The recent Conference of Parties 25 (CoP 25), held in Madrid, Spain from 2nd to 13th December 2019, has placed ‘Carbon Markets’ in the spotlight due to a series of contentious debates. The core concept behind carbon markets revolves around buying and selling carbon emissions with an ultimate goal to reduce global emissions. This system existed under the Kyoto Protocol and is going to be transitioned to the Paris Agreement in 2020.
Understanding Carbon Markets
Carbon markets have a significant potential to drive emission reductions beyond what individual countries are capable of achieving alone. This is achieved either through direct investment or through the sale of carbon credits.
One instance of how this can work is through technology upgrades and emission reduction efforts at a brick kiln in India. This can be carried out in two ways. Firstly, a developed nation, unable to meet its own emission reduction goals, can fund the technology upgrade at the Indian brick kiln. The emission reduction achieved through this initiative can then be claimed by the investing nation. Alternatively, the kiln owner can make an investment to reduce emissions and then sell the resulting emission reduction in the form of carbon credits. A party facing difficulties in meeting emission reduction targets can then purchase these credits and claim the reduction as its own achievement.
Carbon Markets under the Paris Agreement
The establishment of a new carbon market is outlined in Article 6 of the Paris Agreement. Article 6.2 facilitates bilateral arrangements for transfer of emission reductions, while Article 6.4 proposes a broader carbon market where anyone can buy and sell reduction credits. Pursuant to Article 6.8, ‘non-market approaches’ to achieving emission reduction targets are made available to countries.
| Article | Description |
|---|---|
| Article 6.2 | Enables bilateral arrangements for transfer of emissions reductions. |
| Article 6.4 | Paves the way for a wider carbon market where reductions can be bought and sold by anyone. |
| Article 6.8 | Makes ‘non-market approaches’ accessible to countries to meet targets. |
Source
The information provided in this article is sourced from IE.