Carbon markets are the key to real climate action – key insights from COP25

If you missed it, check out Prof Zero’s first part of the COP25 summary here

Article 6 negotiations are hugely important for the Toitū collective (and businesses and governments worldwide) – but they remain unresolved

Article 6 of the Paris Agreement should establish the rules for carbon market mechanisms and international collaboration to help us achieve net zero by 2050. How the proposed market-based systems will work is likely to impact on how Toitū carbonzero programme members, especially exporters, make carbon neutral or net zero claims.

Unfortunately, no agreement was reached and negotiations on many parts of Article 6 have been deferred to COP26 in Glasgow, November 2020. So – no answers yet.

The World Resources Institute statement captures the frustration felt by many of the participating groups:

“The negotiations fell far short of what was expected. Instead of leading the charge for more ambition, most of the large emitters were missing in action or obstructive. This reflects how disconnected many national leaders are from the urgency of the science and the demands of their citizens. They need to wake up in 2020."

The devil is in the detail – negotiations needed to navigate the many conflicting priorities

The real purpose of Article 6 is to raise ambition – to meet the Paris Agreement “1.5 degree Celsius” and “well below 2 degrees Celsius” twin goals. So, if everyone wants to work toward this, then why was it so hard? Well the devil is in the detail. Each party to the negotiations has its own priorities, and you can imagine that those are very different between major economies and those countries already experiencing the brunt of climate change. Not to mention the perspectives of business and other groups in the mix. There was an incredible amount of technical negotiation around the rules which attempt to ensure real action, and this led to compromises or stalemate.

The lack of agreement enraged indigenous groups, NGOs and other representatives of civil society calling for human rights safeguards, gender equality, disability and diversity to be respected in the design of carbon trading mechanisms. The statement by the Association of Small Island States reflected the level of frustration:

“What’s before us is a level of compromise so profound, that it underscores a lack of ambition, seriousness about the climate emergency and the urgency of securing the fate of our islands”.

Strong rules could drive real climate action and the wider sustainability goals

Clear and robust rules for carbon markets could unlock greater action and support higher ambition by involving the private sector, while generating investment, innovation and new technologies.

To try and ensure that Article 6 delivers on its promise, a break-away group of countries announced strong guiding principles (San Jose Principles), along with calling for the negotiations to take account of the climate science, environmental integrity, and avoidance of greenwash. By the end of COP25, the signatories of the San Jose Principles had reached over 30 countries.

The best outcome would include the interests of indigenous peoples, human rights, adaptation funding for underdeveloped nations, along with large emitters accepting liability. Delivering on the Sustainable Development Goals was emphasised, in particular, ensuring transition to a just society, indigenous worldview and human rights.

Professor Zero says, “There is an incredible amount of work to be done between now and at COP 26 in Glasgow. Let’s all encourage our leaders and businesses to push for more ambitious action, so that we can make the targets and avoid slipping behind on emissions reduction commitments.”

Missed the first Professor Zero summary of other highlights from COP25? Read it here {link to previous article}

If you’re keen, more info about the San Jose Principles and the countries that support them can be found here.

Want to get technical? Here’s some detail on some of the concepts, along with some of the accounting and reporting rules.

Double counting. Because commitments from each country vary in timescale, greenhouse gases and sectors, if accounted for inappropriately, trading these reductions could result in a country claiming to have met its targets without actual reductions

Carry over of Kyoto units. The Kyoto Protocol was a historical agreement for developed countries to meet emissions targets (it finished in 2012). Some countries want to carry over any “emissions allowance” they didn’t use from Kyoto, to meet current Paris Agreement goals. There is also a discussion of whether the carbon credits created under this historical protocol can continue to be traded. However, those against say that allowing this historical “hangover” could increase our emissions reductions requirements by 25%. One suggestion under consideration is that a “vintage” restriction be applied so that only units created after an agreed date can be traded.

Specific reference to the interests of indigenous peoples and human rights. It is crucial that the many island states, small nations and civil society groups are heard to ensure there are safeguards to prevent the well-documented human rights violations that happened through historical carbon credits projects and their international trading.

Share of proceeds from carbon trading for adaptation. In general, while countries support a share of proceeds for adaptation and agreed to this in the Paris Agreement under the central mechanism, there was strong debate about it for other situations, like where a trade could be linked to a subnational emissions trading scheme.

Liability and finance for loss and damage. This is an attempt to address equity - for those countries bearing the brunt of climate change effects that haven’t significantly contributed to it (like small island nations). There is call by some for large emitters to accept liability for loss and damage in other countries. There is also a call for separate finance to address these issues. (The Warsaw International Mechanism or WIM was set up in 2013 to address loss and damage from climate change).

Common timeframes. Reduction targets submitted by countries vary across a huge range of timeframes, making it harder to keep track of overall progress. Keeping “deadline” years consistent will make carbon reduction progress much clearer. Also, a number of countries are pushing for 10-year reporting periods after 2030. Others see this as “weak ambition” and that targets should be reviewed every five years and ratcheted up in accordance with the latest science.

Periodic review. This is a commitment to reviewing the science and the progress to align to what the science recommends to avoid catastrophic climate change. The first periodic review was carried out from 2013-2015 and informed the negotiations in Paris. Where everyone expected a 2°C goal, the results of the review resulted in the addition of “pursuing efforts to stay below 1.5°C” to the goal.

Common metrics. This is about how to convert non-CO₂ greenhouse gas emissions (e.g. methane and nitrous oxide) uniformly for reporting. (As a reminder, there are seven different greenhouse gases that have different potential to increase temperatures and longevity in the atmosphere). Historically, just the Global Warming Potential (GWP100) was agreed. More recently, Global Temperature Potential (GTP100) was added so either GWP or GTP could be reported. The difference of the gases ‘impact’ between the two measures is significant. With GWP100, one tonne of methane is equivalent to 28 tonnes of CO₂ over a 100-year period, whereas, under GTP100, the same tonne of methane would be equivalent to 4 tonnes of CO₂. Having two measures causes discrepancy and confusion. Many countries now want the GWP values to be used to ensure consistency, comparability and transparency.

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