This document discusses the need for a global carbon pricing mechanism and carbon market to effectively address climate change. It proposes adding only a few lines to the 2015 Paris Agreement to establish a unified international carbon trading system between countries. This system would allow countries to voluntarily transfer portions of their emissions reductions to other countries in the form of carbon units, with the transfers and receipts recorded centrally. Such a small addition could create the basis for a true global carbon market that harnesses market forces to lower abatement costs and drive more ambitious climate action over time.

1. Paris: Can the 2015
agreement send a signal to
change the (energy) world?
David Hone
Chief Climate Change Adviser, Shell
Chair, International Working Group, IETA

2. We need a price on carbon . . .
. . .
. . .
We need a price on carbon . . .

3. Only the clarity of a carbon price
will change the long term energy
investment outlook

4. A carbon market is
the key enabler for
global change . . .
New technology mechanisms evolve (e.g. for CCS)
China adopts ETS approach
Linkages develop
between all
systems and more
systems appear
CDM Forestry mechanism
Japan technology mechanism
Norwegian ETS
Expanding EU-ETS
2000 2005 2010 2015 2020 2025
Danish-ETS
UK-ETS
Australian ERF
US States “cap-and-trade”
EU-ETS
CDM evolves to includes sectors
Pre-Kyoto Kyoto Post 2012 / LCA
ADP / Linkage
framework
New Zealand ETS
Global shipping mechanism

5. So far, only part of the way there

6. The Paris Agreement
• May well be quite short;
• Probably more outline than substance;
• Big picture items only;
(but what could be bigger than a global carbon market)
• Plenty of COP decisions later;
• Each idea or concept gets just a few lines.
• Markets and carbon pricing are still struggling to gain global
acceptance
So how do we create the essence of a global market?

7. Just a few lines to create a global
carbon market as proposed by IETA
Cooperation between Parties in realizing their Contributions
1. Parties may voluntarily cooperate in achieving their mitigation
contributions, [which may improve cost effectiveness and bolster
ambition].
2. A unified international transfer system is hereby established.
a. A Party may transfer portions of its defined national
contribution to one or more other Parties through carbon
units of its choice.
b. Transfers and receipts of units shall be recorded in
equivalent carbon reduction terms [in the international
transaction log and be included in national reports as
contributions delivered by the receiving Party and as
transfers from the transferring Party].

8. The “bare bones” version – 5 lines
Cooperation between Parties in realizing their Contributions
1. Parties may voluntarily cooperate in achieving their mitigation
contributions.
2. A unified international transfer system is hereby established.
a. A Party may transfer portions of its defined national
contribution to one or more other Parties through carbon
units of its choice.
b. Transfers and receipts of units shall be recorded in
equivalent carbon reduction terms.