Carbon Market Clubs and the New Paris Regime

The report analyzes the compatibility of Carbon Market Clubs (CMCs)—networks of emissions trading schemes (ETSs) sharing rules and services—with various 'climate clubs' consisting of governments, cities, and businesses. It explores whether standardized CMC services, such as mitigation value assessments and international asset reserves, can reduce transaction costs and political barriers to linking diverse carbon markets. While the Paris Agreement's Article 6.2 encourages voluntary cooperation, the report finds that political concerns over sovereignty, environmental integrity, and the 'not invented here' syndrome often outweigh technical efficiencies. Case studies of the EU ETS, WCI, RGGI, and ICAO illustrate the tension between the desire for centralized control and the economic benefits of networked markets.

• The relative small size of climate clubs compared to large multilateral organizations may simplify negotiations on design and implementation, although establishing strict criteria for participation and compliance can hinder consensus.
• Political friction is likely when adopting external valuations for mitigation units due to their multi-component nature, and a 'not invented here' mentality often persists in the design of emissions trading schemes (ETS).
• The EU ETS demonstrates a strong preference for maintaining internal control over its structures and institutions, which has historically led to friction with the UNFCCC and a reluctance to adopt non-EU systems for valuation or risk reduction.
• The International Civil Aviation Organization (ICAO) is moving toward a voluntary 'market based mechanism' (MBM) for emissions trading, but faces political challenges regarding the eligibility of offsets and the potential for a third-party valuing system to be seen as an intrusion.
• The Paris Agreement, specifically Article 6.2, provides high-level encouragement for cross-border cooperation and the transfer of 'mitigation outcomes' (ITMOs), which could incentivize the creation of CMCs.
• Standardized CMC services—including registries, market supervision, and accounting conventions—could reduce risks for private sector market players and increase liquidity and price stability in existing ETSs.
• The Pacific Islands Development Forum (PIDF) and Pacific Small Island Developing States (PSIDS) show openness to carbon markets and REDD+, but their focus is more likely to be on carbon finance for domestic projects than on inter-member trading.
• The Western Climate Initiative (WCI) provides evidence that political will can overcome administrative difficulties in linking trading systems, as seen in the full linking of California and Québec.

APA

Brewer, T. L., Derwent, H., & Błachowicz, A. (2016). Carbon Market Clubs and the New Paris Regime. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2016/10/Climate-Strategies-Carbon-Market-Clubs-Report.pdf

Chicago

Brewer, Thomas L., Henry Derwent, and Andrzej Błachowicz. Carbon Market Clubs and the New Paris Regime. Climate Strategies, 2016. https://climatestrategies.org/wp-content/uploads/2016/10/Climate-Strategies-Carbon-Market-Clubs-Report.pdf.

Wikipedia

{{cite report |last1=Brewer |first1=Thomas L. |last2=Derwent |first2=Henry |last3=Błachowicz |first3=Andrzej |title=Carbon Market Clubs and the New Paris Regime |publisher=Climate Strategies |date=July 2016 |url=https://climatestrategies.org/wp-content/uploads/2016/10/Climate-Strategies-Carbon-Market-Clubs-Report.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{brewer2016carbon, author = {Brewer, Thomas L. and Derwent, Henry and Błachowicz, Andrzej}, title = {{Carbon Market Clubs and the New Paris Regime}}, institution = {Climate Strategies}, year = {2016}, month = jul, url = {https://climatestrategies.org/wp-content/uploads/2016/10/Climate-Strategies-Carbon-Market-Clubs-Report.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }