Center for Clean Air Policy (CCAP)

The so-called “dual markets approach” developed by the Center for Clean Air  Policy (CCAP) proposes the creation of a new carbon market that would be  separate from the post-2012 carbon market and would trade solely in REDD  credits. Emissions reductions within this market could be used by Annex I  Parties to achieve national targets but credits would not be fungible between  the two markets.

The rationale behind creating an independent market is to separate the  impacts and risks of integrating a REDD market with the post-2012 regime.  Concerns exist that development of a single market would risk flooding with  an excess supply of REDD units and raise concerns related to volatility and  permanence, leading to disruptions in the post-2012 carbon market. The  dual markets approach allows time for a REDD program to develop before  any market linking.

The COP would decide the maximum amount of credits derived from REDD  activities that could be used to meet national targets. Annex I Parties would  specify at the outset how many, and from which developing countries, offsets  will be purchased, thereby providing a minimum level of demand for REDD.

A supplemental non-market fund for REDD activities could be set up  to address market distortions. For example, the REDD market could  be dominated by a small number of developing countries, especially if  implementation costs vary significantly between nations.