Creating a Club of Carbon Markets: Implications of the Trade System

In the wake of the Copenhagen Accord in 2009 and amid frustration with the slow pace of the United Nations Framework Convention on Climate Change (UNFCCC) talks, a number of bilateral and plurilateral efforts and technology initiatives has been launched to deal with international climate policy. Bilateral efforts such as the November 2014 joint announcement between the United States (US) and China have provided welcome momentum. These minilateral efforts, together with the broader multilateral ones, constitute the emerging “regime complex” for climate change. To promote the spread of such policies, ensure their integrity, and drive the deep reductions needed to limit the worst impacts of climate change, this paper proposes the formation of a club of carbon markets (CCM)—a group of jurisdictions that develop harmonized standards for carbon market operations and mutually recognize each other’s emission units. . This paper addresses the potential for that conflict to arise in a CCM, arguing that emission units are not “goods” or “services” and World Trade Organization (WTO) disciplines do not necessarily apply in this case.