After the relevant rules were finally passed at the United Nations Climate Conference in Glasgow earlier this month, countries are preparing to start establishing an international carbon market.
According to the COP26 agreement, countries should soon be able to buy and sell each other’s carbon credits certified by the United Nations and use them as a way to fulfill their greenhouse gas emission reduction commitments under the Paris Climate Agreement.
But some observers worry that there are major loopholes in these rules that may make it look as if countries are making more progress in emissions than they actually are. Others warn that the agreement may accelerate the creation of carbon credits in separate voluntary offset markets, which are often criticized for exaggerating climate benefits.
Carbon credits or offsets are generated by projects that claim to prevent large amounts of carbon dioxide emissions or emit the same amount from the atmosphere. They usually win awards for practices such as stopping deforestation, planting trees, and adopting certain soil management techniques.
A new regulatory agency that will begin meeting next year will develop final methods to verify, monitor and certify projects seeking to sell UN-approved carbon credits. The Glasgow Agreement will establish a separate process for countries to work with other countries on projects to reduce climate emissions, such as funding another country’s renewable energy power plants, in order to obtain credit to achieve their Paris goals.
Experts disagree on how big the UN-supported market will become, what some new rules will actually do, and how much the details might change as the final method is determined. But Jessica Green, associate professor of political science at the University of Toronto, focuses on climate governance and carbon markets, she said, but the process is “slow, chaotic, and slow to build infrastructure in order to make carbon more of a commodity. Trading.”
The United States and the European Union have stated that they do not intend to rely on carbon credits to achieve emissions targets under the Paris Agreement. However, according to Carbon Brief, countries including Canada, Japan, New Zealand, Norway, South Korea and Switzerland have indicated that they will apply for carbon credits. In fact, Switzerland is already funding projects in Peru, Ghana and Thailand, hoping to include these measures in its Paris targets.
Most observers praise Glasgow for at least one key achievement: These rules will largely prevent double counting of climate progress. This means that two countries trading carbon credits cannot both apply climate gains to their Paris targets. Only countries that buy or hold credit can do so.
However, some experts worry that double counting may still occur.
Developers of offset projects have long been able to generate and sell carbon credits through voluntary programs, such as those managed by registries such as Verra or Gold Standard. Oil and gas companies, airlines, and technology giants are all striving to achieve net zero emissions targets, buying more and more compensation through such programs.
The new rules of the United Nations have adopted a non-interference attitude towards these markets. CarbonPlan’s policy director Danny Cullenward pointed out that CarbonPlan is a non-profit organization that analyzes the integrity of carbon removal.
This shows that, for example, project developers in Brazil can make money from voluntary market sales compensation-while the country itself can still use these carbon proceeds for its emissions schedule under the Paris Agreement. Karen Ward said this means that there may still be double counting between a country and a company, with both parties claiming that the same credit line reduces their emissions.
Another problem is that research and survey stories have found that voluntary offsetting plans may exaggerate the reduction or removal of carbon dioxide levels due to various accounting issues. But in fact, the United Nations does not intend to oversee these plans, which may provide market clarity, thereby driving greater demand for these offsets and stimulating the development of more projects with questionable climate benefits.
“This is a complete green light for the continued expansion of these markets,” Cullenward said.
Some observers believe that many countries will choose not to use the credit sold on the voluntary market to achieve their Paris goals. Similarly, certain markets may distinguish between used and unused credits in the country in this way, mark credits to indicate their relative quality and price accordingly.
“I hope that as recognition increases, [corresponding adjustments] Need to ensure the environmental integrity of voluntary offset claims, then the market will move in this direction,” wrote Matthew Brand, a senior lecturer in carbon accounting at the University of Edinburgh Business School, in an email.
Lambert Schneider, the coordinator of international climate policy research at the German Institute of Ecology, pointed out another “big loophole” in an analysis last month.
Schneider, a member of the EU carbon market rules negotiating group, pointed out that these rules allow different countries to use different accounting methods for carbon credits generated and sold at different times. This may also lead to double counting. In a scenario he outlined, two countries can apply for half of the emission reduction of a set of carbon credits.
If all countries have been using the same accounting method, the results of the two accounting methods may be more or less balanced over time. But on the contrary, each country can choose the most beneficial method every time it reports progress, which may distort the overall carbon calculation.
“This is a critical question,” Schneider said.
Questionable climate benefits
Another area of concern is that the rule will allow countries to apply some credit from the early United Nations program authorized in the Kyoto Protocol, which came into effect in 2005, which is called the Clean Development Mechanism.
The system issues certified emission reductions to countries that fund clean energy projects in other countries, such as solar and wind farms, because they may have prevented emissions. It aims to incentivize rich countries to provide funding for the sustainable development of poorer countries. They assumed that electricity was originally generated by climate-polluting facilities (such as coal or natural gas power plants), thereby continuing to generate credit.
According to the rules approved by Glasgow, countries can continue to use credits from such projects registered in 2013 or later for their first set of emission reduction targets (in most cases, 2030).