Rise of Carbon Markets Drives Interest In Linking Them, Speakers on Climate Say

Bloomberg BNA -- The rise of carbon markets across the world is driving increased interest from companies and governments to link those markets together, representatives from companies and a Harvard University researcher said Sept. 22.

About 40 countries and more than 20 cities, states and provinces have carbon pricing policies or plan to launch them. Together, these carbon pricing instruments cover about 12 percent of annual global greenhouse gas emissions.

“Where we're heading is some sort of globally linked carbon market,” whose segments will appear at different times in different countries, David Hone, Shell's chief climate change adviser, said at a Climate Week event organized by the International Emissions Trading Association and Harvard University.

Linking emerging carbon markets could end up being an important element of a global climate deal set to be reached in 2015, according to Robert Stavins, who directs the Harvard Project on Climate Agreements.

Stavins is conducting research on how the architecture for an international carbon market could be written into the agreement being negotiated under the United Nations Framework Convention on Climate Change (UNFCCC). His research will be released in time for UN negotiators' next meeting in Lima, Peru, in December.

Linking these carbon markets would result in cost savings for the countries and companies involved, Stavins said. It would also help reduce the volatility of carbon markets.

Full Coverage: Climate Week 2014

But when it comes to what language to include in the 2015 agreement, less is more, Hone and Stavins said.

“If we had only five lines to describe a global carbon market [within the agreement], what would they be?” Hone asked at the event.

Those five lines should talk about cooperation between parties, but not “lead straight into ‘you should have a carbon’ market because that will make some [negotiators] walk out of the room,” he said.

Stavins agreed that “the inclusion of detailed rules in the core agreement is not desirable” because it could make it difficult for carbon pricing to evolve. The agreement should however include common definitions of key terms for compliance and registries or tracking systems.

Preference for Markets

While Stavins said the 2015 agreement could encourage different types of carbon pricing, including taxes or cap and trade, market-based schemes were the favored choice of corporate voices at the meeting.

Hege Marie Norheim, senior vice president of sustainability at Statoil, which is Europe's largest oil producer, said the European experience with carbon pricing has shown that national carbon taxes are difficult to harmonize.

“Markets are much easier to link between nations,” she said at the event.

Anne Chassagnette, GDF Suez's director for environment and social responsibility, agreed, saying “we are in favor of market-based approaches” because they give companies “flexibility to make cuts when and where necessary.”

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