Negotiations on the New Market Mechanism and the Framework for Various Approaches - What Future Role for the UNFCCC in Regulating the Carbon Market?

This article reviews on-going negotiations under the UNFCCC on the New Market Mechanism (NMM) and Framework for Various Approaches (FVA), which covers both market-based and non-market-based approaches. It argues that limited progress has been achieved in the past five years under the UNFCCC concerning the future international legal framework for carbon trading. A number of important design elements remain outstanding in the negotiations concerning the NMM and its modalities and procedures. The general objective and scope of the FVA also remain undefined. The article concludes that to successfully complete these negotiations, UNFCCC Parties must find convergence on principled questions concerning multilateralism and the future role of the UNFCCC in developing and overseeing market mechanisms.

This article reviews the on-going negotiations concerning the future of carbon trading under the United Nations Framework Convention on Climate Change (UNFCCC). It focuses on the New Market Mechanism (NMM) and the Framework for Various Approaches (FVA), which covers both market-based and non-market-based approaches under the UNFCCC. It argues that limited progress has been achieved at the international level in the past five years concerning carbon trading under the UNFCCC and its Kyoto Protocol beyond 2012. One of the reasons is that the future international mitigation regime remains relatively undefined and the level of ambition of developed countries’ mitigation pledges is low. It has been estimated that there will be a surplus of credits from the existing three flexibility mechanisms under the Kyoto Protocol that could satisfy demand for international credits through 2020, meaning that there is likely to be insufficient demand for credits from new market mechanisms. Some UNFCCC Parties fear that if operational, the NMM and the FVA would further reduce demand for credits from the existing Kyoto Mechanisms. Parties also hold divergent views on many key issues with respect to market-based approaches, including the detailed design of the NMM, and the role and functions of the FVA. Differences over top-down and bottom-up approaches that have slowed down negotiations on the legal design of the international mitigation regime since preparations for the 2009 UN Climate Change Conference in Copenhagen are increasingly apparent in the negotiations on market mechanisms. While a number of Parties would prefer the UNFCCC to play a central role in regulating such market mechanisms that are used for compliance under the UNFCCC, some Parties advocate a bottom-up approach, calling for regulatory diversity that builds on mechanisms developed outside the UNFCCC regime. As widely expected, the recent 2012 UN Climate Change Conference in Doha brought no conclusive answers on the many principled differences concerning market approaches. It merely conferred to the Subsidiary Body for Scientific and Technological Advice (SBSTA) the mandate to elaborate the modalities and procedures of the NNM as well as central elements of the FVA by the 2013 UN Climate Change Conference in Warsaw.

Copyright: © Lexxion Verlagsgesellschaft mbH
Quelle: Issue 4/2012 (Dezember 2012)
Seiten: 11
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Autor: Dr. Kati Kulovesi

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