Markets in the 2015 Agreement from the UN talks in Geneva: Friday 13 Feb Update

Markets-related discussions reached a high peak on Wednesday at the UNFCCC talks in Geneva during the draft negotiating text of the Paris agreement. The negotiations have continued in earnest and there is now a ‘Geneva text,’ which supercedes the Lima draft elements text from COP 20 late last year. You can view the full Geneva text for the Paris agreement here. Climate envoys will next meet in Bonn this June to begin negotiating the text.

Markets and carbon pricing make their biggest appearance in section D of the text on mitigation. Paragraph 23 of this text includes five options on carbon markets and carbon accounting which have been put forward by several countries and country negotiating-groups.

On Wednesday, the negotiators finished inserting new options to the text and began a discussion on the structure of the agreement itself. The idea put forward by the ADP co-chairs is to understand from governments first their big-picture ideas on the how the agreement will be structured, before beginning the process of ‘streamlining’ the text and negotiating it section by section. During this discussion on the agreement’s structure comments on markets were raised by several top officials. Other issues were raised (adaptation, legal arrangements, finance, capacity building, etc.), but the summary below just highlights when markets were raised, to give you a flavour of how markets may feature in the Paris agreement.

Wednesday afternoon (interventions from countries to discuss the structure of the agreement, with only the the comments from markets listed below):


The agreement must use a governing body structure, but rely on subsidiary bodies to help implement decisions (like the CDM);


We want to use markets as they are proven and cost-effective. Rules on accounting should be set internationally;

New Zealand:

How we address market mechanisms will need to be addressed by decisions under the COP, these need to be ‘fleshed out’ significantly in order for the agreement to work effectively;


Markets-related language should be in the agreement, but some of the technical issues related to their implementation can go into future COP decisions.


Any transfer of international mitigation outcomes requires should take place only between countries that have quantified economy-wide emission targets. The Convention currently does not give the authority for transfers between countries with economy-wide emission reduction targets.

As such, international transfers of mitigation outcomes should be based on a common understanding of agreed accounting rules. The agreement must give  mandates for further defining these accounting rules in future COP decisions.


REDD+ must be a central part of the Paris outcome because it offers the cheapest way of achieving emission reductions. International emissions trading should be included in the agreement, with a structure built from the elements in the Kyoto Protocol.

The mitigation section of the agreement should include a key section on markets that covers all sectors of the economy, including forests, and accounting rules should be clearly set out.


Countries that host CDM projects will continue to account emission reductions from those projects, but need ‘transitionary applications’ for rules related to the CDM after 2020. New market mechanisms currently under discussion have no principles or rules on how they will be used. Universal access to markets to be used voluntary (not just for countries with quantified economy-wide emission reduction targers) goes against the rules of the Convention, and further the Convention does not have a mandate for the creation of new market mechanisms.

Universal access to new market mechanisms could make all countries both suppliers and buyers of units. Therefore, a subsequent COP decision text on rules for using those mechanisms is needed. As a result of this, all references to market mechanisms should be taken out of the agreement since they do not fall under the mandate of previous agreements.


Paragraph 32 of the text should more clearly define the role of market mechanisms. Ethiopia proposes language in which 20% of a country’s’ total emission reductions can be claimed outside its national borders. Buying and selling of mitigation outcomes should be called the carbon market. Full stop. Linkage between buying and selling of carbon credits can be arranged directly by Parties to the Convention or by intergovernmental organisations or private sector companies/organisations. Carbon trading shall be measured/reported/verified and avoid double counting.

The US and EU interventions on Wednesday did not reference markets.

Markets-related discussions will continue again today, and after the talks in Geneva close this evening will pick up again at the UNFCCC conference in Bonn this June.

Jeff Swartz
Director, International Policy
International Emissions Trading Association (IETA)

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