Carbon markets are supposed to reduce emissions, right? You would think so but government negotiators surprisingly removed a provision saying this last month at COP27. This and other developments from the climate conference paint a concerning picture as to the future of such ‘solutions’ for achieving the very purpose for which they exist. Lessons from this must be learnt in the design of the new agreement on global biodiversity set to come out of COP15 this month in Montreal.
Carbon markets are a tool to make reducing emissions cheaper and easier. Carbon markets trade credits equivalent to one ton of CO2 reduction. They tend to be generated by a project in one country and traded with another which uses it towards its own emissions accounting. The types of projects offering carbon credits come in many forms: from hydroelectricity in Honduras to cable cars in Colombia. However, studies find that the use of such credits may have only marginally reduced global emissions and perhaps even increased them.
How can this be? Well, because of a lack of environmental integrity. This means that the credits may not be worth the paper they are written on and simply amount to ‘hot air’. In this sense, they are also known as ‘zombie credits’: complete with a role in sleepwalking us into a dangerously warm world.
Carbon credit projects can also be problematic for reasons beyond failing to reduce emissions.
There is evidence of clearances of indigenous peoples’ from their land and other human rights violations in projects registered under the Kyoto Protocol carbon market. There is also no option for affected parties to draw attention to their plight and access justice.
Given this, it is no surprise that the question of how carbon markets should be managed under the future Paris Agreement carbon market has proved thorny. It took six years to agree the basic framework for the rules (a key part of the so-called Article 6 rulebook) with negotiations only concluding last year in Glasgow at COP26.
At COP27, negotiators considered further rules to operationalise the new carbon market under the Paris Agreement. Topics ranged from how credits could be registered and tracked to the fees project developers will pay to register their projects.
The rules that were ultimately agreed upon leave a lot to be desired. For example, negotiators blocked a robust international tracking log for the transfer of carbon credits. This means it will be harder to track where credits generated in one country end upâ — leaving open the door for misuse. The new rules also fail to limit the risk of ‘double counting’: a situation where two countries may claim the same credits towards their Paris Agreement commitments.
The rules also afford a huge amount of discretion to parties to keep things confidential and block transparency of reporting. In other areas, there are still large gaps outstanding. Negotiations next year could further threaten the viability of carbon markets delivering the real emissions reductions needed to reach net-Zzero.
The decision to get a bad rule across the line at COP27, no matter the cost, also led to provisions on human rights and indigenous rights being weakened. There was also no discussion of the much needed independent grievance process. Given that these are significant issues under the current Kyoto Protocol carbon market, these flaws are too serious to overlook.
What all of this tells us is that negotiators have still not learnt the lessons from the failed Kyoto Protocol carbon market. Instead, they left explicit room for a number of zombie credits to flood the new Paris Agreement carbon market (one estimate suggests that up to 70% of such credits under the Kyoto Protocol’s Clean Development Mechanism could be hot air).
To be clear, there were some steps in the right direction at COP27. Negotiators agreed thatm both types of carbon credits that will be traded under the Paris Agreement, should help fund climate adaptation efforts. They also agreed that 2% of these credits should be cancelled to contribute to global mitigation efforts. This reflects the reality that there is doubt as to how effective carbon credit projects are for mitigation and that we no longer have the luxury of not funding adaptation at the same time.
It is well known that the overall outcome of COP27 came close to extinguishing our 1.5 °C future. The very system where climate rules are negotiated is closed, convoluted and rife with potential conflicts of interest. After all, COP27 had a record-setting 600 odd fossil fuel lobbyists in attendance.
This makes a successful outcome in Montreal even more crucial. At COP15, ‘debt-for-nature swaps’ are on the table, which could just as easily risk being another source of hot air.
Therefore, it is imperative negotiators learn lessons from COP27 and remember that hot air will not cool the planet, nor save its inhabitants.
By Injy Johnstone @injy_johnstone, PhD Candidate at Victoria University of Wellington