In 2015, the Paris agreement was negotiated committing countries to climate targets. The agreement also outlined a global architecture supporting the international response. Discussions over the carbon markets in article 6 have deadlocked three climate conferences. The delayed Glasgow climate conference is seen as the last chance to save these international structures and securing funding. The unlikely events of 2020 mean this is not a hopeless cause.

Carbon markets

In 1997 the Kyoto protocol set mandatory emission reductions for 37 industrialised nations. It also contained the Clean Development Mechanism. This scheme allowed projects reducing Greenhouse gas emissions to be traded between countries. It was the beginning of carbon markets. The EU was initially sceptical but soon became the key promoter of this idea.

The nature of carbon markets have been covered in Bright Green before. When functioning, they should generate some government revenue, drive climate finance towards developing countries and accelerate emission reductions.

Given the widespread enthusiasm for them, Article 6 of the 2015 Paris agreement incorporated three different mechanisms for markets.

Bound up with this is the global climate fund to help countries in the Global South – supposed to be at $100bn, as well as the loss and damage mechanism to help those countries adapt to already occurring effects of climate change.

State of negotiations

As the EU carbon trading scheme has demonstrated, there are a number of ways that a carbon market can go awry. With the Paris markets, there were a number of areas of contention about how the markets would operate. These were kicked down the road at Paris to subsequent climate conferences and were set to be resolved at the 2019 Madrid conference. Madrid postponed the decision to Glasgow 2020. Covid-19 hit and Glasgow never happened.

Oddly this break may have been exactly what the negotiations needed.

In Madrid disagreements were found in six key areas:

1. Overall emissions mitigation achieved:

Establishing a carbon market is only a first step. There also needed to be a way to gradually reduce the emissions allowed in the market, or else all you have is an expensive measuring system. Bizarrely there is no agreement on how this critical element will work.

2. Share of the proceeds:

Most carbon markets generate some revenue. With some Paris markets it is agreed that 2% of these revenues will be reserved to help developing countries with adaption.

3. Accounting issues and double counting:

There are a number of issues with counting credits over different time frames, verification and countries. Counting emissions in one market towards reductions in another reduces the mitigation saved.

4. Human rights:

Many countries in the Global North are still objecting to provisions enshrining human rights protections in climate mitigation projects.

5. The legacy of Kyoto:

The problem with carbon markets is in the two decades since they where conceived, they have failed at least as often as they have worked. The Clean Development Mechanism created by Kyoto is no exception. Dodgy verification systems led to a flood of credits of little to no worth. These credits have the potential to flood the market suppressing prices and undermining any emissions reduction benefit. Australia, India and China hold a lot of these credits and want to use them.

6. The lack of funding:

The deadlock around article 6 is merely the most active front in a battle for funding. The global climate fund was supposed to have $100bn. It currently has 80% of that, and 74% of it was in loans. The loss and damage mechanism agreed at the Warsaw conference in 2013 has been stymied by the USA.

Where are we now

Three conferences of deadlock, it would seem unlikely to expect something different now, particularly in post covid chaos where countries such as the UK are backing away from their aid commitments.

However, there are reasons for optimism. Foremost among them is that the climate movement has grown in strength. The international school strikes movement was the world’s largest mobilisation for climate action. This has contributed to a massive scaling up in ambition in climate targets, though not always action. Meanwhile the UK, and China have announced new carbon markets. The Biden administration is heavily invested in a new climate deal. These countries want a deal to go with their rhetoric on climate leadership.

Moreover, high ambition countries such as Costa Rica have already proposed the San Jose principles for just and effective carbon markets centring human rights.

What do we do now?

Greens are often sceptical of international climate summit processes, due to the dismal results that they have achieved in the last few decades. Countries aiming for increased ambition, such as small island states, reliably condemn the pitiful commitments. Some go further and argue that the focus on national governments distracts from more productive domestic process and pressuring industrial lobbies that have often been the key impediments to saving our civilisation.

However, these summits represent a key opportunity to pressure for climate action. They are also one of very few opportunities to press for international transfers to aid the worst affected countries. 2021’s summit taking place in Glasgow, the opportunity is particularly acute for UK climate activists.

This year, the board overseeing the Kyoto finance commitments suspended new projects. 2021 is the last chance to agree new governance arrangements. With the key asks for just carbon markets already articulated in the San Jose principles, there is a possibility that this could be the year that substantial money is committed to climate finance. Certainly, manoeuvring on the issue will be key for 2021s climate diplomacy.

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Image credit: COP Paris – Creative Commons