The European Union could achieve part of its 2040 climate targets through a novel form of international climate cooperation that rewards governments for delivering emissions reductions, dubbed ‘jurisdictional reward funds’, according to the Potsdam Institute for Climate Impact Research (PIK).
As PIK noted in a policy paper, Making international carbon markets work for Europe, EU legislation decrees that the bloc reduce greenhouse gas emissions by 90% by 2040, compared to 1990 levels, with up to 5% of that target permissible through climate action outside the EU.
These jurisdictional reward funds could support this external component, at a cost of around €5 billion annually, while also strengthening global climate actions, it noted.
‘Political ambition’
“Our analysis shows that the international flexibility built into the EU’s 2040 climate target should not simply be dismissed as a questionable substitute for political ambition at home,” commented Ottmar Edenhofer, co-author, PIK director and chair of the EU climate advisory board.
“Rather, climate protection beyond our borders acts as a stabilising mechanism. It ensures that ambitious climate policy in Brussels remains realistic in the future – regardless of what is decided in Beijing or Washington.”
The introduction of such a scheme would also address concerns around international carbon credits, which enable countries to count emissions reductions achieved abroad towards their own climate targets, PIK noted, adding that some governments see this as a ‘gateway to cheating’ – overstating emissions reductions or setting weakened climate targets in order to secure funding.
According to PIK, these concerns can be reduced by the introduction of a system that rewards governments based on measurable climate outcomes, rather than individual projects.
‘A more efficient framework’
“The option of crediting climate protection efforts beyond one’s own borders is an opportunity – if it is designed correctly,” added Lennart Stern, PIK researcher and also an author of the study.
“To avoid the perverse incentives of previous voluntary carbon markets, we propose a more efficient framework: Brussels would provide financing via so-called jurisdictional reward funds as remuneration for efforts made by governments outside the EU. All developing and emerging economies with a proven track record of tightening climate policy would be eligible. The key point is that, in principle, the offer is the same for all countries.”
Funding would largely focus on the phase-out of fossil fuels, PIK suggested, with 62% allocated to coal, 32% to oil and gas, and 6% to forest conservation measures. At a cost of €5 billion annually between now and 2040, this would equate to approximately €21 per tonne of carbon dioxide avoided. Read more here.
