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Towards net zero: dynamic baselines for internationalmarketmechanisms


Michaelowa, Axel; Michaelowa, Katharina; Hermwille, Lukas; Espelage, Aglaja (2021). Towards net zero: dynamic baselines for internationalmarketmechanisms. CIS Working Paper 107, University of Zurich.

Abstract

Baselines for international carbon markets have to date been specified in form of GHG intensity factors and linked to business-as-usual developments. This means that with increasing production of goods and services through carbon market activities, absolute baseline emissions increase or fall only slowly. This generates a large ‘emissions gap’ to the emissions pathway necessary to reach the long-term target of the Paris Agreement. In contrast to these ‘traditional’ baseline setting approaches, baselines can also be ‘dynamic’. This paper focuses on one option of dynamic baselines meaning that they change over time on the basis of observable pre-determined parameters. In this context, we propose to calculate baselines by applying an ‘ambition coefficient’ to emissions intensities of business-as-usual technologies. The coefficient would decrease over time and reach zero when a country needs to reach net zero emissions. Due to the principle of common but differentiated responsibilities, this coefficient would fall more quickly for rich than for poor countries. The latter would still be able to generate emission reduction credits well beyond 2050, while for the former this would stop around 2035. Such an approach would generate certainty for carbon market investors. Only a dynamic baseline approach is able to ensure a continued role for carbon markets as it generated trust that the markets will operate in line with the long-term ambition of the international climate policy regime.

Abstract

Baselines for international carbon markets have to date been specified in form of GHG intensity factors and linked to business-as-usual developments. This means that with increasing production of goods and services through carbon market activities, absolute baseline emissions increase or fall only slowly. This generates a large ‘emissions gap’ to the emissions pathway necessary to reach the long-term target of the Paris Agreement. In contrast to these ‘traditional’ baseline setting approaches, baselines can also be ‘dynamic’. This paper focuses on one option of dynamic baselines meaning that they change over time on the basis of observable pre-determined parameters. In this context, we propose to calculate baselines by applying an ‘ambition coefficient’ to emissions intensities of business-as-usual technologies. The coefficient would decrease over time and reach zero when a country needs to reach net zero emissions. Due to the principle of common but differentiated responsibilities, this coefficient would fall more quickly for rich than for poor countries. The latter would still be able to generate emission reduction credits well beyond 2050, while for the former this would stop around 2035. Such an approach would generate certainty for carbon market investors. Only a dynamic baseline approach is able to ensure a continued role for carbon markets as it generated trust that the markets will operate in line with the long-term ambition of the international climate policy regime.

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Additional indexing

Item Type:Working Paper
Communities & Collections:06 Faculty of Arts > Institute of Political Science
Dewey Decimal Classification:320 Political science
Uncontrolled Keywords:Prognose 2020-2070, Umweltzertifikathandel, Emissionsverringerung, Internationaler Umweltschutz, Klimaschutz, Klimaabkommen von Paris
Language:English
Date:March 2021
Deposited On:29 Mar 2021 14:08
Last Modified:03 Feb 2023 15:43
Series Name:CIS Working Paper
Number of Pages:15
ISSN:1662-7504
OA Status:Green
Free access at:Official URL. An embargo period may apply.
Official URL:https://ethz.ch/content/dam/ethz/special-interest/gess/cis/cis-dam/CIS_2021/CIS%20WP%20107.pdf
Related URLs:http://www.cis.ethz.ch/research/working-papers.html (Organisation)
  • Content: Published Version
  • Language: English