Post Kyoto: What does carbon’s future hold?

Each day we approach the upcoming Durban climate talks is another day that the eCO2market staff has another discussion about what the future of carbon markets will look like. Since it’s Friday and because Durban starts in just over a week, we wanted to take the question to the public and encourage our readers to share their opinions with us in a casual conversation about possibilities for future compliance markets. It seems as if there are several options which could prevail, some of which might be more realistic than others.

Let’s take a look at just a few of the possible future scenarios, and raise more questions than we can answer:

  1. Kyoto Protocol lapses: This scenario seems to be a popular . If the Kyoto Protocol is not renewed before the end of 2012, a complicated set of events will occur, ultimately affecting the fate of JI and CDM. Since CDM is the dominant force, perhaps it will continue in an unofficial manner? Will the UN continue supporting CDM? Will there be enough international willpower to institute a second binding period if the first lapses?
  2. Japanese bilateral agreements will take the lead: The Japanese government insists that their proposed scheme could exist peacefully with current CDM rules,  but on paper it appears as though this is not true. Will divisive technologies like CCS be allowed in the Japanese scheme? Will their rules truly speed up the process that so many feel the UNFCCC slows down through current practices?
  3. World carbon markets link: This is more of a casual daydream than any kind of firm possibility at this point. But, with the advances Australia and California are making with their respective carbon markets, the possibility at least exists now for these new markets to interact with the EU ETS (or, more likely in the case of California, for the CA ETS to link with the Western Climate Initiative initially). For that matter, could the Japanese bilateral system ever link with CDM? What would the standardized offset unit be? Who would act as the decision making body?

In no way do these three scenarios even touch the tip of the potential carbon iceberg facing the market, but they raise some other interesting macro questions and it’s interesting to think about: Can a successful global market mechanism be implemented by one country? Will California (or Australia) be able to create a successful insulated market?

We would love to engage our readers about this fascinating topic – leave a comment and let us know your thoughts!

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