With many countries placing conditions in their intended nationally determined contributions that emissions reduction targets are contingent on having access to international climate markets, how will emissions trading discussions shape next month's climate negotiations in Paris? During today's OnPoint, Dirk Forrister, president and CEO of the International Emissions Trading Association, discusses the framework that he believes needs to be established in the Paris agreement to facilitate trading systems and linking.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Dirk Forrister, president and CEO of the International Emissions Trading Association. Dirk, great to have you back on the show.
Dirk Forrister: Thank you, Monica. Good to be here.
Monica Trauzzi: Very good time to have you on. Dirk, as we hit that final stretch before the negotiations in Paris for this year's international climate discussions. There's a lot of work happening behind the scenes, and also quite a bit of prejudging about what we might actually see as the outcome of the conference. How substantive are you expecting the actual agreement to be and how much will it accomplish?
Dirk Forrister: I think the actual agreement is likely to be quite short, and it'll kind of be headline items. It'll be very principled, but it'll probably be something like, you know, 10 or 15 pages long, something you can read in one sitting and understand. And all the detail will be picked up in decisions that are taken by the negotiators. Some of those decisions will happen in Paris, but there are a good number of them that will likely be put on a work plan to be produced in following years. So we would almost think about it like the difference in legislation and regulation. So you'll get the basic ideas in the agreement and the rest of it in decisions.
Monica Trauzzi: And has a lot of the real work or the hard work happened already through the INDC process?
Dirk Forrister: I think so. I mean, in a sense, that's where the real action is. That's not the only action, but that's where you're understanding what the level of activity is going to be in key places, every place around the globe, and that's very different this time around because I think it's 154 countries have submitted their plans of what they intend to do, but the real magic of Paris is going to be not in just what everybody did in their individual plans, but what they decide to do together, which is where climate finance, markets, technology, capacity building all come in because those things need to produce a bigger result than what people can do by themselves. If it was just INDCs, we wouldn't need to go. You emailed those in. It's already done.
Monica Trauzzi: Yeah. Do you think there's an opportunity for any element of the agreement to be binding?
Dirk Forrister: Well, I think there will be some element, like it's binding to submit an INDC or something like that, but I think for purposes of compliance, it's really going to be binding at home. Now, this is still a fight. Europe wants it to be binding, but I think many other key parties, including the U.S. have a different view of it, so maybe some elements have a binding nature to how you report or sort of what the formatting is and things like that, but I think the real action part of it will be binding at home but not internationally.
Monica Trauzzi: Many countries have indicated and placed a condition in their INDCs that the targets are contingent on having access to international climate markets. They want that written into the agreement. So how does that directly influence the dynamic of the discussion that we'll see in Paris?
Dirk Forrister: Well, I think it's a very different dynamic from my days as a negotiator, back in the other century, and that is that the calls for markets are coming from many more voices. It's a number of countries in Africa and Latin America. Brazil is taking a real leadership role in trying to insert it in the agreement itself. Places like New Zealand and Norway and Australia and Canada are all voicing support -- Switzerland -- for having good accounting principles so that you know where imports and exports of units are. So markets have many, many more friends this time around than in times past, and you raise a really important point that some of those are tied to their level of ambition. So if you care about ambition and you care about achieving as best we can those levels of reduction that would correspond to a 2-degree level of protection, markets are part of the key to getting there.
Monica Trauzzi: And does that also mean that we could see some countries changing their commitments based on whether there is that written into the agreement?
Dirk Forrister: I think this is one of the things that we'll learn more about too is how do you firm up your INDC into an NDC going forward, how do you firm that. I almost think about it, like in the commercial world, it's a letter of intent versus the actual agreement. So we'll see how those things firm up, but you're exactly right. I think some of them could strive for more. Mexico, I think, was the first one, first country that put in an INDC of that nature from the sort of the traditional developing country side, although they're more OECD now. But same with Switzerland, put it in very early. That made it clear that their ability to achieve the best level of reduction was tied up to the idea of markets.
Monica Trauzzi: So what do the Paris discussions need to accomplish in order to set up an appropriate framework that allows for and facilitates trading schemes?
Dirk Forrister: Well, I think there are three things that we look for, and two of them might could be combined, but one is the sort of simple authority, just a reference to forms of cooperation across borders. We did a project last year with Rob Stavins and a team from Harvard to give us ideas about what might go into the agreement, and that was one of the basic ideas that came from that. The second is around accounting principles. People in markets care about that. We care about actually the transparency of knowing where the import-export levels are in particular jurisdictions, so having that appear in national reports, we think, would be important and would build more confidence for market-based approaches. And then the third thing is a mechanism for creating credits, and there I'm talking about project-based credits. A number of the INDCs talk about that, and these are people that got a little bit of experience with the CDM. They may have programs that are going to cover part of their economies, but still have portions of their economies that could produce project-based credits through a mechanism like that if it was available. So there's been a long and tortured negotiation on CDM reform and on reform of the joint implementation mechanism, both of which are in the Kyoto protocol, but also a discussion about just putting those to bed and creating a new market mechanism. So one of the topics is might you merge those things into a central mechanism, and that's something Brazil has put on the table, and we're very interested in that.
Monica Trauzzi: Are you concerned that the conversation on markets could be sticky?
Dirk Forrister: Well, it has been sticky already. It's been sort of a stepchild at times in the process, but starting last year when you had many, many countries and leaders and corporate officials stepping forward and calling for carbon pricing signals, and approaches that support carbon pricing, that sort of put markets back in the mainframe, and I think it will survive, but it was a difficult thing to get market provisions sort of added back in the last negotiations and bond so that they're sort of a part of the discussion in a more central way.
Monica Trauzzi: Right. And South Korea this year launched an emissions trading system.
Dirk Forrister: Right.
Monica Trauzzi: So you think that that kind of launches the ball forward when countries are having these discussions individually.
Dirk Forrister: I do. I mean, South Korea has the first national program in Asia, but the other really important one, obviously announced here in town, was China stepping forward with plans for a national emissions trading market. So guess where I'll be spending time next year, right. It's China putting together a national plan, and I think it's going to be very interesting to see sort of an Asian flavor to emissions trading begin to emerge.
Monica Trauzzi: All right, Dirk. Very interesting. Thank you for coming on the show.
Dirk Forrister: Thank you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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