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


Jake Spring and Kate Abnett
Sat, November 13, 2021

Nov 13 (Reuters) - Negotiators began to close in on a deal to settle rules for carbon markets on Saturday, as talks extended into overtime at the COP26 U.N. climate summit.

New draft documents released early Saturday on implementing Article 6 of the 2015 Paris Agreement https://www.reuters.com/business/cop/toughest-tasks-un-climate-talks-article-6-co2-markets-2021-10-26 suggest progress around all three of the key sticking points that have skuppered a deal on the issue at the past two U.N. climate conferences.


Article 6 would set the rules allowing countries to partially meet their climate targets by buying offset credits representing emissions cuts by others.

Companies as well as countries with vast forest cover are keen for a robust deal on government-led carbon markets in Glasgow, in hopes also of legitimising the fast-growing global voluntary offset markets.


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

TAXING TRADES

On the issue of whether certain carbon trades should be taxed to fund climate adaptation in poorer nations https://www.reuters.com/business/cop/that-sinking-feeling-poor-nations-struggle-with-un-climate-fund-2021-11-11, the latest proposals offer a two-track approach.


Bilateral trades of offsets between countries would not face the tax. That suggests capitulation to rich nations including the United States, which had objected to poor countries' demands for the levy.

In a separate centralised system for issuing offsets, 5% of proceeds from offsets will be collected to go toward an adaptation fund for developing countries.

Also in that system, 2% of the offset credits will be cancelled. That aims to increase overall emissions cuts by stopping other countries using those credits as offsets to reach their climate targets.


OLD CREDITS

Another stubborn roadblock had been whether carbon credits created under the old Kyoto Protocol, the Paris Agreement's predecessor, should be included in the new offset market system.

Negotiators had been wrangling over a compromise that would set a cut-off date, with credits issued before that date not being carried forward.

The latest text would carry over any offsets registered since 2013. That would allow 320 million offsets, each representing a tonne of CO2, to enter the new market, according to an analysis by the NewClimate Institute and Oko-Institut non-profits.

Campaigners had warned against flooding the new market with old credits, and have raised doubts about the climate benefits of some.

The latest compromise got a mixed response.

The 2013 date "is not good. So now it will be buyer countries' jobs to just say 'no' to them," said carbon markets expert Brad Schallert with non-profit World Wildlife Fund.


Some countries said it was unfair that old credits would be allowed in the new market, while they feared credits awarded under a forest scheme known as REDD+ were not explicitly included.

"Panama will not accept the proposed text in Article 6 as it currently stands," Juan Carlos Monterrey Gomez, lead negotiator for Panama, said. "Forests must be part of this deal. If not, no way, no how, no deal."

A negotiator from another country told Reuters that in their view, the draft proposal could include such forest credits.

"DOUBLE COUNTING"

One of the most contentious points had been on the question of whether credits could be claimed by both the country selling them, and the country buying.

A proposal by Japan may have resolved the issue, and appears to have backing from both Brazil and the United States. Brazil's past insistence on allowing double counting had torpedoed an Article 6 deal in the past.


Under the new proposal, the country that generates a credit would decide whether to authorise it for sale to other nations to count towards their climate targets.

If authorised and sold, the seller country would add an emission unit to its national tally and the buyer country would deduct one, to ensure the emissions cut was counted only once between countries.

The same rules would apply to credits used more broadly toward "other international mitigation purposes" - wording that some experts said could include a global scheme for offsetting aviation emissions, ensuring double counting doesn't happen there too.


"It's a strong text on double counting," said Kelley Kizzier, a vice president at the Environmental Defense Fund, who has chaired the Article 6 talks at past U.N. summits. "It does what it needs to do."

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

Kerry, Xie Huddle as Glasgow Deal-Making Goes Live: COP26 Update

Jennifer A. Dlouhy, Ewa Krukowska and Akshat Rathi
Sat, November 13, 2021

Kerry, Xie Huddle as Glasgow Deal-Making Goes Live: COP26 Update



(Bloomberg) -- COP26 talks are now in the final stretch, with negotiators haggling over money, coal, and carbon-trading.
Two proposals that have faced resistance -- calling for a shift away from fossil fuels and for countries to upgrade their climate plans -- survived another night of talks. The main issue now is how the rich world will help poor countries withstand the worst effects of climate change. Vulnerable island nations are enraged by the lack of new funds.


But negotiators are moving closer to a deal on global emissions trading that could speed reductions of greenhouse gases. While environmentalists say it still needs to be strengthened against the risk of greenwash, the latest draft offers a compromise.

As talks run well into overtime, some top officials from smaller countries are already heading home. Covid rules on tests, flights, and quarantine are adding extra logistical hurdles right to the end.

Key developments:


Latest draft on carbon-trading shows signs of progress


COP set to call for phase-out of unabated coal and “inefficient” fossil-fuel subsidies


Countries told to strengthen climate plans next year


Maldives says it’s not good enough


EU, Italy are hatching a plan to solve the finance gap


Activists warn that carbon-trading deal could lead to greenwash...


... and Extinction Rebellion labels COP26 a failure


Delegates got through 11,000 liters of disinfectant

Read more: What to Look Out for If You’re Just Tuning In

(Timestamps are Glasgow, Scotland.)

Time for Objections (3:12 p.m.)

After much huddling and pouring over texts, COP26 President Alok Sharma has finally got everyone seated. Now listen out for objections as countries take turns to have the floor.

Sharma has made clear he wants to wrap up “this afternoon.” It’ll soon be clear what kind of deal has emerged from two long weeks of talks.

Extinction Rebellion Labels COP26 a Failure (2:55 p.m.)

Extinction Rebellion activists disrupted the City of London Lord Mayor’s event as they declared COP26 a failure. They displayed a float with a giant drowning head and two outstretched arms, and with banners saying “COP has failed” and “Stop Fossil Fuel Funding,” the group said in a statement.

U.S.-China Huddle (2:41 p.m.)

U.S. and Chinese negotiating teams are huddling as they try to get a deal over the line. Sharma had called people back for 2:30 p.m. But it looks like they still have some chunks of text to discuss. U.S. climate envoy John Kerry, masked and wearing reading glasses, is parsing the texts with his Chinese counterpart Xie Zhenhua.

There’s been a fair amount of backslapping too, particularly between the Brits and Americans.

Plan Is to Close Summit Today (2:01 p.m.)

COP26 President Alok Sharma insisted he plans to close the summit this afternoon, as he gave delegates more time for informal talks to try to get a deal over the line.

A plenary session was delayed as delegates huddled in small groups for last-minute horse-trading. Sharma has called everyone back for 2:30 p.m.

“At the end of the day what has been put forward here is a balanced package,” he said. “Everyone’s had a chance to have their say.”

Financing Still a Challenge (1:08 p.m.)

Climate financing continues to be the biggest challenge, said Brazil’s Environment Minister Jaoquim Leite. Rich nations have not only missed their target of $100 billion a year of annual funding for poor countries to tackle climate change, but some say that money is just not enough. The financing has been a key sticking point, and major complaint from vulnerable nations.

“They signed in 2015, promised for 2020 and now are kicking the can down the road to 2023 or 2024, for resources that are no longer enough,” Leite said.

He added that an agreement on carbon trading is likely on Saturday, after nations have finally agreed on a compromise to avoid double-counting carbon credits.

“The global carbon market is one of the solutions but not the biggest,” he said. “The main solution is more resources, funding above $100 billion.”

How Good is the Carbon-Trading Deal? (12:45 p.m.)

As negotiators close in a deal on a global carbon market, activists and experts are pouring over the detail.

The new proposal has been praised by some activists for offering stronger provisions on accounting -- a key issue. Another important element of the draft is also an obligation to cancel 2% of newly issued credits -- a step that would ensure pollution is cut, rather than just offset elsewhere.

Kelley Kizzier, vice president for global climate at the Environmental Defense Fund and a former negotiator, called the new draft text a good deal.

“It gives us a robust accounting framework, especially for compliance markets,” she said in an interview. “I think it also provides the opportunity for avoiding double counting for voluntary markets for the first time. But that will definitely be the job for civil society and national governments to make sure that that’s implemented.”

Yet some activists voiced concerns over the treatment of old carbon credits generated under the now-defunct Kyoto Protocol-era offset market. Up to 4 gigatons of old units could be carried over -- more than the annual emissions of Russia and Indonesia combined, according to WRI’s Helen Mountford.

“This is a concern, and we need to ensure that this is as limited as possible” lest it undermine ambition,” she said.

Maldives Laments Lack of Progress (12:50 p.m.)

With just minutes to go before countries take to the floor to take stock, the Maldives have signaled their unhappiness with the amount of adaptation finance provided for in the draft text, setting the stage for a potential showdown.

“We know through the trillions that are invested in fossil fuels every year that money is not the question -- the question again is one of political will,” said Shauna Aminath, environment minister for the chain of 26 atolls in the Indian Ocean, which are threatened by rising sea levels.

“We have 98 months to halve our emissions. We are not there. The difference between 1.5 and 2 degrees is a death sentence for us.”

Saudi Arabia Doesn’t Reject Fossil-Fuel Line (11:50 a.m.)

Saudi Arabia doesn’t object to the line in the text that calls for a phase-out of “unabated coal power” and “inefficient” fossil-fuel subsidies, according to a person familiar with the country’s position.

The coal line would be a big win for the summit as it would make the first time a final COP text references the need to move away from the dirtiest fossil fuel. Still, the fossil-fuel language matches what the G-20 has been saying for years, even as members continued to pump billions of dollars into subsidies.

Greenpeace Celebrates Fossil-Fuel Language (11:30 a.m.)

“The key line about fossil fuels is still in the text,” says Greenpeace International Executive Director Jennifer Morgan

“It’s weak and compromised, but it’s a breakthrough, it’s a bridgehead and we have to fight like hell to keep it in there and have it strengthened.”

The Risk of Compromise (9:43 a.m.)

The draft compromise proposal on a UN-supervised carbon market is a good start but still needs stronger provisions on the use of credits from a previous program, according to Gilles Dufrasne of Carbon Market Watch. Under the new documents, offsets from projects registered under the Clean Development Mechanism in 2013 or later could be transfered to the new market.

The controversial, technical issue of provisions to avoid double counting also needs more analysis, according to Dufrasne. “It looks like the risk has been reduced but the devil is in the detail and we will need to see how this can be implemented in practice.”

New Ad Hoc Finance Group (9:30 a.m.)

Climate finance has been one of the thorniest issues at COP26, and newly released drafts are unlikely to mollify poor nations angered by wealthy countries’ failure to fulfill a pledge for $100 billion annually that was supposed to start flowing by 2020.

Under draft documents released Saturday, an ad hoc group would work to develop a new climate finance plan for the second half of the decade with the new collective funding goal established in 2024.

But negotiators have dialed back any commitment on what that plan would actually look like -- including by omitting proposed language to set the floor at $100 billion annually and mobilize at least $1.3 trillion per year by 2030.

Coal and Fossil Fuel Phase-Out (9:05 a.m.)

COP26 is set to call for a phase-out of “unabated” coal and “inefficient” fossil-fuel subsidies, according to the latest draft. It will likely be considered a win after the line faced fierce resistance from some countries. If it survives until the end, it will be the first time a final COP text references fossil fuels.

Still, the G-20 has been calling for an end for inefficient fossil-fuel subsidies for a decade, and the latest numbers show those countries spent $600 billion subsidizing fossil fuels.

“It’s a major shift if it survives since it’s been so verboten,” said Collin Rees, a senior campaigner at the environmental group Oil Change U.S. Even if the language won’t “deliver much tangible change by itself,” he said, the real value is in signaling the shift away from fossil fuels and setting a precedent to build on.

Paying for Climate Damage (9:15 a.m.)

Negotiators have moved closer to a plan for compensating climate-vulnerable countries for the damage caused by global warming. A new draft has countries committing for the first time to provide funds to a program that was set up years ago but still doesn’t really work.

Under the latest draft text, the so-called Santiago network “will be provided with funds to support” efforts to avert, minimize and address loss and damage associated with climate change.

It still falls short of the demands from climate-vulnerable countries.

Gaps Are Closing on Carbon Trading (8:45 a.m.)

Envoys moved closer to a deal on launching a global carbon market market, according to a new draft.

The document outlines solutions to some of the biggest sticking points, including the accounting rules. Here, negotiators backed provisions endorsed by Brazil, Japan and the U.S., which environmental activists say creates the risk of lax accounting -- or greenwashing.

Negotiators kept a rule that 5% of revenues from offset trading under the new UN-supervised program would have to be channeled to developing countries to help them adapt to climate change. And to ensure that the market accelerates pollution cuts, 2% of newly issued offsets would have to be canceled.

There’s also a draft compromise on the use of old Kyoto Protocol-era offsets. The unused so-called Certified Emission Reductions would only be authorized for use to meet nations’ first climate plans under the Paris Agreement. To qualify, the offsets would have to come from projects registered no earlier than 2013.

New Steps on Carbon Trading (8:10 a.m.)

Negotiators are making progress on creating rules for international carbon markets. A new draft proposal published on Saturday moves ahead on the thorny issue of how to use cash generated from bilateral emission trades.

Instead of channeling a fixed share of revenues to developing countries, a demand voiced by African nations and other developing countries, now they are “strongly encouraged to commit” to contributing funding for adaptation, particularly through the Adaptation Fund.

EU, Italy Seek Band-aid on Finance (9 p.m.)

The European Union and Italy are rushing to draft a last-minute climate finance proposal that would help rich countries make good on failed funding promises -- and perhaps rescue COP26 negotiations.

(Michael Bloomberg, the founder and majority owner of Bloomberg LP — the parent company of Bloomberg News — committed $500 million to Beyond Carbon, a campaign aimed at closing the remaining coal-fired power plants in the U.S. by 2030 and halting the development of new natural gas-fired plants. He also started a campaign to close a quarter of the world’s remaining coal plants and cancel all proposed coal plants by 2025.)