48 COM/ENV/EPOC/IEA/SLT(2021)3
5. Exploring the role of international carbon markets in achieving countries’ net-zero targets This section explores what role international carbon markets could play over time to help countries achieve their net-zero emissions targets. Unless otherwise stated, in this section “international carbon markets” refer to “carbon credit mechanisms”11 that allow international transfers of carbon credits from one country to another. Discussions in this section focus on existing carbon crediting mechanisms, any potential future voluntary bilateral co-operation through Article 6.2 of the Paris Agreement that will involve crediting from mitigation activities, and future crediting from activities registered under the Article 6.4 mechanism.12 This section first provides an overview of the type of credits issued to date in international carbon markets to help understand the role of these credits in achieving net-zero. It then discusses different approaches countries have taken in their proposed use of international carbon markets and the potential role of international carbon markets in achieving net-zero targets, both on the supply and demand side.
11
A carbon crediting mechanism is a programme that registers mitigation activities and issues carbon credits corresponding to a defined quantity (generally, one tonne of CO2-eq) of emission reductions or removals achieved by the activities, and it is also often referred to as “baseline and credit” mechanism (EDF, WWF-US and Oeko-Institut, 2020[132]) (Michaelowa et al., 2019[177]). 12
This paper recognises that the rules for Article 6 are still under negotiation as of October 2021. Moreover, domestic carbon crediting mechanisms and voluntary / independent crediting schemes, are discussed because they share the same functioning principles as international carbon credit mechanisms, but they are not the primary focus of this section. Considerations on the role of other non-crediting domestic carbon market instruments, such as emission trading systems (ETS), in achieving net-zero are outside the scope of this paper, while acknowledging that linking of two ETS could potentially be framed as bilateral co-operation under Article 6.2 of the Paris Agreement.
UNDERSTANDING COUNTRIES’ NET-ZERO EMISSIONS TARGETS Unclassified
