The Role of Carbon Markets in Achieving the Sustainable Development Goals (SDGs)
Introduction
With the climate crisis being considered a result of the greatest market failure the world has ever seen, there has been a lot of interest in pricing carbon — CO2 and other greenhouse gas (GHG) emissions — as a means of addressing the failure. This article explores the potential of carbon markets in achieving the Sustainable Development Goals (SDGs) and highlights the need for a combination of markets and taxes to effectively tackle climate change.
The Kyoto Protocol and Carbon Offsets
The Kyoto Protocol recognized the differential role of developed and developing economies in contributing to carbon emissions. It introduced the Clean Development Mechanism (CDM), which created a compliance market for carbon offsets. However, the system ended in 2012, highlighting the need for a more sustainable approach.
The UNFCCC Paris Agreement and Carbon Pricing
The 2015 United Nations Framework Convention on Climate Change (UNFCCC) Paris agreement emphasized the importance of carbon pricing and an institutional mechanism to address double counting of mitigation efforts. Article 6 of the agreement proposed inter-governmental and private carbon credit transactions. While this system is yet to be implemented, there is growing anticipation around carbon markets and their potential to drive mitigation outcomes.
The Debate: Carbon Markets vs Carbon Taxes
The World Bank suggests that carbon markets are a panacea, while the IMF favors some form of carbon taxes. The main difference lies in the approach to pricing carbon emissions. Carbon markets rely on price discovery through cap and trade systems, where credits are bought and sold based on emission levels. On the other hand, carbon taxes are simpler and more universal, but can be politically challenging to implement.
The Limitations of Carbon Credits
Carbon credits, whether compliance or voluntary, do not meet the basic standards of a good asset. They are influenced by volatile policy environments and global macroeconomic cycles. Additionally, as enterprises strive to improve their emissions, the demand for credits gradually falls, making it difficult for the market to function effectively.
A Pragmatic Solution: Combining Markets and Taxes
Instead of debating which approach is better, a combination of carbon markets and taxes offers a more pragmatic solution. While carbon markets can incentivize emission reductions and promote investment in climate-friendly projects, carbon taxes provide a simple and universal mechanism for pricing carbon emissions. By utilizing both approaches, we can create a comprehensive framework for addressing climate change.
The Urgency of Action
It is crucial that we act now to mitigate emissions and prevent irreversible damage. If we fail to take action, we will be left with limited options for adaptation and dealing with the consequences of climate change.
Purkayastha is India director, Climate Policy Initiative. Sarkar is professor of economics, IIM Calcutta
SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 13: Climate Action | Target 13.2: Integrate climate change measures into national policies, strategies, and planning | Indicator not mentioned in the article |
| Target 13.3: Improve education, awareness-raising, and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning | Indicator not mentioned in the article | |
| Target 13.5: Implement the commitment undertaken by developed-country parties to the United Nations Framework Convention on Climate Change to a goal of mobilizing jointly $100 billion annually by 2020 from all sources to address the needs of developing countries in the context of meaningful mitigation actions and transparency on implementation and fully operationalize the Green Climate Fund through its capitalization as soon as possible | Indicator not mentioned in the article | |
| Target 13.a: Implement the commitment undertaken by developed-country parties to the United Nations Framework Convention on Climate Change to a goal of mobilizing jointly $100 billion annually by 2020 from all sources to address the needs of developing countries in the context of meaningful mitigation actions and transparency on implementation and fully operationalize the Green Climate Fund through its capitalization as soon as possible | Indicator not mentioned in the article | |
| SDG 17: Partnerships for the Goals | Target 17.16: Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technology, and financial resources, to support the achievement of the sustainable development goals in all countries, in particular developing countries | Indicator not mentioned in the article |
1. Which SDGs are addressed or connected to the issues highlighted in the article?
The SDGs that are connected to the issues highlighted in the article are SDG 13: Climate Action and SDG 17: Partnerships for the Goals.
2. What specific targets under those SDGs can be identified based on the article’s content?
Based on the article’s content, the specific targets that can be identified are:
– Target 13.2: Integrate climate change measures into national policies, strategies, and planning.
– Target 13.3: Improve education, awareness-raising, and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning.
– Target 13.5: Implement the commitment undertaken by developed-country parties to the United Nations Framework Convention on Climate Change to a goal of mobilizing jointly $100 billion annually by 2020 from all sources to address the needs of developing countries in the context of meaningful mitigation actions and transparency on implementation and fully operationalize the Green Climate Fund through its capitalization as soon as possible.
– Target 13.a: Implement the commitment undertaken by developed-country parties to the United Nations Framework Convention on Climate Change to a goal of mobilizing jointly $100 billion annually by 2020 from all sources to address the needs of developing countries in the context of meaningful mitigation actions and transparency on implementation and fully operationalize the Green Climate Fund through its capitalization as soon as possible.
– Target 17.16: Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technology, and financial resources, to support the achievement of the sustainable development goals in all countries, in particular developing countries.
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
No, the article does not mention or imply any specific indicators that can be used to measure progress towards the identified targets.
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Source: m.economictimes.com
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