- COP26 climate negotiations complete the rules of the Paris Pact for the carbon market
- The guidelines only apply to emission reductions traded between nations
- Calls are increasing for a regulation of voluntary credits used by companies
OSLO, December 23 (Thomson Reuters Foundation) – New UN guidelines for carbon trading, set during the COP26 climate talks in November, are a step towards engaging forests to help curb climate change. global warming, but strong rules are urgently needed for a fast-growing but opaque volunteering business market, analysts say.
The Glasgow summit completed a ‘rule book’ for governments under the 2015 Paris Agreement by adopting standards for international carbon trading and a new mechanism for rich countries to help the poorest reduce their greenhouse gas emissions by investing in everything from wind turbines to forests.
But the long-awaited deal on “Article 6” of the Paris Pact has highlighted the lack of rules for a murky and expanding voluntary carbon market.
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Here, companies are investing to protect rainforests from the Amazon to the Congo Basin and are clamoring for carbon credits to help them meet their own net zero emissions goals.
“There is a dire need for more regulations and rules on this matter,” said Anders Haug Larsen, policy officer at Rainforest Foundation Norway, which supports the rights of indigenous peoples.
The Glasgow Pact – which only covers government action – could inspire stricter rules in the voluntary market, he noted, but warned that it “continues to leave the responsibility of knowing what to do to the companies themselves “.
More than 2,000 companies around the world, including Amazon, Royal Dutch Shell and NestlÃ©, have set net zero emissions targets.
Investing in forest protection to help meet these goals is attractive, both because customers like the idea and because trees naturally absorb carbon dioxide from the air as they grow.
Voluntary carbon markets are on track to exceed $ 1 billion in trade for the first time in 2021, according to an annual report from Forest Trends’ Ecosystem Marketplace.
Prices on a futures market for nature-based climate solutions spanning forestry, agriculture and other land uses, known as N-GEO, have risen to over $ 14 per tonne of carbon this month, down from around $ 8 a tonne in October.
The coming year promises to be crucial in the effort to develop stricter standards, observers say.
Groups working to this end include the Voluntary Carbon Markets Integrity Initiative with participants from nonprofits to governments, and a working group on the development of voluntary carbon markets set up by the former governor of the United States. Bank of England, Mark Carney.
“The new sets of guidelines are really going to help separate the wheat from the chaff,” Kelley Kizzier, formerly the EU’s chief climate negotiator for markets, told the Thomson Reuters Foundation.
By the time of the next UN climate summit in Egypt in November 2022, “we should have a clear idea of ââwhat a ‘good’ looks like in terms of carbon credits,” said Kizzier, now vice president for global climate to the United States-based Environmental Defense Fund. .
Responsible companies want strong rules to prove that they protect forests.
But less rigorous investors have often been accused of “green laundering” – making investments that look great in a glossy corporate brochure, but with little effect on reducing emissions.
Kizzier praised the progress made at COP26, noting that âa victory for carbon markets is a victory for forest carbon marketsâ.
The breakthroughs in Glasgow included establishing accounting rules, championed by developed countries, that prevent double counting of emission reductions when two countries cooperate on reductions as part of their climate action plans, known as Nationally Determined Contributions (NDCs).
The rules also allow emerging economies such as China, India and Brazil to carry over some credits for emission reductions earned from 2013 to 2020, for things like building hydropower and solar power plants, under the new regime. of the Paris Agreement.
But, Kizzier noted, there was no windfall for COP26 for forest countries, as new carbon market rules prohibit the carry-over of pre-2020 credits for tree planting and reforestation, which cannot be used to meet emission targets set in NDCs.
Hugh Sealy, an expert on voluntary carbon markets at the University of the West Indies in Barbados, said the Glasgow agreement sent “a strong and strong signal that the world wants to use markets, but … with a great integrity “.
âThere’s no stick we can wield – the market has to want that (integrity) to happen,â he said in an online briefing this month.
Under the rules established in Glasgow to prevent double counting by governments, the United States could pay to plant forests in Brazil to absorb 100 million tonnes of carbon emissions, and this would be recorded as a reduction in carbon emissions. American shows – not Brazil’s.
But the COP26 agreement leaves the door open to a different system for “other international mitigation goals”, such as those of private companies or investors rather than countries.
This means that an American company investing to protect Brazilian forests could claim the carbon credits to reduce its corporate emissions while Brazil also counts the reductions in its national target under the Paris Pact, Kizzier said.
Critics, such as the environmental group Greenpeace, say the system will allow companies to avoid drastically cutting their own emissions and simply paying others to take action.
Donors, however, say it can spur investment in a more agile cooperative system to help reduce emissions overall.
They argue that this would not be considered double counting under the Paris Agreement as long as the emission reductions are recorded in a country’s only NDC.
Verra, a body that helps set standards for carbon credit certification, welcomed Glasgow’s clarification that Article 6 “does not regulate the voluntary market”.
Verra said he would clearly label projects whose credits are traded in the voluntary market to show the carbon accounting methods used.
âSome countries may want to take advantage of private finance provided by voluntary carbon markets to pursue their own climate action, which many buyers will want to contribute,â he noted.
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Reporting by Alister Doyle; edited by Laurie Goering and Megan Rowling. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, which covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org/climate
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