The Carbon Market and the Post-2012 Climate Regime: Key Legal Scenarios
Less then six months before Copenhagen, even the broad outline of the post-2012 legal framework remains undecided. The reasons for this are both political and procedural. Legal issues are politically highly sensitive – this is the main reason why they have not been clarified earlier. Procedurally, negotiations are proceeding on two separate “tracks,” one under the Kyoto Protocol and another one under the United Nations Framework Convention on Climate Change (UNFCCC). The combined effect of these factors is that several different scenarios are possible for the post-2012 legal framework. This article focuses on the main options for the legal design of the post-2012 climate regime and their implications for the carbon market. It argues that the three main options for the post-2012 legal framework include: a single new protocol that will replace the Kyoto Protocol; a combination of an amended Kyoto Protocol and a new protocol; and an amended Kyoto Protocol combined with a series of Conference of the Party (COP) decisions from the Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA). The article explains that each of these options has its benefits and downsides, as well as its supporters and opponents, and that it is difficult to predict what legal form the post-2012 climate regime will ultimately take. It analyses the implications of the main legal options for the carbon market, while predicting that at least the detailed rules for any new post-2012 market mechanisms will be finalised only after the Copenhagen conference.