Carbon Markets Key to Battling Climate Change

By HSealy
June 6, 2017

As summer approaches in many countries, scientists are monitoring the earth’s temperatures — last year was the hottest on record.[1] Glaciers are melting, sea levels are rising, and natural disasters are spiraling out of control.[2]

Fortunately, nations are no longer standing idly by, watching the climate change. So far, 195 countries have signed the Paris Agreement, which aims to limit warming to less than 1.5 degrees C above pre-industrial levels, and have net zero greenhouse gas emissions in the second half of the century.[3]

In order to achieve these goals, an effective price will have to be placed on carbon.  That’s what some experts in the Caribbean are proposing now.

Last summer, leaders in the region attended a dialogue at St. George’s University to explore how to create a regional carbon market in the Caribbean.[4] This summer, the group will reconvene at SGU to continue that discussion.

Carbon markets are among the most creative solutions available for combating climate change. Broadly, here’s how they work. A governing body stipulates a maximum amount of carbon that participating entities can emit — and then auctions off emission allowances. Members must comply with the cap or buy other members’ allowances to emit more than they’re entitled to.[5] [6]

Currently, the Caribbean carbon market, one of many enabled by the Clean Development Mechanism in 1997,[7] only involves the selling of credits from a limited number of countries in the region to developed countries. These credits help the developed countries meet their carbon emission caps.  Under Article 6 of the Paris Agreement, all countries can be both buyers and/or sellers of units, and all countries have taken on Nationally Determined Contributions. The rulebook for these new market approaches under Article 6 is expected to be completed by 2020.

Therefore, countries in the Caribbean have to position themselves, including their private sectors, to participate in both emerging domestic and regional markets.

Carbon markets elsewhere have been successful. The European Union’s carbon market is on track to reduce emissions by over 40 percent in 2030. Qu├ębec’s carbon market is playing a large role in achieving the province’s 2020 emission goals. China’s has a market value of over $86 million just a few years after its creation.[8]

Creating an integrated approach to carbon pricing within the Caribbean could facilitate the investment of hundreds of millions of dollars into the regional economy — all the while helping to drive down overall carbon emissions.[9]

[1] http://www.scientificamerican.com/article/99-percent-chance-2016-will-be-the-hottest-year-on-record/

[2] http://climate.nasa.gov/effects/

[3] http://ec.europa.eu/clima/policies/international/negotiations/paris/index_en.htm

[4] http://www.sgu.edu/news-events/2016/St-Georges-University-Hosts-Paris-Agreement-Article-6-Climate-Summit.html

[5] http://lexicon.ft.com/Term?term=carbon-market

[6] https://www.theclimategroup.org/news/carbon-price-success-story-new-icap-report

[7] http://www.sgu.edu/news-events/news-archives13-sgu-un-framework-convention.html

[8] https://www.theclimategroup.org/news/carbon-price-success-story-new-icap-report

[9] http://www.sgu.edu/news-events/2016/St-Georges-University-Hosts-Paris-Agreement-Article-6-Climate-Summit.html

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