Carbon market cooperation

The rise of climate coalitions

We are in the race of our lives to beat global warming and the rules are changing.

A decade ago, the presumptive approach was a global governance structure under the auspices of the United Nations.

Now, the challenges are more urgent and the landscape is more decentralized.

The U.N. will still play a vital role — as illustrated by the breakthrough climate accord reached in Paris in 2015. Yet even the Paris Agreement simply provides a foundation for national action. Countries recognize that progress on climate depends on implementation at home.

Coordinated groups of countries are emerging as focal points for climate action, and the idea of grouping is gaining currency as a vehicle for securing greater investment, market access, and financial stability, and for driving greater ambition in climate action.

Such coalitions might form among countries seeking to harmonize carbon pricing policies, catalyze a broad market for renewable energy, or create preferential trade and investment incentives for low-carbon technologies.

Building a coalition

One golden opportunity for coalitions concerns emission trading programs (or "carbon markets") that cap and cut climate pollution, harnessing the power of market forces to drive carbon pollution down and spur investment into innovative technologies. Carbon markets are now underway in more than 50 jurisdictions around the world that are home to over 1 billion people.

As carbon markets continue to expand, coordination among programs will be increasingly important to ensure environmental integrity and maximize benefits.

By supporting the development, harmonization, and increased ambition of domestic carbon markets — including in fast-growing economies — coordination could help broaden participation in climate action and enable deeper reductions in greenhouse gas emissions. The results will complement - and build additional momentum for - climate efforts under the U.N.

Much as the General Agreement on Tariffs and Trade helped galvanize participation and ambition in trade, a voluntary coalition of carbon market jurisdictions could expand the scope and maximize the cost-effectiveness of ambitious climate action around the globe.

For more information about the benefits of a coalition of carbon markets and possible pathways to its creation, see EDF's "Building a coalition of carbon markets to spur faster, deeper cuts in climate pollution" [PDF].