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Trading Carbon : November 2011
26 CARBON ENTREPRENEURS November 2011 Q: And where have carbon markets most clearly been a success? PMC: Carbon trading was successful in engaging the financial sector in environmental issues. Prior to that, there was a complete disconnect between financial sector (and all ancillary services -- legal, accounting, banking, etc.) and green causes. JB: The CDM has managed to stimulate lots of development in cleaner energies in developing countries, and yielded large emission reductions in a transparent manner, while the EU ETS has lead to real reductions in European carbon emissions, and been the motor behind CDM. SD: Carbon markets were a very innovative and bold move at the start. Most importantly, carbon trading got people in Europe to measure their carbon emissions for the first time ever. Q: To what extent does there need to be a new global climate deal for carbon trading to be a success? PMC: Markets work better when politicians show leadership and support. It is ironic that markets have taken the environment and climate change more seriously than did most political leaders around the world. MM: The UN process has lost its way, so at international, regional and national levels there needs to be stronger incentives and a much bigger range of finance initiatives. Carbon trading really didn't work for a lot of new technologies and for clean energy to take root governments have to try and mitigate the risk by underwriting climate bonds or giving stronger tax breaks. JB: A pledge and review based approach can also work reasonably well, particularly if the infrastr uctural backbone of the UNFCCC (UN Framework Convention on Climate Change) -- principles for accounting, monitoring verification and reporting, registries -- form the basis for such approaches. It would be a benefit if there was a global deal providing more meat on that part of the bone. But given the limitations on US flexibility in climate talks, insisting on a legally-binding agreement would end up being positive for those who don't want carbon markets. MS: I think growth in carbon markets will be restricted to domestic trading schemes as I don't feel the international system is likely to grow when there is such slow progress at climate talks. In North America, Australia and China there could be good opportunities. An international carbon market is likely to diminish in importance. Developing countries are in very different situations now than in 1997, so the c urrent UN-based system is looking less appropriate. Q: Do you think the pace of climate change has been so fast as to render meaningless attempts at cutting emissions, particularly through markets? Given the pace of population growth and high energy- consumption patterns in developed and, increasingly, in developing countries, are efforts to cut emissions likely to be futile or ineffective? MS: It's fair to say that linking patterns of consumption to climate responsibility would provide a more equitable allocation of targets. It is not fair that citizens of some countries emit many times more than citizens of less developed countries, while at the same time denying responsibility for climate change. JB: I have never thought that the use of market forces Steve Drummond, Bainton Capital Partners Carbon trading got people in Europe to measure their carbon emissions for the first time ever Steve Drummond, Bainton Capital Partners Jorund Buen, Differ
December - January 2011