Overview of the state and trend of carbon market development

Overview of the State and Trend of Carbon Market Development

John Kilani, Director, UNFCCC

Sustainable Development Mechanisms programme

ADB ETS Linking Workshop

23 September, 2013

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PRESENTATION OVERVIEW

• Carbon market developments

• Update on the UNFCCC process

• Form of the global carbon market post 2020

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CARBON PRICING MECHANISMS

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CARBON MARKET DEVELOPMENTS

Examples in the Asia Pacific alone:

• China

• India

• New Zealand and Australia

• Kazakhstan

• South Korea

• Thailand, Vietnam and Indonesia

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CARBON MARKET DEVELOPMENTS

Carbon markets:

• Create a price signal and a clear incentive to reduce emissions

• Allow for this price to be lowered through the discovery of lower-cost opportunities for reducing emissions

• Drive down the costs of meeting emissions targets, while facilitating an increase in ambition

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UPDATES ON THE UNFCCC PROCESS

• Framework for various approaches (FVA)

• New market-based mechanism (NMM)

• CDM and JI review: to update governing rules and strengthen their role in the intl. climate process

• The broader role of market-based (and non-market-based) mechanisms as part of the 2015 outcome

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UPDATES ON THE UNFCCC PROCESS

• UNFCCC is a neutral player – an "honest broker" –interested in capped emissions and in helping governments, organizations, and individuals meet these caps at the lowest possible cost

• The best way of doing this is broad and connected carbon markets

• The UNFCCC has the internationalconnections and the in house expertise to make this happen

• Just as an example…

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CDM: ACHIEVEMENTS TO DATE

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THE POST-2020 GLOBAL CARBON MARKET

Markets will be a key component of any future climate-action framework because they:

• cross international boundaries through the creation of tradable assets;

• encourage and are driven by national and subnational policy;

• empower the private sector by creating economic reasons to reduce emissions.

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THE POST-2020 GLOBAL CARBON MARKET

The future of markets must include at least two critical components:

1.New markets that cover more global emission reductions

2.Linked markets that increase trading opportunity & fungibility

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3

LINKING JURISDICTIONS

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4651

0

615

721

INCREASINGLY COMPLEX LINKAGE

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THE POST-2020 GLOBAL CARBON MARKET

Another approach is for different jurisdictions to look to a set of consistent and harmonized standards.

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This is precisely what is currently under development under the UNFCCC with the FVA.

IN SUMMARY

• Carbon pricing instruments are proliferating as a policy tool for addressing emissions.

• In order to keep these markets healthy, they must link.

• UNFCCC provides a good platform to assist in this linking under the FVA.

• Despite difficult market situations signs indicate that markets, and market mechanisms will remain an integral part of any 2015 climate agreement.

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FURTHER INFORMATION:http://cdm.unfccc.int

THANK YOUJohn Kilani– Director, UNFCCC SDM programme

@UN_CarbonMechs /UNCarbonMechs

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