Point of view: OECD Analyst reports from Copenhagen

What images come to mind when we hear “Copenhagen”?  Ministers sitting around a table and protesters waving banners?  COP15 is also analysts, scientists, businesses and civil society representatives working together on climate-related initiatives…OECD Analyst Christa Clapp tells us what she is doing at COP15:

“While in Copenhagen, I will be speaking at an event sponsored by Eneco, a Dutch energy company. Eneco is supporting the Luz Verde programme to distribute 30 million compact fluorescent light bulbs in Mexico. This is one of the first “programmatic” Clean Development Mechanism (CDM) projects to be approved. It groups similar disbursed projects together to lower transaction costs to access the carbon market and earn carbon credits. Such projects are a first step towards scaling-up carbon market mechanisms. The OECD is working together with the International Energy Agency to support the Annex I Expert Group, which is a group of climate negotiators, on carbon market issues. Our recent papers focus on the strengths and weaknesses of project-based carbon market mechanisms and scaled-up sector-based approaches.

More than 30 countries are already trading in carbon markets, either at a national or sub-national level. Additional countries are discussing how to design new market instruments and potentially link emission trading systems. Decisions taken in Copenhagen may impact the reach of these carbon markets and how they function. At OECD we are actively exploring how carbon markets might evolve post-Copenhagen, building on our recent Economics of Climate Change Mitigation work, which analyzes how carbon market instruments can be used to build up a global carbon market.

To further explore how carbon markets are expanding and evolving, we are bringing together experts and policy-makers for an OECD Workshop on Carbon Markets in April 2010. This workshop will offer an early post-Copenhagen opportunity to investigate these key questions:

  • How can we build up a global carbon market, for example by increasing the number of countries participating, and through direct linking of emissions trading schemes?
  • How will decisions taken in Copenhagen impact incentives for developing country engagement in carbon markets, including the design of “offset” mechanisms?
  • Under what conditions can cities and sub-national actors access carbon market financing for local low-emission projects?
  • How might voluntary markets evolve as compliance markets grow?

Pay a little now or a lot later?

Climate change has stirred controversy since scientists first started debating it.  Cop15 seems to signal a new consensus  – or at least the beginnings of one.  But many big questions remain : How will climate change actually affect people’s daily lives?  What’s the best way to attack the problem ?  Who should pay the bill?

Agreeing that climate change is a world problem requiring world cooperation is only the first step, and many of us watching the summit wonder what real solutions will emerge.

As political leaders settle in to negotiate an agreement, we should be aware of a basic economic fact:  the costs of tackling climate change are moderate provided that we start lowering emissions now.   OECD calculations show that the longer we wait, the more expensive the bill.

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