What is the Paris Agreement and how does it impact carbon trading?

The Paris Agreement is an international treaty adopted in 2015 under the United Nations Framework Convention on Climate Change (UNFCCC). Its main objective is to combat climate change by limiting global warming to well below 2 degrees Celsius above pre-industrial levels, and to pursue efforts to limit the temperature increase to 1.5 degrees Celsius.

In terms of carbon trading, the Paris Agreement has a significant impact. It recognizes the importance of carbon markets as a tool to reduce greenhouse gas emissions and encourages countries to use market-based approaches, such as carbon trading, to meet their emission reduction targets. The agreement promotes the implementation of carbon pricing mechanisms, including emissions trading systems (ETS), as a means to incentivize emission reductions and facilitate the transition to a low-carbon economy.

The Paris Agreement also establishes a framework for international cooperation on carbon trading. It encourages countries to cooperate in the implementation of their nationally determined contributions (NDCs) through various approaches, including the transfer of mitigation outcomes generated by one country to another. This cooperation can take the form of international carbon markets, where countries can trade emission reductions or removals to achieve their respective targets more cost-effectively.

Furthermore, the agreement establishes a mechanism called the Sustainable Development Mechanism (SDM), which aims to promote sustainable development and assist countries in achieving their NDCs. The SDM allows for the use of market-based approaches, including carbon trading, to support emission reductions and sustainable development projects in developing countries.

Overall, the Paris Agreement recognizes the importance of carbon trading as a tool to achieve emission reductions and encourages countries to use market-based approaches. It provides a framework for international cooperation on carbon trading and establishes mechanisms to support the implementation of emission reduction projects. By promoting the use of carbon markets, the agreement aims to enhance global efforts in combating climate change and transitioning to a low-carbon economy.