Overview of the State and Trend of Carbon Market Development

John Kilani, Director, UNFCCC

Sustainable Development Mechanisms programme

ADB ETS Linking Workshop

23 September, 2013

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PRESENTATION OVERVIEW

• Carbon market developments

• Update on the UNFCCC process

• Form of the global carbon market post 2020

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CARBON PRICING MECHANISMS

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CARBON MARKET DEVELOPMENTS

Examples in the Asia Pacific alone:

• China

• India

• New Zealand and Australia

• Kazakhstan

• South Korea

• Thailand, Vietnam and Indonesia

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CARBON MARKET DEVELOPMENTS

Carbon markets:

• Create a price signal and a clear incentive to reduce emissions

• Allow for this price to be lowered through the discovery of lower-cost opportunities for reducing emissions

• Drive down the costs of meeting emissions targets, while facilitating an increase in ambition

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UPDATES ON THE UNFCCC PROCESS

• Framework for various approaches (FVA)

• New market-based mechanism (NMM)

• CDM and JI review: to update governing rules and strengthen their role in the intl. climate process

• The broader role of market-based (and non-market-based) mechanisms as part of the 2015 outcome

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UPDATES ON THE UNFCCC PROCESS

• UNFCCC is a neutral player – an "honest broker" –interested in capped emissions and in helping governments, organizations, and individuals meet these caps at the lowest possible cost

• The best way of doing this is broad and connected carbon markets

• The UNFCCC has the internationalconnections and the in house expertise to make this happen

• Just as an example…

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CDM: ACHIEVEMENTS TO DATE

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THE POST-2020 GLOBAL CARBON MARKET

Markets will be a key component of any future climate-action framework because they:

• cross international boundaries through the creation of tradable assets;

• encourage and are driven by national and subnational policy;

• empower the private sector by creating economic reasons to reduce emissions.

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THE POST-2020 GLOBAL CARBON MARKET

The future of markets must include at least two critical components:

1.New markets that cover more global emission reductions

2.Linked markets that increase trading opportunity & fungibility

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3

LINKING JURISDICTIONS

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4651

0

615

721

INCREASINGLY COMPLEX LINKAGE

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THE POST-2020 GLOBAL CARBON MARKET

Another approach is for different jurisdictions to look to a set of consistent and harmonized standards.

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This is precisely what is currently under development under the UNFCCC with the FVA.

IN SUMMARY

• Carbon pricing instruments are proliferating as a policy tool for addressing emissions.

• In order to keep these markets healthy, they must link.

• UNFCCC provides a good platform to assist in this linking under the FVA.

• Despite difficult market situations signs indicate that markets, and market mechanisms will remain an integral part of any 2015 climate agreement.

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FURTHER INFORMATION:http://cdm.unfccc.int

THANK YOUJohn Kilani– Director, UNFCCC SDM programme

@UN_CarbonMechs /UNCarbonMechs

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