Outline of carbon markets deal emerges at U.N. climate summit

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(Businesshala) – Negotiators began closing a deal on Saturday to set rules for carbon markets, as talks at the COP26 UN climate summit escalated into overtime.

FILE PHOTO: Smoke rises from a chimney at a coking factory in Hefei, Anhui Province, October 2, 2010. Businesshala/Stringer/File photo

New draft documents released early Saturday to implement Article 6 of the 2015 Paris Agreement suggest progress around all three key points that thwarted a deal on the issue at the last two UN climate conferences Is.

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Article 6 will set out rules that allow countries to partially meet their climate goals by purchasing offset credits representing emissions reductions by others.

Companies as well as countries with vast forest cover are eager for a strong deal on government-led carbon markets in Glasgow, hopefully also to legalize fast-growing global voluntary offset markets.

But balancing those interests against concerns that it will go too far in allowing countries to continue emitting climate-warming gases has made some wary of a hasty deal.

tax business

On the issue of whether some carbon trades should be taxed for climate adaptation in poorer countries, the latest proposals offer a two-track approach.

Bilateral trade of offsets between countries will not face tax. It suggests surrender to rich countries, including the United States, who objected to the poor countries’ demands for the levy.

In a separate centralized system for issuing offsets, 5% of the proceeds from offsets would be collected to go towards an adaptation fund for developing countries.

Also in that system, 2% of the offset credit will be cancelled. It aims to cut overall emissions by using those credits as an offset to other countries reaching their climate goals.

old credit

Another difficult hurdle was whether carbon credits created under the old Kyoto Protocol, a predecessor to the Paris Agreement, should be included in the new offset market system.

Negotiators were fighting over an agreement that would set a cut-off date, with credits issued before that date not being carried forward.

The latest text will take any offset registered since 2013. This would allow 320 million offsets to enter the new market, each representing one ton of CO2, according to an analysis by the Newclimate Institute and Oeko-Institute non-profits.

Campaigners have warned against filling the new market with old credit, and have raised doubts about the climate benefits of some.

The latest agreement received a mixed response.

2013 date “Not good. So now it will be the job of the buyer countries to tell them ‘no,'” said carbon market expert Brad Schallert with the non-profit World Wildlife Fund.

Some countries said it was unfair that the old credit would be allowed in the new market, while they feared that the credit granted under the forest plan, called REDD+, was not explicitly included.

“Panama will not currently accept the proposed text in Article 6,” said Juan Carlos Monterey Gómez, Panaman’s chief negotiator. “Forests should be a part of this deal. If not, no way, no how, no deal.”

A negotiator from another country told Businesshala that in his view, such forest credits could be included in the draft proposal.

“double counting”

One of the most controversial points was the question of whether both countries could claim credit for selling them and buying countries.

A proposal from Japan may have resolved the issue, and appears to have the backing of both Brazil and the United States. Brazil’s previous insistence on allowing a double count has wired an Article 6 deal in the past.

Under the new proposal, the country that generates the credit will decide whether to authorize it for sale to other countries so that they can calculate their climate targets.

If authorized and sold, the seller country would add one emissions unit to its national tally and the buyer country would subtract one, to ensure that emissions reductions were calculated between countries only once.

The same rules would apply to more widely used credits for “other international mitigation purposes” – something experts said could include a global plan to offset aviation emissions, ensuring that double counting is there. Doesn’t happen either.

“It’s a strong lesson on double counting,” said Kelly Kizier, vice president of the Environmental Defense Fund, who has chaired Article 6 negotiations at previous United Nations summits. “It does what it needs to do.”

Reporting by Jake Spring and Kate Abnett; Additional reporting by Valerie Volcovici; Editing by Katie Daigle and Jan Harvey

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