Reuters has reached an agreement on carbon markets at the UN climate summit

By Jake Spring and Kate Abnett

GLASGOW (Reuters) – Negotiators reached an agreement to set rules for carbon markets in a UN COP26 climate talks on Saturday, and could unleash billions of dollars to protect forests, build renewable energy facilities and other projects to tackle climate change.

The latest agreement approved by nearly 200 countries will implement Article 6 of the 2015 Paris Agreement https://www.reuters.com/business/cop/toughest-tasks-un-climate-talks-article-6-co2-markets-2021 -10- 26, to enable countries to partially meet their climate targets by purchasing compensation credits that indicate emissions reductions from others.

Companies, as well as countries with extensive forest cover, pushed for a strong agreement on government-led carbon markets in Glasgow with the aim of also legitimizing growing global voluntary compensation markets.

Critics are concerned that the compensation may go too far in allowing countries to continue to emit climate-warming gases in the face of some hasty agreements.

The deal was “a victory for Brazil” and is preparing the country to become a “major exporter” of carbon credits, the Environment Ministry said on social media. The country is a large part of the Amazon (NASDAQ 🙂 forest and has great potential to build wind and solar plants https://www.reuters.com/business/cop/brazils-hydroelectric-energy-crisis-eased-after -rains-ministries -dio-2021-11-03.

“It should encourage the development of projects that can provide significant investment and emission reductions,” Brazilian chief negotiator Leonardo Cleaver of Athayde told Reuters.

But the nations most vulnerable to the effects of the climate expressed concern about the compensation that could be open to abuses that could reduce emissions for bad actors.

“As for Article 6, we need to be vigilant against green clearing,” Marshall Islands Climate Representative Tina Stege said in a statement.

OVERCOME DISAGREEMENTS

The agreement managed to overcome several marriages that resulted in the failure of the previous two major climate meetings.

Previously, there was disagreement over a tax on some carbon trade with the aim of financing climate adaptation in the poorest nations. The agreement dealt with a two-way approach.

Bilateral trade in compensation between countries will not affect the tax. The agreement suggests that developing nations capitulated to the demands of wealthy nations, including the United States, because they acted against the tax.

In a separate centralized system for the issuance of compensation, 5% of the compensation proceeds will be channeled to an adaptation fund for developing countries.

In this system, too, 2% of the compensated credits will be canceled. This aims to increase overall emission reductions by allowing other countries to stop using these credits as compensation to achieve climate goals.

Another provision resolved how to transfer carbon credits created under the old Kyoto Protocol, prior to the Paris Agreement, to the new market compensation system.

The negotiators reached an agreement setting a cut-off date without proceeding with the credits granted before that date.

The latest agreement covers all compensations recorded since 2013. This will allow for 320 million compensations, each representing a tonne of CO2, to enter the new market, according to an analysis by the NewClimate Institute and the non-profit organization Oko-Institut.

Campaigners warned that the new market was flooded with old credit, and raised doubts about the climate benefits of some.

The 2013 date “is not good. So now it will be the job of the buyer countries to tell them ‘no’,” said carbon market expert Brad Schallert, of the World Wildlife Fund.

DOUBLE COUNTING

One of the most debatable points was whether the country that sells these credits and which country buys them could be asked.

A proposal from Japan solved the problem and won the support of both Brazil and the United States. Brazil’s persistence in allowing double counting in the past torpedoed the Article 6 agreement in the past.

Under the agreement, the country that generates a credit will decide whether to allow it to be sold to other nations or to count it for climate purposes.

If authorized and sold, the selling country will add one emission unit to its national count and subtract one from the buyer country to ensure that the emission reduction will be counted only once between countries.

The same rules apply to credits used more widely for “other international mitigation purposes” – some experts say they could introduce a global scheme to offset aircraft emissions, ensuring that double counting does not happen there either.

Matt Williams, a climate expert in the Energy and Climate Intelligence Unit, said the final deal was better but not perfect.

“We have seen the worst options for counting double emission reductions tightened or protected. It doesn’t mean it’s completely ruled out.”