Climate Action 2011-2012

Figure 1. Potential market linking opportunities.
Source: Deutsche Bank
reporting and verification). Capital has to be able to flow
towards the cheapest abatement options first, so that the
carbon price represents the marginal abatement cost. But
markets will suffocate if that confidence in the mechanism is
broken through political risks. Many forms of government
intervention may look helpful or attractive to politicians
but are poisonous to the smooth and cost-effective delivery
of emissions reductions that is the objective of emissions
trading systems.
The processes involved in approving and using projectbased
offsets need to be clear, reliable and predictable.
Offset programmes can only attract finance, and only
offer their cost-reducing opportunities, as long as the
methodology is proven to be effective and administrative
delays are kept to a minimum. In addition, to be effective
an emissions trading scheme needs a coherent and
appropriate market regulatory regime.
Offset programmes can
only attract finance as
long as the methodology
is proven to be effective.
But while Europe dominates and many look to the
US to secure its longer-term future, the carbon market
is continuing to develop through increased participation
by emerging economies. By creating the Partnership for
Market Readiness (PMR), the World Bank has supported
carbon markets in countries that only a short while ago
seemed very unlikely to have any dealings with the policy
or its objective. Thus far, Chile, China, Columbia, Costa
Rica, Indonesia, Mexico, Thailand, Turkey, Morocco
and Ukraine have been confirmed as beneficiaries of
the US$350,000 fund to assist developing countries in
creating new carbon trading schemes, put together from
the contributions of Australia, the European Commission,
Japan, Norway, the UK and the USA, among others. The
primary emphasis is on domestic schemes, and much of the
focus is on assimilating the lessons of the European scheme.
But in time these initiatives could reach out to each other
and to more established schemes, creating a framework
for a truly global network of linked trading markets, and
helping define a new chapter in the use of pricing and
markets to combat climate change.
Henry Derwent became the President and CEO of the International
Emissions Trading Association (IETA) in February 2008. Previously, as
international climate change Director for the UK Government,
he oversaw the UK’s role in the international negotiations, in the G8
(especially as Prime Minister’s special representative during the UK G8
Presidency in 2005) and in other forums.
Monique Motty supports the work of IETA Brussels office in researching
climate policy and overlapping environmental issues with a special
interest in new market mechanisms and project based mechanisms.
The International Emissions Trading Association (IETA) is a
nonprofit business organisation created in June 1999 to establish
a functional international framework for trading in greenhouse gas
emission reductions. The membership includes leading international
companies from across the carbon trading cycle.
International Emissions Trading Association (IETA)
24, rue Merle d’Aubigné, CH-1207 Geneva, Switzerland
Tel: +41 22 737 05 00 | Fax: +41 22 737 05 08
Email: derwent@ieta.org, motty@ieta.org
Web: www.ieta.org
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