Toward a club of carbon markets

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. 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. 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. 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.