Carbon Market Watch

For fair and effective climate protection.

Beware hot air in the Paris climate talks

02 Dec 2015

Paris is hosting the 21st climate summit and the hopes are high that the conference will produce a new climate treaty to help keep global warming to below dangerous levels. The measure of success of the Paris climate treaty hinges on its ability to promote new climate actions while containing the dangers that hot air could pose to an effective response to climate change.

Written by Femke De Jong, EU climate policy advisor at Carbon Market Watch

Lessons learnt from the Kyoto Protocol

The experience with the Kyoto Protocol highlights the importance of avoiding hot air under a future international climate treaty. The Kyoto Protocol is currently suffering from an 11 gigatonne “Hot Air” loophole that undermines the viability of this international climate treaty.

Numerous reports have presented evidence that the market mechanisms under the Kyoto Protocol could have delivered fewer emission reductions than were sold. One study estimates that up to 70% of all offset credits issued from the Clean
Development Mechanism (CDM) may not represent real emission reductions. Another study finds that bogus carbon offsets issued from the Joint Implementation (JI) mechanism could have increased global emissions by 600 million tonnes of CO2.

The carbon credits resulting from these carbon market design problems are called “Hot Air” because they do not represent real emission reductions. If used by countries to count towards climate targets, they increase global greenhouse gas emissions. This hot air could have been avoided by ensuring that only countries with adequate carbon budgets are allowed to use international market mechanisms.

What we know about carbon markets

The role that carbon markets will play in the Paris treaty is still unknown, but it looks like international emissions trading will be very different after 2020 from the situation under the Kyoto Protocol. Although 19 governments and nearly 90 businesses recently launched the Carbon Pricing Leadership Coalition to expand carbon pricing across the globe, there is little ho
pe that the Paris treaty will set out the rules for carbon trades between countries. In contrast to the Kyoto Protocol that has a registry to track the transfers of international carbon units, such international oversight seems to be missing from the current draft treaty text.

For the moment it appears more likely that a move towards a global carbon price will be done bottom-up by linking carbon pricing initiatives with each other, rather than through a top-down process from the Paris climate treaty. Without international oversight and clear rules, this could increase the likelihood of double counted emission reductions however.

The dangers of hot air

Badges_ v copy 8These changing circumstances do not contain the dangers of hot air unfortunately; in fact they rather compound them. The lack of rules from the Paris treaty would allow countries to freely use hot air for compliance with their climate targets under the Paris treaty, or trade these hot air units with other countries. Without oversight, countries are even able to get away with double counting hot air units towards their own targets and towards the buyers’ targets.

The danger that this hot air poses can be seen from the EU’s experience with carbon markets. The EU ETS has been oversupplied with carbon permits ever since its existence ten years ago. The amount of hot air units in the EU ETS is currently equal to double the total amount of required emission reductions from 2013 to 2020. If the EU does not remove this hot air from the EU ETS it is automatically carried over into the post-2020 period and can be used by companies as a “get-out-of-jail-for-free” card instead of taking actual climate actions. Full carry-over of all of the EU’s hot air could slash the effectiveness of the EU’s climate instruments (in terms of emissions reductions) by more than half.

Obviously if all countries are allowed to do this, it would make the Paris climate treaty a much less effective climate instrument, and delay the much needed transition to climate friendly societies.  It is a relevant topic as not only the EU ETS but all carbon markets around the world are oversupplied with surplus carbon permits at the moment.

Avoiding hot air

So how can we avoid the dangers of hot air in the Paris climate treaty? While the hot air units under the Kyoto Protocol are expected to become useless commodities after its second commitment period ends in 2020, there are several other sources of hot air that the Paris climate talks need to address to make the COP21 a success:

  • Leave our excess weight behind: cancel the hot air from emissions trading systems. These surplus carbon permits allow businesses to continue polluting while still achieving their climate targets. All countries should cancel this hot air by 2020 to ensure that carbon markets only promote real climate actions.
  • Only count once: create a robust international accounting system to avoid double counting. The Paris treaty should provide for international oversight to register and track carbon units and verify transfers of carbon units so that emissions reductions are not double counted.
  • Finance, not offset, climate actions abroad: disallow CDM and JI offsets after 2020. The Paris treaty should move away from carbon offsetting that has in the past led to increased global emissions. Countries should instead provide financial support for climate actions in developing countries with emission reductions to stay in the country of origin.
  • Do not mix apples with pears: keep land use offsets out of carbon markets. While soils and forests only temporarily absorb carbon, the emissions from fossil fuels are permanent. Non-permanent land use offsets should therefore not be allowed into carbon markets.

What can you do?

While negotiatorcap_tag_images are busy with the climate talks in Paris, you can help the climate superhero CAPMAN to take carbon out of the game. During the climate summit in Paris, Carbon Market Watch will launch a new video game superhero CAPMAN who is the heroic embodiment of real climate action.  However, like every superhero, CAPMAN has some evil enemies that are determined to stop him: Various “Hot Air” Challengers threaten CAPMAN’s goal of saving the planet. A strong negotiation text will help CAPMAN to get rid of “Hot Air” and take carbon out of the game. Join CAPMAN in taking carbon out of the game and play CAPMAN online at: