Recent work of the Climate Change Expert Group (CCXG) on market mechanisms

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1 Recent work of the Climate Change Expert Group (CCXG) on market mechanisms Andrew Prag Partnership for Market Readiness 4 th Assembly Meeting Sydney, 22 October 2012 Climate Change Expert Group

2 Overview How are domestic market mechanisms relevant for UNFCCC negotiations, and vice-versa? Analysing design elements and governance of market mechanisms Options for developing or recognising international standards under the UNFCCC 2 Climate Change Expert Group

3 Domestic market mechanisms and the UNFCCC negotiations Domestic mechanisms and international links emerging in parallel to UNFCCC negotiations Domestic mechanisms are not governed through the UNFCCC......but units that cross borders matter for international emissions accounting How can the international community have confidence in the quality of internationally-traded GHG units? 3 Climate Change Expert Group

4 Principles and objectives Principles and objectives Design elements of market mechanisms Trading system Foundations Crediting mechanism Coverage, caps, allocation/auction etc Rules on use of credits Nuts and bolts Trading periods, monitoring/ reporting, registries, unit issuance, etc Including accreditation of 3 rd party verifiers Enforcement and non-compliance Foundations Eligibility, crediting baselines/additionality, etc Nuts and bolts Crediting periods, monitoring/ reporting, registries, unit issuance, etc Including accreditation of 3 rd party verifiers and validation Adherence to rules 4 Climate Change Expert Group

5 Governance: who does what? High level authority Foundations Nuts and bolts Enforcement Trading Accreditation EU ETS EU co-decision European Commission 3 rd party National government California State Gov t Air Resources Board (ARB) 3 rd party Air Resources Board (ARB) Australia Aus Parliament DCCEE Emitters or 3 rd party N/A Clean Energy Regulator Crediting CDM CMP CDM EB 3 rd party CDM EB VCS VCSA VCSA / ISO 3 rd party VCSA VCSA / 3 rd party WCI offsets WCI Cttee. WCI Cttee. / ISO 3 rd party WCI partner jurisdiction 5 Climate Change Expert Group

6 Devolved governance, common standards Even where governance is devolved, linking and potential UNFCCC recognition facilitated through mutual confidence in design and operation Common principles are useful but likely not sufficient Use of internationally-agreed standards for design elements could help build this confidence What is environmental integrity What role for standards in UNFCCC process? And for which design elements? 6 Climate Change Expert Group

7 How to approach standards through UNFCCC process? UNFCCC decisions to develop standards Could be broader facilitative guidance or more detailed prescriptive standards developed by subsidiary bodies UNFCCC recognition of other standards Recognising ISO or other standards as valid if verified through accredited agencies UNFCCC agrees only on transparency National regulators decide on standards and which units to recognise 7 Climate Change Expert Group

8 Which elements for standards? Foundations Nuts and bolts More politically-sensitive areas, particular to national circumstances Examples of design agreements More technical aspects conducive to standards Monitoring standards, registry systems Wide experience with third party verification and accreditation Fairly comprehensive ISO standards Enforcement 8 Climate Change Expert Group Highly specific to jurisdictions Good practice guidelines and transparency, but is it enough?

9 Thank you TO BE RELEASED AT COP 18: Making Markets: Unpacking Design and Governance of Carbon Market Mechanisms by Andrew Prag, Gregory Briner and Christina Hood 9 Climate Change Expert Group

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