States are able to trade greenhouse gas reductions across borders. The Paris Climate Agreement now permits trading the results of climate conservation activities for entire sectors. In the transport sector, for example, a country might generate tradable greenhouse gas savings, if it is able to increase the share of biofuel in diesel and petrol. Two conditions must nonetheless be met for this market mechanism to work in practice. Firstly, the greenhouse gas savings that are being traded must be the product of climate change mitigation efforts on behalf of the country concerned, i.e. they would not otherwise have been achieved. Secondly, the tonnes of CO2 which have been saved cannot be sold more than once. Guidance from international climate conservation experts sets out in greater detail how participating states can ensure that these conditions are met.
Background: Under the Kyoto Protocol, participating states were able to generate tradable emissions reductions from individual projects or project bundles, e.g. by establishing biogas facilities. The Paris Agreement extends this scheme to large parts of the economy, such as sectors or policies, by reducing the greenhouse gas emissions of the entire transport sector, for example. Methodologically, it is more difficult to calculate greenhouse gas savings for an entire sector than for an individual climate conservation project, because a variety of additional assumptions must be made. A further factor is that, under the Paris Agreement, all participating states now have their own, country-specific, climate conservation targets. This means that a country selling its greenhouse gas savings must estimate in advance what volume of emissions savings it requires to achieve its own targets, and what volume it can sell. Would you like to know more? Technical Note 15 published by the Partnership for Market Readiness is aimed at climate conservation experts, and provides detailed information on this topic.