Leaked Danish Text and Carbon Markets

The agreement represents the interests of developed countries by effectively killing the Kyoto Protocol and replacing it with a weaker agreement. It also makes financing for developing countries contingent on actions they take, something that hadn't been negotiated before.

In terms of offsets, the text is rather vague, but it does state that carbon markets will transition from "project-based to more comprehensive approaches." One can interpret this more comprehensive approach to mean sectoral crediting. Sectoral crediting can be very risky, because if the crediting baseline is set too weakly, then non-additional credits can enter the system and make it even worse than the project-based Clean Development Mechanism, because the number of credits would be much larger. Secondly, it creates a perverse incentive for developing countries to not implement sound policies that would decrease their business-as-usual emissions, because this would in turn make the crediting threshold more stringent.  

Since developed countries are offering so little public finance (the text mentions $10 billion in short-term financing, but gives no numbers for long-term financing), developing countries have no choice but to support offsetting mechanisms to access funds from developed countries. This is dangerous with regards to setting the crediting baseline, because both parties have an interest in ensuring that it is weak. The end result is lots of offsets, but few real emission reductions.

Let's hope that this leaked document has shamed and embarassed developed countries to negotiate in good faith. We need an agreement that is ambitious AND equitable.