Could Carbon Market Create a More Effective International Climate Regime?: Carbon Market and Regime Evolution

Abstract

The Kyoto Mechanisms established under the Kyoto Protocol aim at allowing developed countries to achieve their emission reduction target more cost-effective way through use of market mechanism. The use of market mechanism has influenced regime making under the Kyoto Protocol: especially during elaboration of its compliance procedure, stringent response to non-compliance had strongly been supported by most of countries. In addition, consequences to non-compliance decided by the Compliance Committee lead to a loss of eligibility of the Kyoto Mechanisms not only for the non-compliant country but also for entities authorized by the country, which will enhance effectiveness of the Kyoto Protocol through a mechanism ensuring compliance with consequences to non-compliance by increasing pressure from such entitieson the non-compliant country to comply.

The emerging and expanding carbon market has led to an increasing involvement of private entities with great economic interest therein, which has been changing position of countries and of stakeholders on market mechanism and has spurred them to support the continuation and the expansion of carbon market. Moreover, various proposals and ideas have been put forward towards creating a more effective climate regime beyond 2012 through use of market mechanism.

While the carbon market has considerably been influencing the evolution of international climate regime, it cannot automatically provide an expected solution. Only setting an appropriate emission reduction target and a skillful institutionalization could bring out full potential of market mechanisms, which allows a climate regime to deal with the problem more effectively. In this sense, market mechanisms are no substitute for, but do complement governmental regulatory control with often even stronger governmental oversight.