COP27: discussions on carbon market rules are slow to start

COP27: discussions on carbon market rules are slow to start

SHARM EL-SHEIKH, Egypt, November 14 (Reuters) – Countries are far from agreeing on the technical details of the global trade in carbon offset credits after a week of talks at the UN climate summit COP27 in Egypt, according to negotiators and observers, with delays threatening to blow a 2023 deadline.

Carbon offsets allow countries or companies to pay others to reduce greenhouse gas emissions to offset their own. While companies are already trading carbon offset credits in private markets, the so-called Article 6 of the Paris Agreement would set rules for countries to partially meet their national climate goals by buying such credits.

The hope is that international rules backed by the world could attract billions of dollars in carbon reduction projects, but countries have struggled for years to agree on what the rules should look like, what projects should be eligible and how to ensure they are making an impact in the real world.

Countries applauded each other at last year’s climate summit in Glasgow for agreeing on broad principles governing carbon markets, breaking six years of deadlock. But that agreement pushed more delicate technical work to subsequent summits, including the current COP27 meeting in Sharm el-Sheikh.

Already at COP27, countries launched a decision until 2023 on the rules for which types of projects can produce credits – from solar farms to projects aimed at avoiding deforestation.

Countries will have to decide on those methodologies next year or risk hitting a 2023 deadline when carbon-reduction projects registered under the old UN rules will have to apply to be part of the new system.

Applying to join the new system without knowing what rules will govern it would be difficult, said Pedro Martins Barata, a carbon markets expert observing the talks for the nonprofit Environmental Defense Fund.

The draft rules under discussion are still riddled with brackets that indicate which sections have yet to be agreed.

“Glasgow was a real breakthrough…it doesn’t send a good signal if all of a sudden they’re caught up in the technical issues,” said David Burns, a policy expert and negotiations observer for the non-profit organization World Resources Institute.

Voluntary carbon offset markets have struggled to gain trust for years. Campaigners including Greenpeace have criticized offsets as a fig leaf for polluters who want to avoid cutting emissions.

“The door is still open for countries to meet their climate targets with accounting tricks rather than real actions,” said Gilles Dufrasne, an expert and observer at the talks at the non-profit organization Carbon Market Watch.

But the nearly 200 countries at the UN summit could still reach a decision on the rules for country-to-country offset trading.

Key sticking points also include whether there should be a centralized body where transactions are reported, a system backed by the European Union. The United States prefers a more diffuse and decentralized system.

PRIVATE MARKETS

As countries struggle to agree, private markets without global standards are on the rise.

Credits worth $2 billion traded in 2021 – nearly four times the previous year – with around 500 million credits representing 500 million tonnes of CO2 equivalent changing hands, according to Ecosystem Marketplace.

Reuters Charts

Private initiatives such as the Integrity Council for the Voluntary Carbon Market (ICVCM) and the Carbon Credit Quality Initiative (CCQI) have written guidance on what they consider to be high quality carbon offsets.

But debates continue on issues such as whether a credit should also consider biodiversity and human rights.

Consensus at the United Nations would send a strong signal to private markets about what their standards should be, said Barata, who also co-chairs an expert group for the ICVCM.

“At COP27, we need to give companies and countries a clear process on how to implement carbon markets in a way that prioritizes transparency and social and environmental integrity,” said he declared.

While hundreds of companies and countries rely on buying offsets to meet their pledges to achieve “net zero” emissions, a UN panel of experts warned last week that many of these targets rely too much on offsets to avoid the more difficult task of purely and simply reducing emissions.

“Net-zero promises are far too dependent on carbon offsetting in forests or agriculture,” said Charles Canham, senior scientist emeritus at the nonprofit Cary Institute of Ecosystem Studies, pointing out that these categories are particularly difficult to achieve. check.

Reporting by Jake Spring, Kate Abnett and Shadia Nasralla

Our standards: The Thomson Reuters Trust Principles.

Jacques Spring

Thomson Reuters

Global Climate & Environment Correspondent, based in Brazil. Interests include science, forests, geoengineering, cryosphere, climate policy/diplomacy, accountability and investigative reporting. His work on environmental destruction under Brazilian President Jair Bolsonaro has been recognized by Covering Climate Now and the Society of Environmental Journalists. Previously based in China, he is fluent in Portuguese and Mandarin Chinese.

Shadia Nasralla

Thomson Reuters

Written on the intersection of corporate oil and climate policy. Has reported on politics, economics, migration, nuclear diplomacy and affairs from Cairo, Vienna and elsewhere.

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