Post-2012 compliance and carbon markets

The Fourth Intergovernmental Panel on Climate Change (IPCC) Report made it very clear that current climate change trends have been human induced, and that serious efforts must be undertaken by the international community if we wish to avoid a global average temperature increase of more than 2°C from pre-industrial periods. This fact has now been acknowledged both in the Copenhagen Accord, and in the Cancun Agreements. At this stage, what is needed goes beyond minor efforts from some key countries, but involves a drive from the entire international community towards a low carbon society. International emissions trading and offsets (the carbon market) have been identified by the Kyoto Protocol as part of this global effort and as key instruments to assist countries to comply with their quantified emission limitation and reduction objectives (QELROs). Against this background, this chapter addresses two core questions: (1) to what extent will a post-2012 agreement on climate change strengthen or weaken the linkage between compliance and the carbon market; and (2) to what extent can a post-2012 regime’s compliance mechanism secure improvements to the design of the carbon market?.