The Merit of Sectoral Approaches in Transitioning Towards a Global Carbon Market

Abstract

Sectoral approaches can be considered part of a transition towards a global carbon market. Providing the potentially strongest link between the EU emissions trading scheme (EU ETS) and sectoral approaches, sectoral benchmarks can be used for setting caps, free allocation, or can become a catalyst for linking carbon markets. There would be at least three ways to strengthen the effectiveness of sectoral approaches through the choice of performance, metrics, reporting and compliance. With the possibility of an increase in decentralisation and flexibility in the post-2012 architecture, bottom-up approaches would rely heavily on the correct conduct of measurement, reporting and verification of mitigation actions in developing countries. Under the UN Framework Convention on Climate Change (UNFCCC), there would be a hybrid range of agreements and mechanisms to make sectoral approaches operational.

Keywords: sectoral approaches, EU, emissions trading, linking carbon markets