It is a premise of this paper that mobilizing markets much more broadly, through well-designed emission trading programs that place durable, declining limits on emissions, will be critical to drive large-scale emissions reductions, spur the development and deployment of clean technologies, and channel necessary investment into low carbon development. While a growing number of jurisdictions are implementing emission trading programs to cap and reduce greenhouse gas emissions, no part of the current regime complex has capitalized on these efforts to promote the broader expansion and coordination of such policies. Yet these efforts have yielded neither emission reductions nor climate finance at the scale and pace required. Indeed, an extensive climate change “regime complex” has emerged comprising a wide range of initiatives and institutions aimed at reducing emissions (Keohane and Victor 2011), including the United Nations Framework Convention on Climate Change (UNFCCC), ratified by 196 countries “minilateral” efforts such as the Climate and Clean Air Coalition to Reduce Short-Lived Climate Pollutants, launched in 2012, with 45 country partners and 56 non-state partners and bilateral efforts such as the November 2014 United States-China announcement.
Because it is a global challenge, international cooperation to curb emissions is needed. With the impacts of climate change already evident and atmospheric concentrations of greenhouse gases continuing to rise, the scientific and economic case for climate action is overwhelming (IPCC 2014). A carbon markets club could be launched under UNFCCC auspices, but a more promising avenue might be to pursue the creation of the CCM as a complement to but outside the UN talks. Using a suite of incentives, including some from the trade arena, a club of carbon markets could serve as a powerful attractive nucleus for broadening the participation of jurisdictions in climate mitigation, much as the General Agreement on Tariffs and Trade (GATT) served as the nucleus for broadening trade in products and services. To achieve its aims, the club would establish common or reciprocal standards for environmental market infrastructure, transparency and environmental integrity offer mutual recognition of members’ emissions units allow participating jurisdictions to share experience and gain assistance in building institutional capacity and promote domestic and cross-border investment in low-carbon development. This paper proposes the creation of a club of carbon markets (CCM), to promote deep reductions in greenhouse gas emissions by supporting the development, harmonization, and increased ambition of domestic carbon markets.
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