Policy Brief: Avoiding hot air in the 2015 Paris agreement

What is hot air?

Since carbon markets make it cheaper to reduce emissions, some countries argue that they can take on higher targets if they use carbon markets. But to date this hope has been in vain: carbon markets have not led to higher commitments. On the contrary, mitigation commitments have been woefully inadequate, cap-and-trade systems have been severely oversupplied and offsetting mechanisms have been tarnished by insufficient environmental quality.

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 mitigation pledges, they increase overall emissions. Under the Kyoto Protocol, carbon markets have, so far, created an 11 gigatonne “Hot Air” loophole undermining the viability of this international climate treaty.

This is a situation that cannot continue as the need to incentivise real additional climate action at Paris 2015 is of unparalleled importance to help limit global warming below 1.5C. A key consideration for the Paris treaty is, therefore, to incentivise real additional climate action while avoiding the build-up of bogus hot air credits. Failure to address the problem of “Hot Air” will mean that bogus pollution rights continue to increase global emissions and this needs to be confronted in any deal made at COP21.

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