Establishing a global carbon market

This paper presents a discussion on the creation of the global carbon market. It observes that action to address climate change is already happening, and the pace at which initiatives are developing is increasing. Many initiatives are in the form of a response to national emissions objectives. Some are driven voluntarily by business. A key objective in creating a global carbon market is to link different emissions management approaches together, thus establishing a single carbon cost and creating equitable access to the prevailing lowest cost abatement opportunities. However, such a global market is not a substitute for policies and instruments that are designed to promote strategic investments in technology development and to provide support for large-scale infrastructure investments.

The paper concludes by outlining some key requirements that must be met before different market-based approaches can be linked including:

• the sector to which an emissions mitigation program pertains must be clearly defined, with an accepted measurement and reporting protocol in place that defines the current status or base situation
• the sector must have a defined pathway forward, which can be translated into an absolute emissions change
• the emissions change for the sector must represent a real contribution to the international goal. Two key aspects within such an assessment include the rate of improvement in energy efficiency and the rate of decarbonisation
• in order to link, similar structural elements must exist. Important considerations include; pricing measures, penalties, banking and borrowing, and monitoring and reporting.