Why does the CAT agreement structure have a single Host and a small number of Partners?

CAT agreements are very different from the private sector driven transactions in a liquid global carbon market. A small group of trusted and compatible partners can ensure high integrity emissions reductions and maximise the effectiveness of international support for mitigation. Each potential host country can select a group of partners with whom it would like to work, among the countries principally interested in acquiring ITMOs through a CAT approach, .  These could be countries with whom they have pre-existing relationships and which have complementary capability to offer.  This set of partners is likely to differ from host to host so each CAT would have only one host.  This does not constrain hosts from cooperating with other hosts in other ways.  A network of CATs with diverse hosts and partners could constitute a relatively efficient global market while also assuring integrity and local effectiveness within each agreement.

Ambitious mitigation requires financial incentives but also political and technical support. In a CAT agreement both host and partners win if the host is successful in reducing GHG emissions beyond their NDC. When the team consists of a small number of partners, these benefits are not too diluted across the partners, creating strong incentives for each to actively support the host beyond the payment for ITMOs received. Such non-monetary support to can be pre-defined to a certain extent in the Agreement between the different parties but the most effective support will be flexibly adjusted over time in response to complex local circumstances.  A small team reduces the moral hazard that arises in teams where efficient roles cannot be fully defined in advance and effort can’t be fully observed so that some team members could free ride on others.  Within a small self-selected group, it is easier to develop trust and improve observability of the effort exerted by each team member.

Thus, CAT partners are not only buyers of ITMOs generated by the host. They also play a crucial role in generating them. Their support can be technical, political or trade related.