Abstract

After Copenhagen and Cancun, fragmentation of carbon markets is in full swing, with the EU and Japan actively dismantling the role of the CDM as “gold standard” currency of the global carbon market. While some political cientists argue that fragmentation could be advantageous for the climate negotiations, economists see it negatively, as it drives mitigation costs upwards and leads to a hodgepodge of rules with high transaction costs. The voluntary market as a laboratory for fragmentation has shown that high-quality credits are restricted to a tiny share, prices vary by several orders of magnitude and registries as well as verification standards have proliferated. Thus fragmentation should be resisted as far as possible.