Talks on a deal to allow countries to trade carbon credits to help them hit their climate targets are set to drag on beyond the COP27 summit in Egypt as issues, including how to keep track of the credits, are unresolved, observers and a negotiator said.
Creating such a market is considered crucial to helping move money from richer, polluting countries to their developing country peers, and was called for in Article 6 of the landmark 2015 Paris climate agreement.
Yet it might be years before countries can, on a large scale, offset their emissions with credits based on emissions-reducing projects such as in renewable energy or forestation based elsewhere, after differences emerged on technical detail.
“The Article 6 texts are all open at the present time,” said Andrea Bonzanni, International policy director at the International Emissions Trading Association (IETA).
A draft document of around 60 pages, published on Wednesday, outlined how inter-country carbon trading might function, but many sections are up for debate.
Pedro Barata, carbon markets specialist at the Environmental Defense Fund, said he was impressed by the size of the draft document, but it was clear it was not leading to a decision in Sharm El-Sheikh.
“(The draft) gives an increased sense of urgency throughout the year to further negotiate and clear this very long – but fundamental – text, so that substantial progress can be locked in at COP28 in Dubai next year,” Barata said.
Issues to be resolved include the extent to which countries’ registries, or digital ledgers of carbon trades, might be exposed to outside scrutiny, what constitutes a carbon removal project and how to integrate existing credits already traded in private markets.
DRAFTS FOR SOME ARE A REASON FOR HOPE
Late on Thursday, another draft text was released dealing with how countries’ registries might interact with the private, so-called voluntary carbon market, and laid out technical steps to be clarified over the course of 2023.
While companies and others are already trading credits in the voluntary market, agreeing how it will mesh with the country-level system is seen as crucial to unlocking many billions of dollars for carbon projects across the globe.
Calling the publication of the drafts and a plan for further action in 2023 “a step forward”, a negotiator who declined to be named added: “I don’t know that it’s (the) big jump that was probably needed.”
Matt Williams from the Energy and Climate Intelligence Unit said he was worried about transparency and the potential for double-counting the same credit in two countries.
Slow progress in the carbon market discussions mirrors a struggle to agree on other climate issues ahead of the scheduled end of the COP27 summit on Friday, including that of whether to set up a fund to help poorer countries after climate disasters strike.
For some that drafts had emerged at all was cause for optimism.
“After years of negotiations about whether carbon markets under the Paris Agreement would actually exist, now they are at the stage of actually setting them up,” said Jonathan Crook, policy analyst at the non-profit Carbon Market Watch.