Market mechanisms in INDCs – presentation at Carbon Expo by Perspectives

www.perspectives.cc · [email protected] © 2015 Perspectives GmbH

Market mechanisms in INDCs

27 May 2015

Carbon Expo, Barcelona

Axel Michaelowa, Matthias Honegger Perspectives GmbH

www.perspectives.cc · [email protected]

Topics

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§  General status of INDCs §  Possible roles of market mechanisms in INDCs §  Buyer countries §  Seller countries §  Current status of mechanisms in published INDCs §  Challenges and opportunities in the run-up to Paris §  Challenges and opportunities for the post-Paris process


General status of INDCs

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§  Lima COP defined bare minimum elements to be published in INDCs -  Quantified reference point (base year) -  Time frames and/or periods for implementation -  Scope and coverage -  Planning processes, assumptions, methodologies No guidance regarding international

transfer of “mitigation outcomes” §  Only 10 countries published INDCs so far

-  March deadline passed without any stir -  September deadline seems to be slipping


Possible roles of market mechanisms in INDCs

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§  "Buyer": Mechanisms can be used to acquire emission credits/"units" from other countries -  “Top-up“: increase of target through market mechanism

§  "Seller": Mechanisms can be used to sell emission credits/"units" to other countries §  Unavailable: explicit exclusion of mechanisms

Emissions budget


Buyer countries

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§  Interest to reduce their mitigation cost through acquisition of units §  Can specify type of mechanism(s) they would like to use -  Kyoto Mechanisms, new market mechanisms -  Bilateral mechanisms

§  Can define the principles that underpin their use of mechanisms -  Real, additional, verifiable, supplemental, interaction with climate finance, …


Seller countries

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§  Interest to generate “means of implementation” through sale of units -  “Conditional goals” that depend on revenues from mechanisms

§  Can specify type of mechanism(s) they would like to use §  Can define the principles that underpin their use of mechanisms -  Share of credits for own use, quality criteria (?) -  Interaction with climate finance


Current status of market mechanisms in published INDCs

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Country Buyer Seller Type of mechanisms

Switzerland X CDM, international mechanisms delivering real, permanent, additional and verified mitigation outcomes meeting high environmental integrity standards

EU Unavailable, maybe top-up?

Norway (x) Join the EU “bubble” (without access to international units), but support mechanisms and continued CDM and JI

Mexico X Global market mechanism, conditional goal (15% more stringent) to rely on bilateral, regional or international market mech.

United States Unavailable “at this time“, maybe top-up?

Russian Federation Unavailable

Gabon X National sustainable development fund to sell domestic carbon credits

Liechtenstein X Conditional on use of “emissions reductions abroad“

Andorra Unavailable

Canada X International mechanism


Challenges and opportunities in the run-up to Paris

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§  Market mechanisms are a negotiation chip that governments want to keep for the Paris endgame -  Some countries push to apply lessons learned from CDM -  Net mitigation contribution remains unresolved controversial issue

§  Many countries are in a rush to define their INDC with limited resources, where market mechanisms distract §  Opportunities for consultants, researchers and NGOs

-  Make a clear case why market mechanisms can increase ambition and should be integral part of Paris agreement -  Provide conceptual clarifications e.g. regarding double counting of credits and (non-?)accounting of revenues from market mechanisms as climate finance


Opportunities and challenges for the post-Paris process

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§  Agreeing on and providing sufficient resources for a work programme for defining rules of various types of mechanisms to increase trust in the integrity of mechanisms on the buyer side -  Pilot activities on various scales -  Linkages of market mechanisms and climate finance

§  Bringing in market mechanisms into NDCs of buyer countries that have not unambiguously excluded the mechanisms

§  Bringing in the private sector through manageable rules and long-term, trustworthy incentives -  Prevent second “boom and bust“ cycle (“once bitten, twice shy”)

www.perspectives.cc · [email protected] © 2015 Perspectives GmbH

Thank you!

Axel Michaelowa, [email protected] Matthias Honegger, [email protected]

Market mechanisms in INDCs – presentation at Carbon Expo by Perspectives

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