Go clean: A green signal to industry

And a global market to trade in carbon dioxide

The Paris climate change agreement sets in place many positive indicators for the businesses and industry to move towards cleaner technologies and fuel sources over time. The agreement also sets up the basic frame for a global market for carbon trade.

With 196 countries collectively deciding that the world would go climate neutral by the end of the century, the markets have got a clear indicator in which way the global economy is headed – less and less dependence on fossil fuels burning which leads to greenhouse gases. Developed countries had pushed for this demand in more explicit terms asking that the economy and its engines needed a clear direction in which to move.

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But experts in negotiating teams of developing world assessed that it also meant large markets being created for the clean technologies of the rich countries in the developing worlds by forcing climate-change related standards through the agreement. Unless the latter too join the game and increase their capacities. Not match, but at least join it.

The technology mechanism that has been set up under the climate agreement hopes to foster collaborative research in future to create technologies but such collaborative work has hardly worked previously with the rare exception of institutions such as the CGIAR.

The agreement will launch a full-fledged carbon market across the globe on the other hand. Even a partial and voluntary market existing earlier called the Clean Development Mechanism was cornered by India and China much to the charging of other developing countries especially in Africa.

The carbon trade mechanism permits countries to undertake emission reduction actions in countries where these actions are cheaper and take credit for the carbon dioxide emissions prevented against their domestic climate actions. Say, shifting a village in India to solar power or paying for converting a city’s transport system more towards public transport. Each tonne of the carbon dioxide saved is traded in markets like a certificate.

In the previous era, under Kyoto Protocol, only developed country had targets and India became a place where projects would take off against the funds that came in from developed countries. This time around with India having its own targets it too could be buying credits from other countries if it decides to do so. But the market is bound to generate a new business at scales never seen before – trading in gas.

The market has its own critiques, who have been partially proven right in the past. They have pointed out that the market-mechanism is so weak that it often it over-values its impacts and lets developed countries getting away with little costs. This time around there will also be the threat that developed world would end up buying cheap credits for the low-cost end of the emission reduction options forcing developing countries to take more costly actions to meet their own domestic targets under the Paris agreement.

The mechanism will be fleshed out over the next five years.