With the Paris climate agreement officially becoming binding this week, how are discussions on creating emissions trading mechanisms developing? During today's OnPoint, Dirk Forrister, CEO of the International Emissions Trading Association, discusses the challenges facing countries as the implementation phase of the climate dialogue begins.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Dirk Forrister, CEO of the International Emissions Trading Association. Dirk, nice to see you. Always good to have you on the show.
Dirk Forrister: Great to be back, Monica. Thank you.
Monica Trauzzi: So, Dirk, as the Paris agreement officially becomes binding, the next COP meeting will take place in Marrakech in November. What role will emissions trading and carbon markets play in the discussion?
Dirk Forrister: Well, it's one of the hot topics this time around because it was kind of a late surprise in Paris that an article was included on cooperation through markets. And it's the basic policy principle that's been agreed. Now we get to talk about the details of how it would work. So I think it's a big topic because that cooperation is key to keeping the cost down and key to getting even high ambitions achieved in the future.
Monica Trauzzi: We were talking a bit before the show about implementation. We're at that critical stage now of figuring out how to make it all work. You're cautious. You're cautiously optimistic. Where do you think the biggest hurdles are?
Dirk Forrister: Well, I think every country put forward its promise about what it wanted to do, and some of those promises, those pledges, had very basic levels of ambition but an offer to do more if they had access to markets and finance. And a lot of those were from the developing world, so now the key to unlocking all of that is in the more detailed policy about what happens in each jurisdiction. It's different everywhere because the governance systems are a little different, the industry setup is slightly different, so they've got to get tailor-made systems, you know, all around the world and then think about how cooperation can work across borders, so it's a big undertaking, and a lot of the action's not what's going to happen in Marrakech but happens back in those capitals.
Monica Trauzzi: The World Bank recently released a report indicating that international carbon trading could cut mitigation costs significantly. They're saying about 32 percent by 2030. How would you describe the level of engagement and momentum that exists now, post-Paris, when it comes to setting up these markets and trading?
Dirk Forrister: Well, I think for a large number of developing countries, there's an interest in how U.N. mechanisms could help them bring forward a market-based approach that has enough credibility that they could actually attract investment with it. The CDM did that under the Kyoto Protocol. It made it kind of accessible and easy for them to use. So for — there's probably 80 or 90 countries that are thinking about it in that way, but there's also quite a number of countries that are thinking about setting up their own domestic program that would have trading. An example would be Mexico that's interested in developing a program that might leak into California and Quebec. And they also were in discussions with people south of them, in Colombia and Peru and Chile, about how a regional market along the Pacific coast of South America might work. And all that's really about achieving those cost savings, allowing their industries to continue to thrive, but also meeting their climate goals and hopefully doing more over time.
Monica Trauzzi: So in the carbon markets that already exist, what are the elements that can be modified and what are those markets kind of looking at now that there is this sort of global eye on emissions trading?
Dirk Forrister: Well, it is a time when, in a number of places, we're seeing sort of the work on the details. In Europe, we're part of very vibrant discussions about the future of the E.U. ETS, how tightly the targets clamp down over the coming decade, what — they're adding a feature there of a market stability reserve that will sort of govern the supply coming into the market based on what recent performance has been. The other really exciting one that happened last week was China announcing to its industries what their individual targets were going to be, so we're now going to start to see assessments about how a China ETS will work in the future. This is happening, you know, a number of places, and I think those details around how much each industry does, what their fair share of the target is, and how they can cooperate together and also with sort of potential partners in other countries.
Monica Trauzzi: What's 2017 going to look like?
Dirk Forrister: Well, I think 2017 is when there's really pressure on negotiators to try to get rules developed (A) on basic accounting principles of how imports and exports will get reported, but also the actual mechanism that will be used internationally for certifying projects. That'll be a big deal. But also we're going to find out with the new U.S. president wants to do on climate change, and there's all the eyes of the world are upon United States and hoping that the U.S. is able to meet its — the minimums that it's offered, but maybe even the higher levels of targets that have been proposed.
Monica Trauzzi: Very dynamic time. Thank you so much for coming on the show. Nice to see you as always.
Dirk Forrister: Thanks, Monica.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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