Summary

A key consideration for the Paris treaty is how to incentivize real additional climate action while avoiding the laundering of bogus “hot air” credits. The lack of environmental integrity of market mechanisms under the Kyoto Protocol have so far created an 11 gigatonne “hot air” loophole undermining the viability of the first international climate treaty.

This can be avoided in the future by avoiding the carry-over of internationally traded units or emissions reductions from pre-2020 to count towards compliance with the Paris agreement, and the enforcement of strict eligibility rules to ensure that only Parties with ambitious mitigation targets, expressed as carbon budgets, are allowed to use market mechanisms.

Similarly, while early action should be promoted as it can help close the pre-2020 ambition gap, it is extremely difficult to ascertain if early action credits amount to more than hot air. Early action should instead be supported through the mobilization of new and additional climate finance for pre-2020 mitigation measures in developing countries and through increasing the 2020 targets of developed countries.

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