There is an urgent need to stabilize market prices to avoid a complete halt of the Carbon Markets. This Policy Brief summarizes the proposed options to increase demand as well as options to restrict supply. It focusses on options that have a short-term effect and can be implemented in a timely manner. The options were analysed regarding their potential to stabilize market prices along three main criteria: their quantitative impact, their signalling effect for the future of the carbon market and their political and market acceptability.
Only two options where found to be likely to have significant impact on the market. Increasing the level of ambition would send a strong signal and could restore market participants’ faith in the future of the mechanism, albeit with limitations. This option is, however, highly unlikely to be implemented. The second option would be the use of international climate finance to purchase excess CERs via the Green Climate Fund or other vehicles. However, this option could conflict with principles of appropriate mitigation and particularly appropriate support that are to be met by the GCF.
If parties want to stop the brain drain from international carbon markets and to safeguard that capacities in developing countries can be maintained, which have been tediously built up, other more target-oriented approaches have to be found. With stringent selection criteria in place and with a focus on projects / programmes that provide a perspective in line with what is desired in a future climate change agreement, the GCF deserves a closer look in this regard./p>
Hermwille, L.: Stabilizing regulated Carbon Markets Options and Ideas to stabilize CER/ERU prices. JIKO Policy Brief 01/2013. Wuppertal Institute for Climate, Environment and Energy. Wuppertal - 25 p., 2 tables.
Date:
May 2013
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