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Governance of Fragmented Compliance and Voluntary Carbon Markets Under the Paris Agreement

Author

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  • Hanna-Mari Ahonen

    (Perspectives Climate Research, Germany)

  • Juliana Kessler

    (Perspectives Climate Research, Germany)

  • Axel Michaelowa

    (Perspectives Climate Research, Germany / Department of Political Science, University of Zurich, Switzerland)

  • Aglaja Espelage

    (Perspectives Climate Research, Germany)

  • Stephan Hoch

    (Perspectives Climate Research, Germany)

Abstract

Over the past two decades, the emergence of multiple carbon market segments has led to fragmentation of governance of international carbon markets. International baseline-and-credit systems for greenhouse gas mitigation have been repeatedly expected to wither away, but show significant resilience. Still, Parties to the Paris Agreement have struggled to finalize rules for market-based cooperation under Article 6, which are still being negotiated. Generally, there is tension between international top-down and bottom-up governance. The former was pioneered through the Clean Development Mechanism under the Kyoto Protocol and is likely to be utilized for the Article 6.4 mechanism, while the latter was used for the first track of Joint Implementation and will be applied for Article 6.2. Voluntary carbon markets governed bottom-up and outside the Kyoto Protocol by private institutions have recently gained importance by offering complementary project types and methodological approaches. The clear intention of some Parties to use market-based cooperation in order to reach their nationally determined contributions to the Paris Agreement have led to an ongoing process of navigating the alignment of these fragmented carbon market instruments with the implementation of nationally determined contributions and Paris Agreement’s governance architecture. We discuss emerging features of international carbon market governance in the public and private domain, including political and technical issues. Fragmented governance is characterized by different degrees of transparency, centralization, and scales. We assess the crunch issues in the Article 6 negotiations through the lens of these governance features and their effectiveness, focusing on governance principles and their operationalization to ensure environmental integrity and avoid double counting.

Suggested Citation

  • Hanna-Mari Ahonen & Juliana Kessler & Axel Michaelowa & Aglaja Espelage & Stephan Hoch, 2022. "Governance of Fragmented Compliance and Voluntary Carbon Markets Under the Paris Agreement," Politics and Governance, Cogitatio Press, vol. 10(1), pages 235-245.
  • Handle: RePEc:cog:poango:v:10:y:2022:i:1:p:235-245
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    References listed on IDEAS

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    6. Luca Lo Re & Jane Ellis, 2021. "Operationalising the Article 6.4 mechanism: Options and implications of CDM activity transition and new activity registration," OECD/IEA Climate Change Expert Group Papers 2021/02, OECD Publishing.
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    Cited by:

    1. Kreibich, Nico & Schulze-Steinen, Max, 2023. "The EU as a normative power? Fighting greenwashing and promoting the integrity of corporate climate action within and outside Article 6 of the Paris Agreement," Wuppertal Reports 25, Wuppertal Institute for Climate, Environment and Energy.
    2. Haotong Jiang & Liuyang Yao & Xueru Bai & Hua Li, 2023. "Dynamic Analysis and Simulation of the Feasibility and Stability of Innovative Carbon Emission Reduction Projects Entering the Carbon-Trading Market," Sustainability, MDPI, vol. 15(8), pages 1-19, April.
    3. Shiyi Wu & Rui Niu, 2024. "Development of carbon finance in China based on the hybrid MCDM method," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-11, December.

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