The UN carbon market is dead. Long live the UN carbon market!

Given its struggles with ensuring and verifying real emission reductions, the Clean Development Mechanism — a mechanism allowing developed countries to partially meet their goals by financing projects in developing countries — had always been one of the most controversial aspects of the UN climate regime. There has an ongoing debate about whether the UNFCCC would double down on its existing mechanisms or scrap them in favor of a new approaches — or even multiple new approaches.

Over the final few days of the COP, the issue of carbon markets finally reared its ugly head in the negotiations — even if the COP does appear to have developed an allergy to the term itself. In the text, markets are nestled under the euphemistic term “cooperative approaches.”

As the negotiations went on, the issue grew increasingly contentious. The early November text contained four options for such “cooperative approaches” — two of which merely acknowledged their importance in a single sentence and one of which was to exclude the section entirely. By December 5th, bracketed (contested) text was inserted specifying the promotion of sustainable development in developing countries as the object of the mechanism. More of the CDM-esque language was removed, and a full second option — eschewing markets in favor of “non-market-based approaches and “technology transfer” — was also added. This option was pushed by certain anti-market parties — notably, Bolivia.

In the face of this threat, Brazil and the EU jointly announced a proposal for new text on carbon markets. This text, still leaving open the issue of whether developing countries would be the focus or not, explicitly supported the inclusion of “internationally transferred mitigation outcomes” and the establishment of a new mechanism in service of this goal — a clear (and very strong) call for carbon markets in the Paris agreement. This call was incorporated into the December 9 text, which included much of that language in a condensed form. In the last draft before the agreed copy of the agreement, carbon markets constituted the vast bulk of the bracketed text — one of the only major issues left unresolved.

And the final text is out, agreed to, and there’s a new mechanism — very, very new.

Parties shall, where engaging on a voluntary basis in cooperative approaches that involve the use of internationally transferred mitigation outcomes towards nationally determined contributions …

A mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development is hereby established under the authority and guidance of the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement for use by Parties on a voluntary basis.

Reading between the lines, this appears to be a mechanism that will allowing developing and developed countries to trade emissions reductions amongst themselves — in the manner of Joint Implementation — trading between developing countries under the current regime — but likely incorporating many of the methodologies of the CDM. The new mechanism will use a share of its proceeds to fight adaptation.

In all aspects, this seems a significant step forward — a step, perhaps, toward a global UN carbon market with a level playing field. The specific rules and bodies governing this mechanism will be established over the following years — we can only hope that it learns from the pitfalls of its predecessors.

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