The 27th United Nations-backed international negotiations on how to address the climate crisis, ended over the weekend without taking necessary steps to clarify issues with voluntary carbon markets -- one of the most widely used tools to address global warming.
Some independent analysts and watchdog organizations criticized the negotiations for leaving agreements in place that allow governments to declare information related to their emissions mitigation efforts as confidential.
Carbon pollution needs to be reduced by 50% over the next eight years to keep temperatures from rising more than 1.5ºC. Unfortunately, if countries maintain their current rate of emissions, that number could hit 3ºC by 2050 -- a result that would be catastrophic for much of the world, according to the researchers at Carbon Market Watch.
“Instead of agreeing on carbon markets with exemplary transparency, robust governance, and stringent accounting provisions, governments did not rule out arbitrary secrecy and weak oversight,” said CMW’s Policy Director Sam Van den plas. “The carbon market spirit of Glasgow turned into the offsetting ghost of Sharm-el-Sheikh, which risks haunting effective climate action for years to come.”
The chief concern for these outside observers at Carbon Market Watch is changes to the rules governing what nations have to disclose around their greenhouse gas emissions and what information is considered confidential. Activists worry that countries may seek to make increasing amounts of information confidential if they fail to live up to their goals for cutting carbon dioxide and methane pollution. “Rather than clarifying the ambiguity surrounding conditions for ‘confidentiality’ in country-to-country carbon credit trades, the poor outcome at Sharm el-Sheikh failed to establish any meaningful guardrails,” said Jonathan Crook, a CMW expert on global carbon markets. “This transparency loophole risks being exploited by countries seeking to shroud their emission trades in secrecy. If a country wants to be clandestine about their engagement in Article 6.2 bilateral agreements and carbon credit trades, they now have a free pass to do so.”
Still, the overall negotiations did produce some rule-making that could make carbon markets operate more efficiently.
One major criticism of the ways carbon dioxide offset markets work today is around double-counting. Currently it's possible for a corporation to buy offsets projects like planting forest regions or protecting natural habitats as a way to "balance" the increased emissions or existing emissions in their current operations.
It's what companies are doing when they refer to having a "net zero" strategy.
In many instances, countries were using those same projects as an example of how they're reducing the carbon dioxide emissions associated with the national carbon footprint.
In an effort to reduce this double counting, the new United Nations guidelines established what's called a “mitigation contribution” unit. It's an offset mechanism that's not directly recognized as a sale of an emission reduction by a country, which means the nation can't count it towards its own emissions reductions goals or vice versa. “COP27 has given an official status to the concept of a ‘contribution’ to climate action. This is a real alternative to using carbon credits to offset emissions. This decision is a clear signal that when emission reductions are counted by a country, they should not also be claimed by a company through the purchase of a carbon credit.” said Gilles Dufrasne, CMW’s lead on global carbon markets. “Companies could frame their purchase of these credits as contributions to domestic mitigation, but must not make misleading offset claims.”
One area where more work still needs to be done, is in categorizing the emerging offset mechanisms including carbon capture and storage and carbon capture and utilization.
Venture capital firms, big oil companies and state owned energy companies are investing billions of dollars into carbon projects -- and with differing levels of commitment to actually reducing total emissions associated with fossil fuel use and production. “Creating carbon credits from removal activities is a major risk, and it is not surprising that the body tasked with providing guidance on this failed to do so in the few weeks they had to work on the issue,” noted Dufrasne. “It is a wise decision to take a step back and rework the proposed text. Had it been adopted, it would have opened the door to the unbridled creation of dodgy carbon credits from removal activities that might not create any removals at all. The work on this is only starting, and there will be many hurdles to overcome before any activity can credibly generate carbon removal credits under the UNFCCC.”