As COP27 in Egypt races towards a conclusion, many important issues including the financing of “loss and damage”, how countries should report on their progress in reducing carbon emissions and whether all countries can agree on a long-term goal to phase out fossil fuels – remain unresolved.
In a statement late November 17, Sameh Shoukry, Egypt’s foreign minister, who is leading the summit, offered a grim assessment: “There are still a number of issues where progress remains insufficient. While some discussions were constructive and positive, others did not reflect the expected recognition of the need to act collectively to address the gravity and urgency of the climate crisis.
One such problem is the nascent market for carbon credits, which is structured at the COP in a way that leaves gaping loopholes for corporate greenwashing.
Carbon markets could be shrouded in secrecy
The 2015 Paris Agreement calls for the formation of two types of carbon trading markets, which would in theory allow a higher-emitting country to pay for carbon reduction projects in another (e.g. forest conservation). , or construction of a solar farm). The country that sells the credit receives the money. The country that buys the credit pays for its emissions rather than reducing them directly. These credits are similar to the types of carbon offsets that exist today, and which are plagued by inconsistency, fraud or inadequacy.
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In the first type of market, two or more countries can agree to trade directly with each other; in the seconda UN-administered market would collect carbon credits from around the world and make them available to countries or private companies.
Byzantine rules for these propositions the markets are still trading, but two big issues with their current shape are worrying independent experts.
The first problem concerns bilateral or multilateral carbon exchanges. The rules provide for an independent committee to oversee these exchanges, so that, for example, two countries in bad faith cannot create a fake carbon market and then claim to be doing their part on climate. But the rules allow countries to designate any amount of information about their carbon market as confidential, essentially putting the whole process in the dark. The The committee may have access to confidential information but cannot reveal it, preventing civil society groups or other watchdogs from holding countries to account.
Moreover, the committee itself is completely toothless. “What is the consequence if the review finds the process to be a complete joke?” said Gilles Dufrasne, principal analyst at Carbon Market Watch, an advocacy and research group. “The review team gives an opinion, and countries can completely ignore it.”
Carbon markets allow misleading accounting
The second issue relates to the broader UN carbon market. This system is only credible if each credit is counted only once. For example, if carbon credits are created from a forest conservation project in Zimbabwe and then sold, via the United Nations market, to an American oil company, the credit can be counted in the national carbon footprint of the Zimbabwe or in the carbon footprint of the oil company, but not both. Double counting these credits would promote the illusion that global emissions are declining faster than they actually are, and would amount to greenwashing.
JThe rules being developed for this market prohibit double counting for a class of credits. But another class of credits does not suffer from this constraint, and if they are cheaper, they could offer companies an attractive way to engage in greenwashing. To circumvent this, Late night COP the negotiations of November 17 led to the decision to qualify this last category of appropriations as “contributions” rather than true offsets. The distinction aims to clarify that companies that buy these credits are merely supporting carbon reduction activity in a general sense of corporate social responsibility, and not directly offsetting their own emissions per se.
The “contributory” language is a positive step, said Dufrasne. But without more specific prohibitionshe said, the rules “still leave the door wide open for double counting between countries and companies”.
Although the rules are not greenwash proof, they provide a template for corporate climate plans. With the right kind of oversight, credits in these markets may end up being more robust than current offsets. Jgenerally climate-conscious companies can scrapping their old-fashioned reliance on shifts, and refocus their actions around the reduction of their own emissions, buy more efficient credits, and “contribute” to emission reductions elsewhere. And even if the UN has no direct power over the $2 billion private carbon credit market, the rules that will take shape here will send an important signal to that market about what governments consider credible.
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