As countries gather in Sharm el-Sheikh next week for the COP27 climate conference, slow progress on promises from the 2015 Paris Agreement has prompted growing alarm. The national emissions pledges to date, experts warn, won’t be able to limit global warming to 1.5 degrees Celsius (2.7F) — and governments aren’t even fully implementing those pledges.
Despite the underwhelming incrementalism of the, one part of the global climate regime continues to gain steam: carbon markets. Article 6 of the Agreement created two new market-based mechanisms to help countries achieve their national pledges. The first, a global emissions offset mechanism, allows countries and private entities to pay for carbon offsets elsewhere and count them toward their own emissions reductions.
The second mechanism, known as internationally traded mitigation outcomes (ITMOs), allows countries to trade reductions bilaterally. Carbon markets might appear an elegant solution, but they’re exceedingly difficult to implement well and have a very mixed record on actually reducing emissions.