Transport in the Global Carbon Market: Baseline Challenges with Sectoral No-Lose Targets

Sectoral no-lose targets have been proposed as a mechanism to engage developing countries in a new international climate agreement. Countries would generate tradable emission credits for reducing emissions below a “crediting baseline,” most likely set as a percentage reduction from business-as-usual. For transport, proposals to date have been largely conceptual. This paper provides a detailed look at how sectoral no-lose targets might be implemented, with particular attention to how the crediting baseline might be set. It concludes that uncertainties in projecting business-as-usual emissions pose serious problems for the feasibility of sectoral no-lose targets for transport. Based on a regression model using historical data, some countries would be likely to generate large volumes of tradable emission credits without taking any action, simply due to imprecision in the business-as-usual projections.