More is less: a case against sectoral carbon markets |
Oscar Reyes | Friday, 17 June 2011 | |
The global carbon market is in crisis. Proposed emissions trading
schemes in the USA, Japan and Canada have stalled indefinitely; new
markets in Australia and South Korea face significant delays; and
climate justice activists have successfully blocked the start of a
planned scheme in California. Trading has become ever more concentrated
around the EU Emissions Trading System (ETS), which could well see
carbon permit prices drop to zero if the 27-country bloc adopts
stricter guidelines on energy efficiency. Overall carbon trading
volumes were lower in 2010 than in the previous year, and are predicted
to stagnate in subsequent years; and the Clean Development Mechanism
(CDM) has declined for four years running, with fewer credits purchased
from new projects than at any time since the Kyoto Protocol came into
force in 2005.
Perhaps confusing these contractions for birth
pangs, there is currently a push to create new international carbon
market mechanisms in the context of United Nations Framework Convention
on Climate Change (UNFCCC) international climate negotiations. The
World Bank is offering further encouragement, in the guise of a new
Partnership for Market Readiness (PMR) to promote carbon markets in
middle-income countries.
This report critically examines the reasons behind and potential
consequences of creating new carbon market mechanisms. In particular,
it focuses on “sectoral” carbon markets, which would move beyond the
project-by-project basis of the CDM and issue carbon allowances in
relation whole sectors of the economy.
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