaptation, technology transfer and finance, as well as how the agreement would be implemented.

The text will be discussed at the next round of talks in Bonn, Germany, which begin on 19 October.

However, the International Emissions Trading Association (IETA) highlighted the lack of provisions in the draft to support market mechanisms, such as taxes, emissions performance standards and emissions trading. Nor does the document specify rules to account for the international transfer of emissions reduction units, it said.

It does mention the need for proper accounting of market-based mechanisms and reference to finding a successor to the clean development mechanism, which allows countries to fund emissions reduction projects in other countries, but these clauses are in square brackets as they have not yet been agreed.

More than 70 countries, including Canada, Mexico and Brazil, have explicitly mentioned the use of market mechanisms in their climate action plans, or intended nationally determined contributions (INDCs), according to IETA's INDC tracker.

Many businesses have also called for carbon pricing to be included in the deal, including BT Group, Swiss Re, members of 25 global business networks and energy companies, such as Royal Dutch Shell and Total.

Some companies are already using carbon pricing internally, with the number tripling from 150 to 438 in the past year, according to a report by the CDP.

Any deal at the Paris climate summit is unlikely to specifically include market mechanisms, said Jeff Swartz, director of international policy at IETA. However, it was important that it should recognise their importance and include measures to link of individual countries' markets, he said.

"Businesses would benefit from the transfer of emissions reduction units from one country to another, and also for that to be properly accounted for," he added.

Carbon markets operate in the EU and in some US states, while a carbon trading scheme is due to begin in China in 2017, he said.


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