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The carbon market experiment involves the construction of a brand new commodity and market from scratch and a cluster of climate governance experiments has emerged to participate in the creation of this and the exchange of commodities that results. This chapter examines experimentation on two levels. The first is the level of the carbon markets themselves, and the chapter begins with a brief overview of their logic, history, and current manifestation. The second is the level of the role climate governance experiments play in carbon markets. A cluster of experimental activity has emerged around the development of carbon markets. The chapter focuses on how infrastructure building experiments have emerged to set standards in the voluntary credit markets and how accountable actor experiments have engaged in the design and functioning of cap and trade systems.

Over the past several years, transactions for the voluntary purchase and sale of greenhouse gas (GHG) emissions reductions have grown significantly. Also known as the ‘voluntary carbon market’, this market has provided a benefit to the climate by building public awareness and infrastructure for transactions and informing government climate policy. This chapter begins with a background on the voluntary carbon market — what it is and the reasons for its growth. It elaborates on the contribution of the voluntary market including the development of GHG reduction accounting standards, registries and policy. It then discusses the additional actions that could be taken in this respect, and identifies the potential need to clarify the legal nature of reductions in the voluntary market.

The integration of carbon markets will require a careful assessment of its political and economic viability, which, in turn, largely depends on the respective compatibility of the underlying emissions trading schemes. Because design features in each scheme can extend to all other linked schemes, and differences — if too pronounced — can affect the integrity of the overall market as well as the direction of trade flows, a certain degree of harmonization is essential for linking. Legal and normative considerations have featured only marginally in existing research on the conditions and implications of a trading link. This chapter provides a systematic overview of such considerations. It starts by drawing a conceptual background for the subsequent analysis, defining central characteristics and different forms of linking in the second section. It then proceeds to explore the specifically normative and jurisprudential implications of linking in the third section, and distinguishes these from broader questions of political expedience and economic rationality.

This chapter proposes the creation of global market mechanisms to forestall the rapid and possibly irreversible loss of species and ecosystems. Several distinct mechanisms are proposed here, each addressing a different aspect of the global environment challenge: watersheds, biodiversity, indigenous knowledge, and the global spectrum. All the mechanisms proposed address the same overall topic and follow the same fundamental principles. The global commons is the overriding topic, and each mechanism addresses one aspect of this, and all the mechanisms proposed here are based on the same fundamental principles or imperatives: promoting sustainable use of the Earth's resources, a harmonious relationship between humans and ecosystems, using market-based and self-funded mechanisms that require no donations for their implementation, and decreasing the wealth gap between rich and poor nations and more generally between high- and low-income people, women, men, and children.

In early 2010 it will be five years since the Kyoto Protocol came into force. This short period has been truly astonishing for the new world of carbon trading. The market for trading emission rights and carbon credits has exploded — more than doubling each year. In 2005, the market was worth US$10 billion, in 2006 US$30 billion, in 2007 US$67 billion, and in 2008 more than US$120 billion. At the same time as the amounts of money involved have increased, so has the level of sophistication of those involved — investors, project proponents, host countries, and the international bodies responsible for overseeing these developments. However, rather than moving into a settled era of maturity and certainty, the future of the carbon market is still wracked with uncertainty. Uncertainty is in fact one of the key themes of this book. But so also is the spirit of experimentation and enterprise — of Innovation and of Learning by Doing. This chapter examines each of these three themes.

This chapter analyzes the risks and opportunities for private entities in the international climate regime and domestic emissions trading schemes, respectively. It begins with an overview of carbon markets and the ways in which private actors are involved. Section 3 focuses on the risks involved in project-based transactions, which is the type of transactional activity that private actors are most likely to engage in. Section 4 discusses some of the risks that private actors face in the European Union Emissions Trading Scheme (EU ETS). Section 5 looks briefly at the new issues and risks raised by Phase III of the EU ETS, and section 6 concludes the discussion.

This chapter examines the recent developments in climate policy in Australia, with a specific focus on the recently introduced legislation for emissions trading in Australia. It also considers the newly implemented mandatory greenhouse and energy reporting regulations, which provide detail on the mandatory corporate greenhouse emissions and energy reporting scheme, and the design proposals for an expanded national renewable energy target. The chapter concludes by considering some recent developments in the voluntary carbon market in Australia, including the investigation by the Australian Competition and Consumer Commission (ACCC) into ‘green’ marketing.

Climate change is not only among the most urgent problems covered, but is inherently interconnected with every other social and economic challenge that this book addresses. This chapter investigates the power of price signals when it comes to pollution and architecture and power of tradable emission schemes. It then examines two examples of innovation in climate finance that have evolved in spite of the delay in the development of a global market for carbon. REDD—Reduction in Emissions from Deforestation and Forest Degradation—shows the potential of pay-for-success partnerships to reduce the destruction of rainforests and carbon emissions, though still in need of scale. In contrast green bonds have experienced tremendous growth, but lack any tight green definitions, a quantity-versus-quality conundrum we revisit throughout the book.

Before being able to correctly classify carbon units (the object of trade in emissions trading schemes) under international economic law, their inherent qualities and characteristics need to be understood. This requires a factual assessment of their qualities and characteristics, which will provide the evidence necessary to determine their proper legal classification under international economic law. In particular, Chapter 3 considers the historical and policy origins of emissions trading schemes and the key attributes and nature of carbon units, such as how they are created, what they represent, how they may be used, and how they derive value. The legal classification of carbon units under the different domestic jurisdictions is also surveyed.

This chapter examines the ‘docking stations’ scheme as a way of helping developing countries make the transition to a global carbon market, with particular emphasis on clean investment budgets (CIBs) to finance low-carbon economic development. It first outlines the goals of a framework that delivers substantial financing for low-carbon economic growth in emerging economies. It then explains how CIBs could enable emerging economies to voluntarily adopt domestically enforceable limits on greenhouse gas emissions from a substantial fraction of their economies. It also describes how CIBs might be determined, using a simple numerical example for illustration, as well as the design of mechanisms to deliver finance necessary to achieve maximum emissions reductions. Finally, the chapter presents clear and measurable performance standards, along with compliance and enforcement.

Part III draws the threads together to discuss the emergence of this new model of “green development”, or green growth capitalism. Chapter Seven is concerned with the process of transition itself, emphasizing the barriers and difficulties encountered by any change on the scale of the new greening trajectory. The greening of markets for energy, commodities and capital can be expected to propagate to encompass the entire economy, through multiple inter-firm connections and driven by competitive forces. Green products will call for new value chains that will propagate via intermediate suppliers and aggregators back to ultimate commodity suppliers, where the greening of commodity markets will exert their effects downstream. The barriers that stand in the way of this emergent system are formidable, from the protection of vested interests and continuation of subsidies to fossil fuels, to the clash of sectional interests. Ultimately it is strong states that drive fundamental change.

The 24,000-acre Garcia River Forest, about 100 miles north of San Francisco, is a coastal redwood/Douglas fir forest owned by The Conservation Fund (TCF), a national nonprofit organization that engages in land conservation projects that balance ecological and economic goals and addresses the priorities of the local organizations with whom it partners. TCF purchased the forest in 2004 from industrial timber companies using public and private grants, a conservation easement, and donations. The forest is now managed for continued—but now ecologically sensitive—selective timber harvesting; 35% of the forest has been set aside as an ecologic reserve network. The forest is also California’s first working forest to be managed for producing carbon offsets for the voluntary carbon market; more than 77,000 tons of carbon emissions are being offset annually and the sale of offset credits has doubled net revenues from the forest.

This chapter presents the global policy debate over forest carbon offsets as it plays out on the ground. More specifically, it analyzes an effort to link the carbon markets in California (USA), Chiapas (Mexico) and Acre (Brazil). The authors situate global policy within local reality by demonstrating how support for and against the MOU is affected by preexisting political conflict in two of the three participating jurisdictions: California and Chiapas. To do so, they present the historical and political context of the carbon-offsets debate in each location. State government officials, environmental and environmental justice activists, nonprofits, and forest dwellers in California and Chiapas approached the carbon offsets agreement from very different social and political contexts. The chapter underscores how sustainability initiatives, even when promoted with apolitical “win-win” rhetoric, are inherently political.

This book addresses whether and how emissions trading schemes to mitigate climate change are subject to the network of treaties comprising the international trade and investment regime, collectively referred to as international economic law. Chapter 1 introduces the broad structure and content of the book, which is divided into three principal parts. Part I, comprising Chapters 2 and 3, sets out the approach of the book, insofar as it involves initial process of treaty interpretation to determine the scope and content of relevant aspects of international economic law (including any relevant interaction with the international climate regime), followed by a subsequent process of applying the resulting interpretations to carbon units and the aspects of emissions trading schemes that affect their trade and investment in ways which attract the scrutiny of international economic law. Part II, covering Chapters 4–7, then seeks to ascertain whether carbon units are subject to international economic law by evaluating whether they qualify as ‘goods’/‘products’, ‘services’, ‘financial services’, and ‘investments’. Having determined that carbon units are, to varying extents, subject to international economic law, Part III (comprising Chapters 8 and 9) assesses the consistency of emissions trading schemes and their rules affecting carbon units with that body of law.