COP26: Crunch talks over Paris Agreement carbon market rules begin in earnest
Nations agree Article 6 negotiating text, fuelling hopes diplomats can hammer out long-sought after deal to finalise Paris Agreement rulebook
Crunch talks over carbon market rules have begun in earnest at COP26, with nations having last night agreed a key negotiating text on Article 6 of the Paris Agreement, which diplomats are hoping to finalise over the next two weeks of talks.
Article 6 remains one of the most critical outstanding aspects of the Paris Agreement, with nations having for years failed to reach agreement over the rules underpinning the trade in carbon credits between nations, which is seen as a key tool for mobilising green investment in developing economies, slashing carbon emissions, and enhancing natural carbon sinks.
Fraught talks over the carbon market rulebook have dogged numerous UN Climate Summits due to competing priorities between nations, with some nations such as Brazil seeking to allow for carbon credits secured under the previous Kyoto Protocol carbon market regime to be transferred into the new framework, while others such as the EU remain determined to ensure robust rules avoid any ‘double counting’ of pre-existing carbon credits.
The issue was once again a major fault line during climate talks at COP25 in Madrid two years ago, which were largely seen to have ended in stalemate and thereby heaped further pressure on COP26 co-hosts, the UK and Italy, to try and engineer a breakthrough in Glasgow.
As such, the outcome of the Article 6 negotiations is seen as crucial to defining the credibility of the carbon offsets and standards which underpin the growing gobal carbon market and is likely to go a long way to determining whether or not the entire Summit is deemed a success or failure.
If a robust deal setting out strong standards for carbon trading, as well as stringent, clear rules for how nations can use such offset projects to count towards their own national emissions reduction pledges, is finalised in Glasgow it could provide a major boost for carbon pricing and trading worldwide.
Moreover, an agreement over Article 6 rules could have significant implications for many national climate action plans, as well as efforts to restore nature and better protect the rights of indigenous peoples.
At the time of writing, negotiating teams and observers were still poring over the hundreds of pages of text agreed last night as a foundation for carbon market talks over the next two weeks, but commentators noted that even publishing the single agreed text could be regarded as notable progress.
Crucially, the negotiating text includes 373 sections in brackets, which indicate areas where there remains significant disagreement, underscoring the vast distance that must still be covered over the remainder of the summit in order to secure a deal.
However, as Carbon Brief’s Simon Evans noted this morning, there were far more bracketed sections – 517 – in the Article 6 negotiating text at the outset of talks in Madrid in 2019, which potentially offers an indication countries may be edging closer to a deal in Glasgow.
No surprise to see the number of brackets ballooning as countries retreat to old negotiating positions before they start trading off priorities
Notably, there were more brackets at the start of COP25 – 517 – and they nearly reached a deal there…
— Simon Evans (@DrSimEvans) November 2, 2021
A spokesperson for the International Emissions Trading Association (IETA) told BusinessGreen the business body was still currently considering the text, and would be releasing a statement later today setting out its view on the current state of talks.
The latest developments came as Canada’s Prime Minister Justin Trudeau earlier issued a plea for progress on carbon pricing worldwide, arguing there was an urgent need for robust, globally-agreed standards for emissions trading systems and carbon tax policies to drive decarbonisation, green investment, and more sustainable consumer behaviours.
“We know that carbon pricing is one of the most powerful ways of reducing emissions and supporting and encouraging the private sector and individual citizens to make smarter choices around reducing emissions at the same time as we create innovations to move forward,” he told the Summit. “But it’s hard – it’s always been hard to do this. In the way that we know citizens want more action on climate, but are always worried that they’re going to be the ones paying for the brunt of it. What a strong carbon price does when it’s properly designed is actually drive those price signals to the private sector, transform the economy, and encourage citizens to make better choices.”
At present, only around 15 per cent of global emissions are covered by some form of carbon pricing mechanism, including emissions trading systems (ETSs) in the UK, European Union, California, and most of Canada.
But, speaking at a COP26 side event this morning alongside EU President Ursula von der Leyen, Trudeau called for COP26 to deliver significant progress on pricing out pollution, with a headline goal to ensure 60 per cent of emissions worldwide are covered by carbon pricing by 2030.
“We know that there are many different ways of putting a price on carbon in different sectors,” he said. “What matters is to establish a principle of stringency and equity that makes sure everyone is pricing at the same level. That’s why one of the things I think we all know needs to come out of COP is a clearer call to create a global standard around putting a price on pollution.”
Alongside the negotiations on Article 6, there was a separate boost for global forest protection efforts this morning, with the UK government announcing the formation of a major new coalition of over 100 nations that have committed to ending deforestation by 2030.
For a deeper dive into Article 6 of the Paris Agreement, and why it is such an important issue for businesses, check out BusinessGreen’s guide from COP25 here.
