As the UN designs a new carbon market, experts call for a different approach

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Back in 2015, when 174 countries and the European Union came together to finalize the Paris Agreement, each agreed to do its part to slash greenhouse gas emissions. Signatories put forward their own specific targets — known as “nationally determined contributions,” or NDCs — that would, theoretically, add up to limit global warming to “well below” 2 degrees Celsius (3.6 degrees Fahrenheit).

It’s been largely up to each country to figure out howto achieve these emissions goals. Some countries have begun transitioning their power sectors away from fossil fuels, for instance. Others have levied a tax on carbon emissions or promoted electric vehicles.

But countries also want to work together to achieve their NDCs — and they’re trying to create a new global carbon market to do so. The idea is to allow emissions reductions in one country to count toward the climate progress of another. A country like Indonesia, for example, could plant trees or build a wind farm instead of a natural gas plant, and the project would generate carbon “credits” representing some amount of prevented or reduced greenhouse gas emissions. Another country like the United States would then purchase the credits and claim them toward its own NDC.

In theory, such a carbon market would unlock cost-effective climate mitigation options that otherwise wouldn’t be available. It would incentivize wealthy countries to pay for the least expensive emissions reductions strategies first — most likely projects in the developing world — before paying for costlier options. According to an independent analysis, a U.N. carbon market could halve the cost of fulfilling countries’ NDCs, saving them $250 billion by 2030. Essentially, this means 50 percent more emissions reductions at no extra cost.