At the Cop28 climate summit last December, governments agreed to set up a new global carbon credit market under Article 6.4 of the Paris Agreement – and a host of fossil fuel firms and their middlemen are now trying to cash in by making their projects eligible for trading.

Developers applied for thousands of projects to be transferred over from the old discredited Clean Development Mechanism (CDM) to the new market that will be established, before the deadline of January 1 this year.

Most of these projects are for renewable energy – which, while good for the climate, have stirred debate. Critics argue that they do not need additional funding from selling carbon credits because they are profitable without it.

However, more controversial are ten projects Climate Home News has identified, based largely in Asia, which backed the construction of power plants that run on natural gas, one of the fossil fuels governments agreed to transition away from at Cop28. 

If approved by their host nations, the projects would transfer more than 10 million old gas-linked credits – equivalent to the reduction of 10 million tonnes of carbon dioxide (CO2) emissions a year – to the new Paris carbon market.

“These projects are entirely inappropriate,” said Carbon Market Watch researcher Jonathan Crook. “Some were registered as far back as 2009. It’s unreasonable to assume they expected to rely on revenue from a new market mechanism in 2024 – not to mention that these projects may lock in fossil fuel emissions and infrastructure for years to come, among other issues.”

Clean, cheap or fair – which countries should pump the last oil and gas?

The Integrity Council for the Voluntary Carbon Market was set up in 2021 in a bid to ensure that carbon credits deliver on the emissions reductions they have promised and have a positive impact for the climate. In its categorisation of different types of carbon credit, offsets issued for gas-fired power plants are given the worst ranking.

Similarly, BeZero, a ratings agency for carbon credit projects, looked at three of the CDM gas projects that have applied for transfer to the new market. It gave them a ‘C’ grade, meaning they “provide a very low likelihood” of reducing emissions by as much as they claim. 

It cited the “minimal impact” of carbon credit revenues on the project’s overall financial situation and the risk of methane leaks from gas infrastructure that would make the projects more polluting than asserted.

Chinese gas-fired plant

The biggest project is a gas-fired power plant built by China’s state-owned oil and gas company CNOOC and Japanese conglomerate Mitsubishi in 2010 in the province of Fujian, China, just across the sea from Taiwan.

To fire the plant’s four turbines, CNOOC and Mitsubishi imported gas from an Indonesian gas field called Tangguh, which they both had stakes in, through the CNOOC-owned Fujian gas import terminal.

In addition to the income they received from selling the gas, importing it through the terminal and then selling the electricity it produced, they also submitted an application to the CDM to develop and sell carbon credits linked to the plant.

By their own calculations, the plant would emit 2.3 million tonnes of CO2 a year when fully operational. But if they didn’t build it, they said the electricity would come from coal, emitting over 5.3 million tonnes of CO2 a year. So they claimed credits for reducing the amount of CO2 that would have entered the atmosphere by an annual 3 million tonnes.

Justifying this assumption, they said that oil was too expensive and zero-carbon alternatives were not viable as an alternative. Most of Fujian’s hydropower potential had already been tapped, while wind power was “just start-up” and “of seasonal nature”, they added. They did not even mention solar power  – now the cheapest electricity source.

However, coal’s main competitors in the province are not gas but nuclear and hydro, power sources that do not emit greenhouse gases. Wind power has also grown rapidly in the province since the gas-fired plant was built.

Lauri Myllyvirta, a senior fellow with the Asia Society Policy Institute, told Climate Home: “The premise that power generation growth would come from coal if a new fossil gas plant wasn’t built was never true and certainly is not true today.”

Mitsubishi withdrew from the carbon credit project in 2022. While CNOOC remains involved, the main project participant is now a company called Europe New Energy Investment Capital, run by a Chinese citizen called Dongquan Yang.

A spokesperson for CNOOC said the project “is out of the scope of CNOOC Limited’s business operations”. Asked how that was compatible with CNOOC Fujian Gas Power Co., Ltd being listed as an authorised participant, the spokesperson did not reply. 

Indian carbon-credit developer

Fossil fuel firms are not the only ones trying to monetise carbon offsets from existing gas power plants. Documents show that Indian company EnKing – which has since changed its name to EKI Energy Services Ltd and claims to be the world’s biggest developer of carbon credits – is involved in three of the Indian gas power projects identified.

Last August, Climate Home revealed that EnKing vastly overestimated the benefits of carbon offsets linked to cookstoves in rural India and helped sell those junk credits to oil and gas giant Shell.

Cooking the books: cookstove offsets produce millions of fake emission cuts

Working with fossil fuel companies, EnKing used a methodology (AM0025), under the old Clean Development Mechanism, to derive credits from the building of gas-fired power plants in India.

The successor to this methodology is still technically up and running – but Verra, one of the main international carbon credit verifiers, has declared it inactive due to lack of use.

According to Crook of Carbon Market Watch, it is “extremely unlikely” that this type of methodology will be applicable under Article 6.4, which will govern the new UN carbon market when it launches. EnKing did not reply to a request for comment.

‘Not good practice’

To oversee the new carbon market, governments have agreed to set up an Article 6.4 supervisory body, made up of government climate negotiators. But the rules agreed for it so far offer little power to reject old CDM credits from gas-fired power plants. 

The host countries of those projects – including China and India – could refuse to authorise them, but they could still be sold, branded as “mitigation contribution units” under Article 6.4.

These are a lower class of carbon credit agreed at Cop27 which do not require authorisation by the host country as it does not need to do a “corresponding adjustment” for them, which means wiping the credits’ emissions reductions from its accounts.

Carbon credits talks collapse at Cop28 over integrity concerns

Mitigation contribution units cannot be counted towards national emissions goals set under the UN climate process, but they can be bought by companies and used for other purposes. That means the firms trying to sell carbon credits from old gas power stations just need to find buyers to make a profit.

Crook said such deals “wouldn’t be good practice”. “Retiring these credits paradoxically rewards fossil fuel companies for locking in emissions,” he added.

The post Fossil fuel firms seek UN carbon market cash for old gas plants appeared first on Climate Home News.

Climate Home analysis shows that renewable energy investments make up four-fifths of all projects seeking a transfer from the old Clean Development Mechanism (CDM) to the new system under article 6.4 of the Paris Agreement.

Experts have long written off the vast majority of credits produced from renewable energy as junk because they often already provide the cheapest sources of power in most of the world and selling offsets to fund them does not have any additional impact on emissions.

Some of these projects have also been accused of human rights violations such as forced evictions for the construction of large dams.

Harry Fearnehough from New Climate Institute told Climate Home that “it could definitely undermine the credibility of the mechanism because, while there’s still uncertainty over what it will look like, as a starting point you have a huge supply of low-quality offsets that are potentially available at a very low cost”.

Established in 1997 by the Kyoto Protocol, the UN’s CDM allowed rich countries to meet some of their climate obligations by financing emission-cutting projects in poorer ones.

The programme has received widespread criticism for its patchy human rights record and for failing to deliver promised climate benefits. Supporters of a new mechanism currently being developed under article 6.4 of the Paris Agreement say it is an improved, higher-integrity successor to the CDM.

Winning a lifeline

Countries are still wrangling over many aspects of the future market, but one much-debated issue was settled at Cop26 in Glasgow.

Under pressure from Brazil, Russia, China and India, countries agreed that a vast number of projects originally created under the CDM were allowed to migrate to the new mechanism. This handed them the chance to significantly extend their lifespan and their potential credit sales.

Project developers had until the end of December 2023 to fill in a simple two-page form and submit their transition requests.

Azerbaijan appoints fossil fuel execs and scandal-hit officials to all-male Cop29 committee

Of the nearly 3,500 eligible projects, over a third (1,284) seized that opportunity.

In total, the projects that have requested transition by the deadline could supply 1.4 billion tonnes of carbon credits between 2021 – the start year for accounting purposes set by the regulation – and 2035, according to a preliminary analysis by NewClimate Institute shared with Climate Home. That is more than the annual CO2 emissions of Germany.

While a relatively small share of the projects opted in, they account for approximately three-quarters of the potential supply of carbon offsets.

That’s because some of the programmes seeking to move could produce an outsized volume of credits. The two biggest ones – a hydro plant and a nitrous oxide emission reduction scheme, both in Brazil – each have the potential to issue around 6 million tons of offsets a year. That’s similar to the annual emissions of Sierra Leone.

Fearnehough says that “very few, if any, of these credits are genuinely likely to be additional”, going beyond what countries would do anyway without the carbon finance.

“A key reason for this is that the CDM was really only scheduled to run up to the end of 2020,” he added. “No investor would have made a decision purely based on expecting revenues from credits in the 2020s because, quite simply, there was no political indication that the possibility to move over to a new mechanism would exist”.

Climate and social concerns

That is particularly true for the renewable energy projects vastly dominating the list. Experts say they are highly likely to fail the additionality test, meaning their credits do not bring any climate benefit. When used to compensate for real emissions elsewhere, they result in more greenhouse gases entering the atmosphere.

The reason is simple. Many renewable offsets came into existence just as solar and wind power were becoming the cheapest source of energy in most countries. After years in operation, they are likely to be profitable from the sale of the electricity alone, without the need for additional revenues from carbon offsetting.

A 2016 study commissioned by the European Commission concluded that the vast majority of these projects “are not providing real, measurable and additional emission reductions”.

The Jirau hydropower plant is located on the Madeira River, in Brazil. Photo: UHE em Jirau/Flickr

Hydropower projects carry even more concerns as their implementation is often marred by human rights problems. Vulnerable communities relying on rivers for their livelihoods are particularly at risk of forced displacement.

The largest project applying for the transition to the new mechanism – the Jirau mega-plant in Brazil’s Rondonia state – is a case in point.

Over the years the project has faced multiple accusations of stoking tensions, pushing indigenous people away from their territories and breaching the rights of the workers that built it. Engie, the project’s developer, previously rejected any accusations.

Other categories of activities featuring prominently on the transition list have raised major concerns in the past.

Credits from projects which claim to cut or stop the emission of industrial gases such as nitrous oxide (N20) and trifluoromethane (HFC-23) were banned by the EU in 2013 for use in its emission trading system.

That’s because, according to studies, they created “a perverse incentive” to increase the production of gases depleting the ozone layer.

Countries’ authorisation dilemma

While the CDM projects have now made their move and requested transition, they are not automatically through to the new system.

Standing in their way is the need to receive a formal authorisation to proceed from the countries where their activities are located. Governments have until 2025 to make a decision and, experts predict, it won’t be a straightforward one.

“A la carte menu”: Saudi minister claims Cop28 fossil fuel agreement is only optional

“It’s not a guarantee that all host countries will want to approve all of these projects”, according to Jonathan Crook from Carbon Market Watch, who said there would be contrasting forces at play.

“If they authorise them, they have to do corresponding adjustments, which they might not be so keen on since those emission reductions will be deducted from their [NDC climate plans]. But, at the same time, most projects are located in very large countries and it may not make a big difference to their plans”.

The answer to this dilemma will rest primarily in the hands of China, India and Brazil. Between them, the countries host around three-quarters of all projects that are looking to migrate under article 6.4.

Spotlight on three countries

Observers of climate talks said their governments all pushed for rules that would grant a lifeline to as many CDM projects as possible when those negotiations took place at Cop25 in Madrid and Cop26 in Glasgow. But, since then, they have been conspicuously quiet on the topic.

Climate Home approached the respective carbon market authorities in the three countries but did not receive a response at the time of publication.

Trishant Dev is a carbon market expert at the Delhi-based Centre for Science and Environment. He expects there will be “a lot of pressure on the Indian government to let projects through from the carbon industry, which is thriving in the country”.

But, at the same time, he thinks the government will take time to properly understand all the pros and cons of allowing such authorisations. “It’s a chaotic process. Countries want to make sense of what the final outcome of the article 6 discussions will be and how that will interact with domestic carbon markets they are constructing”, he said.

Who will buy the credits?

Article 6 talks collapsed at Cop28 last December after attempts led by the EU to introduce tighter controls and further integrity safeguards had been rebuffed by the US. Negotiators will try again this year to hammer out a deal on many technical issues that need to be resolved before trading of offsets can begin.

Meanwhile, questions also remain on who will be interested in using those credits, once the market is up and running. Countries, corporations and individuals could all be potential buyers.

Comment: High stakes for climate finance in 2024

New Climate Institute’s Fearnehough said there doesn’t seem to be much appetite from countries based on what they are saying in public. “But it’s hard to predict what will happen when suddenly the offsets are available and you have an easy option to meet your NDC targets”, he added.

The credits may gain more interest from polluting companies. Banks, airlines and industrial heavyweights keep buying large volumes of questionable renewable energy offsets despite the known concerns, a Bloomberg investigation found. Dressing them up with the UN stamp of approval may add to the appeal.

Carbon Market Watch’s Crook believes much will depend on the transparency of the system – something still largely unknown. “If there is a very transparent register disclosing who purchased how many credits and for what purpose, that would disincentivize companies from transacting low-quality credits out of reputational fears,” he said. “But if it isn’t transparent, buyers may not be as careful with due diligence or may be even encouraged to buy bad credits since there won’t be scrutiny”.

A previous version of this article stated that projects requesting transition could provide 700 million tonnes of credits until 2035, while the correct figure is 1.4 billion tonnes. That was due to a computational error in the model used by NewClimate Institute for their analysis of which we were informed after publication.

The post Junk offset sellers push to enter new UN carbon market appeared first on Climate Home News.

Talks over Article 6.2 of the Paris Agreement – allowing for bilateral deals – collapsed in Dubai following a bitter fight over integrity between the European Union and the United States.

But willing countries can still move ahead with agreements in a vacuum that is increasingly being filled by independent certifiers from the voluntary market. Some observers are raising questions on whether they are fit for purpose.

Transatlantic fight

When the EU led a push at Cop28 for tighter controls over the bilateral exchange of carbon credits, one of its main goals was to restrict the role of operators from the voluntary carbon market.

In the year leading up to the summit, criticism of the market, which sells offsets mainly to corporate emitters, intensified. The climate credentials and the social and environmental integrity of several of its projects were being questioned. The nascent mechanism should draw a blank slate – the EU argued – and rely on a new standard directly supervised by the UN.

US Climate envoy John Kerry is a major proponent of carbon markets. Photo: COP28 / Christophe Viseux

The US went into the talks with a polar opposite vision. It wanted a light-touch approach built on the existing voluntary standards, accepting their requirements and using their infrastructure, according to a leaked EU memo prepared before Cop28 and first reported by The Lever.

The two forces clashed during deeply divisive marathon negotiations in Dubai, failing to find common ground. “Views have become more polarised,” said Pedro Martins Barata, an expert at EDF and a former carbon markets negotiator. “There’s more dissent on an almost philosophical level on what carbon markets should be like.”

After no deal

As the summit drew to a close, the Cop presidency put a ‘take it or leave it’ text on the table. It contained provisions the EU and other groups found unacceptable and was roundly rejected. Negotiators will try again to land a deal at Cop29 next year.

In the meantime, countries can still go ahead with bilateral deals under an initial rulebook agreed two years ago in Glasgow. “Nothing that happened in Dubai prevents countries from moving forward and some will certainly do so,” said Martins Barata.

Switzerland is developing projects with Ghana, Thailand and Vanuatu that will help achieve its climate goals. Singapore inked a similar deal with Papua New Guinea during the summit.

How Russia won a ‘dangerous loophole’ for fossil gas at Cop28

The political stalemate has opened up a big opportunity for players from the voluntary market. They are expected to take a leading role in filling the regulatory gap, experts told Climate Home.

“If a voluntary standard or its projects are given preference by certain countries, it will be a significant stamp of approval and could generate lots of investment,” said Jonathan Crook from Carbon Market Watch.

Voluntary market eyes opportunity

Some are wasting no time. Singapore, a pioneer in bilateral offsets, is partnering up with Verra and Gold Standard, the leading carbon credit registers. Their goal is to create a “playbook” with rules and procedures for countries to use existing carbon credit programs to achieve their climate plans under Article 6.

Hugh Salway, a senior director at Gold Standard, sees an important role for existing operators to speed up the implementation of deals. “A government can create its standard which would take time to develop and would be complicated to maintain,” he told Climate Home. “Or it can use our standard which is already set up with rules, methodologies, and auditors.”

‘Car without wheels’: Adaptation playbook lacks finance target

Another register, the Qatar-based Global Carbon Council (GCC), is also working with a series of credits-producing countries, including Oman and Ghana. They are looking to sell article 6.2 offsets in a first-of-its-kind auction at the beginning of 2024.

“We have been doing this for years, we have the necessary capacity to make it work,” said Kishor Rajhansa, chief operating officer of GCC. Limiting the role of the private sector “would kill off the potential of article 6.2,” he added in an interview at Cop28.

Integrity concerns raised

But some observers are concerned by an outsized influence of existing standards given their chequered record.

Some flagship projects certified by Verra have come under fire for making exaggerated climate claims and for causing alleged environmental and human rights violations. The GCC has been accused of breathing new life into offsets that hardly make any difference to global emissions and would not be accepted anywhere else.

Using voluntary market systems “may simplify things, but it raises many questions about how suitable it is, both for countries and the climate, given all the issues that have been flagged,” said Carbon Market Watch’s Crook.

This article was updated on 20/12/24 to add that the leaked EU memo was first reported on by The Lever.

The post Countries go ahead with carbon deals despite Cop28 standoff appeared first on Climate Home News.

Countries failed to agree on key rules to trade offsets bilaterally and to kickstart a long-awaited global UN-sanctioned market.

Two opposing, and ultimately irreconcilable, forces fueled tense marathon negotiations regularly stretching into the early hours. Getting the system up and running as quickly as possible, on one hand, while ensuring integrity and transparency on the other.

The US championed what observers described as a “light-touch, no-frills” approach to regulations. That would hand a prominent role to private sector players from the much-criticised voluntary market.

A bloc led by the EU along with African and Latin American states pushed back. They wanted stronger checks and balances and a loosening of confidentiality clauses that could have prevented scrutiny.

The risk many highlighted is that, with a weak framework, the new mechanism could become a dumping ground for junk credits.

After late-night informal negotiations tried to salvage a deal, the presidency put “take it or leave it” text on the table. It contained confidentiality provisions many found unacceptable and was roundly rejected. Negotiators will try again to land a deal at Cop29 next year.

Markets in limbo

The collapse leaves bilateral deals in limbo. Several countries have struck preliminary deals to buy carbon credits from others to meet their emissions targets. Switzerland signed its first such agreement with Peru back in 2020, while Singapore inked a deal with Papua New Guinea on Friday.

Controversial Emirati startup Blue Carbon is also aiming to trade credits under the mechanism from several African and Caribbean nations.

The breakdown in talks also sends rule-makers for a new global carbon market back to the drawing board.

Over 12 months and several meetings, a technical body had drafted rules on methodologies underpinning projects and on the eligibility of removal activities. But countries did not adopt the body’s recommendations.

“Trading carbon credits requires strong environmental and human rights guardrails,” said Gilles Dufrasne, policy lead at Carbon Market Watch. “The text on the table just didn’t provide this. It would have risked reproducing the mistakes of voluntary carbon markets, and by rejecting it, negotiators made the best out of a bad situation.”

Mark Kenber, executive director of the Voluntary Carbon Market Integrity initiative, said the lack of agreement would make it harder to achieve the goals of the Paris Agreement.

“For the market to fully develop in the next two years as the UN and governments have called for, policymakers can draw on the foundational work of the VCMI and IC-VCM to accelerate the transparency and integrity agenda, developing high-integrity VCM and Article 6 markets that deliver the finance that makes ambitious global action possible,” he said in an emailed statement.

Non-market tussle

Nor was significant progress made on non-market approaches to cross-border cooperation that don’t involve an exchange of carbon credits.

Bolivia lamented the lack of attention given to these tools and threatened to impose a moratorium on market mechanisms if that was not rebalanced. Developing countries also fought back against attempts by the European Union to include carbon taxes and levies among non-market activities, observers said.

On this item, there was a procedural outcome “encouraging” countries to continue work on identifying non-market approaches.

The post Carbon credits talks collapse at Cop28 over integrity concerns appeared first on Climate Home News.

The Paris Agreement establishes ways for countries to “voluntarily cooperate” to meet their climate targets by allowing emission reductions and removals to be traded.

In Dubai, negotiators will finalise the architecture of a new mechanism allowing countries to sell offsets to other governments, companies and individuals under Article 6.4.

It comes at a pivotal time. The voluntary carbon market has faced more intense scrutiny than ever this year with report after report casting doubt over its integrity. But for many, carbon credits remain a valuable tool to channel much-needed finance to developing countries.

The stakes are high for the new system to get it right and correct problems with existing systems. We outline four critical questions for the outcome from Dubai.

Which activities are eligible?

Deciding which activities can produce credits is an important and fraught question.

If the criteria are too restrictive, countries may struggle to obtain any meaningful financial support from the mechanism. Too broad and projects with questionable climate credentials, or other significant environmental and social concerns, will undermine their credibility.

Over the last year, the UN’s Article 6.4 supervisory body has been evaluating the eligibility of carbon removals: activities that take carbon dioxide out of the atmosphere and store it. These can be nature-based, such as planting trees, or engineering-based, like machines to suck CO2.

A Direct Air Capture (DAC) plant operated by Climeworks in Iceland. Photo: Climeworks

Tensions emerged last May when an internal briefing note drafted by the UNFCCC secretariat advised against including technological solutions describing them as “unproven” and potentially risky.

While the supervisory body distanced itself from the document, it angered the industry which responded by flooding the consultation process with submissions putting their case forward.

It worked. The final recommendations, agreed upon after several extended meetings, do not directly encourage or discriminate against any type of activity.

Ministers still need to approve the package in Dubai. While a broad agreement is expected, certain groups may still have issues with it.

Papua New Guinea, representing the Coalition for Rainforest Nations, could be a blocker. It has long argued that credits issued for forest conservation under the Redd+ framework should automatically qualify for the new mechanism.

Most countries and experts disagree. “The intention of the Redd+ framework was never to generate credits”, says Pedro Martins Barata, a carbon markets expert at EDF and a former negotiator. “That mechanism is much less stringent. They should go through the same process of methodology submission and independent evaluation as all the other activities.”

Are the reductions additional and permanent?

As credits are used by governments or companies to compensate for their polluting activities, each unit must represent a real emission reduction. This has been a fundamental and long-standing issue with many carbon offsetting projects.

Among other things, rules need to make sure the activities would have not happened anyways without the carbon finance (additionality) and that any CO2 removed does not re-enter the atmosphere in a short amount of time (permanence).

The Supervisory Body has tackled those policy issues in the recommendations sent to Cop28 for approval.

On additionality, the document says that projects will have to take into account all relevant legislation and produce a detailed analysis of investment barriers to demonstrate that emission-cutting activities would have not occurred without the mechanism.

Experts told Climate Home these provisions should be stringent enough.

A community ranger standing in a mangrove forest restored as part of a nature protection project in Kenya. Photo: Anthony Ochieng / Climate Visuals Countdown

On permanence, concerns have been raised.

“The text leaves open the question of for how many years a credit is guaranteed to correspond to an actual removal without giving specific thresholds,” says Martins Barata, adding this should be established in further work.

Another contentious point is the possibility of relieving project developers of the duty to carry out permanence monitoring after they stop issuing credits. The risk is that, for example, protected trees could burn in a fire unleashing the stored carbon into the atmosphere.

The recommendations indicate this exemption can apply when a “negligible” risk of the emission removals being reversed is demonstrated.

Jonathan Crook of Carbon Market Watch argued the text could be tightened. “How do you define negligible risk? What sources will be accepted as evidence? These are all open questions that may cause potential issues,” he added.

What happens if a country wants to take back credits?

Article 6 has a provision to ensure that emission reduction activities are not counted twice, by both the seller and buyer, towards their respective climate plans. When a country transfers a credit to a government or a company it needs to deduct that from its greenhouse gas inventory.

As a result, countries need to strike a balance between attracting revenues and being able to meet their own climate plans.

But a contested rule could give struggling governments a way out. In Dubai, negotiators will be discussing whether countries may be allowed to withdraw any credits that have been previously authorised. This could also apply in cases where the projects are causing environmental and human rights violations.

Carbon Market Watch’s Crook said this provision poses a substantial threat. “If a country can revoke credits that have already been traded, and potentially used, then you have a serious risk of double counting,” he told Climate Home. “If revocations are allowed, at the very least they shouldn’t apply to credits already sold.”

Will the new market rescue the reputation of carbon credits?

A lot is riding on the Article 6.4 mechanism because of the impact it can have on the wider carbon offsetting world.

Crook said it needs to set a “high bar”, sending a strong message to the voluntary market that there needs to be improvements.

The new mechanism is set to include some positive elements that currently don’t exist in carbon markets used by corporations.

Already agreed rules have established that 2% of any credits traded in the new market will be automatically cancelled. This means that offsetting will not just be a zero-sum game, shifting emissions cuts from one place to another.

But when it comes to individual projects, experts said it was too early to say if they will have high integrity.

“You can have the best rules but it all comes down to implementation,” said Martins Barata. “They’re off to a good start. But come back to me when they start approving projects”.

If the recommendations are approved in Dubai, the new mechanism may start issuing credits towards the end of 2024.

Paradoxically, the first batch of credits to be traded may pose some of the biggest integrity risks. A process to transition credits created under the Clean Development Mechanism (CDM), the now-defunct UN carbon market established through the Kyoto Protocol, into the new mechanism is well underway.

CDM credits have been widely criticised for failing to contribute to real emissions reductions and causing human rights violations.

The post Four questions for Cop28 to settle about a global carbon market appeared first on Climate Home News.

How to mobilise climate finance and agree rules for a global carbon market were two of the main items on the agenda at the Petersberg Climate Dialogue, hosted by Germany and the UK. Neither yielded quick results.

Around 40 ministers participated in the online summit which is held every year to boost political cooperation in parallel with formal climate negotiations. Campaigners hoped Angela Merkel would use the summit to cement her climate legacy before stepping down as chancellor in September with a doubling of Germany’s climate finance pledge over the next five years.

The German chancellor launched the first-ever Petersberg summit 12 years ago and oversaw the first UN climate talks in Berlin in 1995, while she was environment minister. 

While her government announced stronger emissions targets for 2030, 2040 and 2045 ahead of the dialogue, Merkel deferred the decision on finance targets.

In the closing session, Cop26 president designate Alok Sharma called on Germany and other members of the G7 group to bring enhanced financial commitments to the leaders’ summit of rich nations in June.

Get climate news in your inbox: Subscribe to our weekly or daily newsletter

UK prime minister Boris Johnson reportedly urged Merkel ahead of the meeting to raise Germany’s contribution. Instead, she told ministers at the summit that Germany’s current pledge was a “fair amount and fair contribution”.

She added discussions over new finance pledges should be held during the Cop26 climate talks hosted by the UK in November, shifting the responsibility of scaling up Germany’s commitment onto the next government.

Johnson’s leverage was limited by the fact Germany has already delivered its 2020 climate pledge, David Ryfisch, who leads the international climate policy team at GermanWatch, told Climate Home News.

Until now, Germany’s annual climate finance contribution has been significantly higher than the UK’s, mobilising €4.3 billion ($5.2bn) in public finance in 2019 alone. In contrast, the UK spent £4.1bn ($5.7bn) in public finance between 2012 and 2020. In 2019, the UK said it would double its commitment to mobilise £11.6 billion in public and private finance for the period 2020-2025.

Internal dynamics in the German coalition government played a bigger role in Merkel’s decision not to increase climate finance than her relationship with the UK, Jennifer Tollmann, policy advisor at think tank E3G, told Climate Home.

It was “a wasted opportunity for Angela Merkel to show climate leadership in supporting international partners,” she said.

Merkel’s conservative CDU party and its junior coalition partner the Social Democrats were more likely to want “to save the win for coalition negotiations” following the election in September, she added.

Tollmann described the decision as “very short-sighted” for the CDU, which is trying to green its image in response to the electoral threat from the Green Party, and the opposition Social Democrats, who made international solidarity a cornerstone of their election manifesto.

Meet the Indian climate experts desperately trying to save lives from Covid-19

Besides climate finance, ministers were aiming to make progress on contentious discussions to establish the rules of a global carbon market, also known as Article 6 of the Paris Agreement. 

Deep divisions remain on the design of the market because of concerns of double counting and countries carrying over surplus credits from the previous trading scheme, established under the Kyoto Protocol.

Participated at the Petersberg climate dialogue XII ministerial session. Discussed critical issues of adaptation and Article 6. Looking forward to successful COP26 pic.twitter.com/efBL7GmIyG

— Foreign Minister of Bhutan (@FMBhutan) May 6, 2021

Asked by Climate Home whether leaders had found a political compromise on some of the outstanding issues, Sharma said: “No, at this session in Petersberg we have not reached a consensus.” 

Sharma said that he has instructed the environment ministers of Singapore and Japan, Grace Fu and Shinjiro Koizumi, to lead on Article 6 negotiations ahead of Cop26.

“Our ambition is that we close off all outstanding items in the Paris rulebook. There is a willingness for us to achieve that but clearly there are some hard miles to be put in to make sure that is possible,” Sharma said.

One of the things I stressed was the importance of agreeing to Article 6 of the Paris Agreement for the success of #COP26. #pcd12 #ClimateAction pic.twitter.com/Go61TMdty4

— Shinjiro Koizumi (@shinjirokoiz) May 6, 2021

Campaigners told Climate Home the San Jose principles, which were drawn up at the climate talks in Madrid in 2019, should be a starting point for negotiations. This would rule out double counting and the use of old credits from the Kyoto Protocol era. 

“The San José Principles have to constitute the minimum baseline to ensure environmental integrity,” said Ryfisch, of GermanWatch. 

Asian Development Bank plans exit from coal finance

Brazil, China and India, all want to trade their old credits from the Kyoto era on the new market, to protect the value of previous investments. 

Gilles Dufrasne, policy officer at Carbon Market Watch, told Climate Home the exclusion of old credits in the new system should be non-negotiable. 

“We don’t want a deal at any cost. Either we get good rules which close all the loopholes. Or we don’t have rules. It’s not great because we have a market that is completely unregulated but it is better than coming up with some half baked deal,” he said.

“It’s not about finding a compromise and getting to a deal where everyone is happy. It’s about making sure that countries such as Brazil change their minds.” 

The post Merkel ‘wasted opportunity’ to show international solidarity at climate summit appeared first on Climate Home News.

In an updated climate plan submitted to the UN this month, Cuba says it “intends to use cooperative approaches that involve the use of mitigation results of international transfer” under Article 6 of the Paris Agreement.

An international carbon market to put Article 6 into practice is still under negotiation. It would allow countries to sell any over-achievement of their emissions reductions targets, for other countries or corporations to count towards their carbon-cutting commitments.

This concept has long been controversial, particularly with left-wing governments allied to Cuba like Venezuela and Bolivia. They prefer “non-market measures”.

Some green campaigners argue carbon trading is a distraction from reducing emissions and could encourage countries to set low reduction targets in order to sell more credits.

Gilles Dufrasne, a policy officer at Carbon Market Watch, told Climate Home that carbon markets “leave the door open for big polluters to continue business as usual”.

The scheme’s supporters though say it incentivises countries, especially poorer ones, to make deeper emissions reductions.

Carbon trading rules meet socialist sticking point

Emily Morris, a Cuba expert at University College London, told Climate Home that Cuba’s statement on Article 6 was “ambiguous”. The Cuban environment ministry did not respond to repeated requests for clarification.

“My guess is that this should not be read as an intention to participate in the carbon credits market as currently proposed,” Morris said, “but rather as a statement that, if and when the question of the responsibility for financing climate change is resolved through a ‘satisfactory covenant’, Cuba would participate, as net recipient of such transfers.”

Morris added that Cuba is restructuring its economy and reviewing its relationships with international finance. While Cuba is committed to reducing carbon emissions, she said, it is also insistent that the richest and most polluting countries should pay the poorer countries (like Cuba), which are suffering most from climate change.

Kelly Levin is an expert in tracking climate action from the World Resources Institute. She told Climate Home that Cuba was one of many vulnerable countries interested in Article 6 – although they would wait and see how it is negotiated before committing.

“Article 6 has the potential to be able to finance mitigation if it is done well but we also need to ensure that it’s done in a way that has environmental integrity and avoids double-counting and strengthens ambition and commitments over time,” Levin said.

In its climate plan, Cuba admitted it doesn’t have a measurement, reporting and verification system in place in line with the Paris Agreement, but said this is an “objective” it is working on. Levin said that such a system is vital if Cuba is to trade carbon credits, although there is some flexibility for small island developing states.

Delay to climate talks deepens uncertainty over carbon markets

An international carbon trading scheme called the Clean Development Mechanism (CDM) was set up under the 1997 Kyoto Protocol. It lost momentum when the European Union stopped buying credits, making them worth a lot less. Levin said the Kyoto scheme only benefitted a few countries while leaving vulnerable countries behind.

Cuba has two projects registered under the CDM in 2007 and 2009, to upgrade a gas-fired power station to more efficient turbines and capture methane from landfill sites, respectively.

Negotiations on a new scheme have been held up by disagreement on how to implement it so as to avoid double-counting. This is when a nation counts an emission reduction towards its own climate pledge but also sells a carbon credit so another country can count it towards its emissions target.

After coronavirus delayed further talks, any scheme will not be agreed until December 2021 at the earliest, when the UK hosts Cop26 in Glasgow.

Cuba’s Article 6 comment came in its updated nationally determined contribution (NDC) to the Paris Agreement, which all signatories are due to submit by the end of 2020. Cuba’s previous plan covered only the energy sector but now it has added goals for agriculture, transportation and forestry.

This move was welcome by Patricia Espinosa, executive secretary of the UNFCC. She tweeted that she was “glad to see [Cuba’s] commitment in expanding [its] mitigation goals by including agriculture, transportation and forestry sectors in addition to renewable energy and energy efficiency.”

Thank you Cuba for submitting updated #NDC to @UNFCCC. Glad to see your commitment in expanding your mitigation goals by including agriculture, transportation and forestry sectors in addition to renewable energy and energy efficiency #ClimateAction #ParisAgreementGoals

— Patricia Espinosa C. (@PEspinosaC) September 18, 2020

Manuel Carmona Yebra, a policy officer at the European Commission’s directorate general for climate said it was “excellent news”.

On transport, Cuba aims to reduce fossil fuel consumption by land vehicles by 50% by 2030. The country’s rail network is old, slow and unreliable and is being improved by Russian and Chinese investment.

The government plans to increase forest coverage to 33% of total land area by 2030 which it says will remove 170m tons of CO2. According to the World Bank, forest coverage was 31% when last measured in 2016.

In agriculture, it aims to treat 100% of waste water from the pig farming sector. Pig manure emits greenhouse gases but filtration and treatment can reduce the emission level.

Climate news in your inbox? Sign up here

Cuba reaffirmed a target to increase renewables from 4% of the country’s electricity generation mix (mainly biofuels) to 24% by 2030. Morris said this was less ambitious than Caribbean neighbours like Belize, Jamaica and the Dominican Republic. “Moreover, the Cuban target refers only to electricity generation, rather than to total energy, and therefore excludes the use of hydrocarbons for transport, which accounts for a quarter of total energy consumption globally,” she said.

According to the International Energy Agency, over 70% of Cuba’s total energy comes from oil products – most of which is imported. The country’s socialist government has traditionally imported oil from its ideological allies, first from the Soviet Union and then from Venezuela and Mexico.

Morris said that Cuba has a “very strong economic imperative” to shift from fossil fuels to domestic renewables as fuel imports account for a “major share”, around 30%, of its total import spending. “Not only does this represent a heavy burden for a foreign exchange-constrained economy, but it also generates vulnerability to economic crisis, due to the volatility of international oil prices” and “leaves Cuba exposed to supply interruptions”, she said.

According to the International Renewable Energy Agency (Irena), one barrier to achieving this “ambitious” goal is a lack of finance. “With the government’s renewable energy investment goal of $3.5 billion, foreign investment in the small island state is critical,” Irena said.

Could Cuban detente bring a new energy dawn?

Cuba used its climate plan as a chance to attack Donald Trump’s “intensification” of the US’s long-running blockade of Cuba. They said this was the “main obstacle to the achievement of major progress when facing climate change and national development” and a “fundamental barrier for Cuba to access international financial resources, supplies and technologies”.

Morris said that most sources of finance were obstructed by US sanctions, but “progress in developing programs to gain access to those limited international climate funds that are not blocked by US sanctions or mobilise domestic sources for investment in renewables has so far been weak”.

Cuba made a similar attack on the blockade when submitting its original climate plan in 2015 – although they recognised then-president Barack Obama’s “limited measures” to relax the embargo. Democratic candidate Joe Biden has pledged to re-instate Obama’s relaxations if elected US president in November.

This article was amended to note that Cuba participated in the CDM.

The post Despite socialist scepticism, Cuba shows interest in carbon trading appeared first on Climate Home News.