The International Emissions Trading Association has said that it is a “huge disappointment” that framing of rules for global carbon trading has been delayed by (at least) a year more.

The rules for operationalisation of an emissions trading mechanism, as envisaged under Article 6 of the Paris Agreement, could not be agreed upon by negotiators at the recently-concluded 25th Conference of Parties meeting at Madrid.

In an e-mail to BusinessLine , IETA’s CEO, Dirk Forrister, however, noted that “countries don’t have to wait on rules to get started in market cooperation.”

In Paris in December 2015, all countries put on the table what they would do for combating global warming/climate change. These Nationally Determined Contributions (NDCs) became commitments under the Paris Agreement.

Cost saving

IETA has estimated that a robust market for carbon trading can help reduce the cost of meeting the NDCs by $320 billion a year, by 2030. Carbon trading refers to trading in instruments that entities would earn for their climate actions, such as putting up a renewable energy plant.

A question is whether there would be a buyers for carbon credits even assuming that an international framework for trading is in place. On this, Forrister said: “The tools of carbon trading will be used extensively if countries are serious about getting to Paris goals of net-zero emissions by mid-century.”

Many countries are still developing their national programmes to implement the Paris Agreement and “we expect many of them to outline plans for the use of international markets,” he said.

Some, such as Jairam Ramesh, Congress leader and a former climate negotiator of India, argue against carbon markets, on the grounds that they are only gamed and used by the developed countries to evade commitments. On this, Forrister said that there ought to be “strong accounting systems”.

“We expect that any UN-sanctioned body that would measure and verify reductions and approve the issuance of carbon instruments would have strong safeguards in place to ensure reductions were real,” he said. “Markets rely on confidence; it will be the UN’s task to deliver that confidence,” he added.

In a IETA press release issued today, Forrister observed that the failure in Madrid wouldn’t stop countries from co-operating on building “high integrity markets of the future.”

“Since the UN climate process has stalled, the opportunity will move to bilateral and regional markets, where pilot systems are already in formation,” the release says.