The climate conference in Glasgow is over and after many high level meetings have taken place, promises have been made and declarations have been proclaimed, it is now the time to take the necessary action. To deliver the desirable future outcome, good actions must now follow. We have observed the events and results of the conference closely and experienced a great deal of positive developments, but also some significant drawbacks. In this blog post we want to elaborate briefly on the relevant developments for the carbon market, especially considering implications for project developers on the voluntary carbon market like us. In this context we looked into some developments in regard to article 6 of the Paris Agreement, the major policy for international carbon markets.
Let’s start with the good news: We happily observed how major countries and institutions increased their investment volume for restoration, community development and nature based climate solutions. One of the most notable efforts in this context may be a 1.7 billion dollar fund, looking especially at the protection of forests through indigenous communities in the tropics. The goal to fully stop deforestation until 2030 was another promise we liked and which was emphasized in unison by all world leaders. However, this one has been made many times before on a national scale and we are not sure if national policies will be implemented in time to reach that goal until the end of this decade. In relation to the carbon market the improved rules for international accounting on emission reductions seem to finally bring more clarity in terms of international trade. The “corresponding adjustments” mechanism, a form of double book keeping, was finally accepted by all countries and players previously opposed, like Brazil, entered in a constructive dialogue this time. In addition, the rusty Clean Development Mechanism is ameliorated through a new concept called “overall mitigation in global emission” (OMGE). This means, on the one hand, that a small share of globally created credits will not be assigned to a seller nor a buyer country, but purely benefit the atmosphere (for a start around 2%). On the other hand this includes new mechanisms to change, review and control the rules of the international carbon market more effectively. Finally, the innovative energy coming from voluntary markets was recognized at various occasions throughout the conference. The often higher standards on the voluntary market were described as crucial to help improve standards on the compliance markets and the necessary inclusion of credits generated on the voluntary market to reach nationally determined contributions was emphasized throughout the event. However, actors have also pointed out the adverse effects of carbon markets and emphatically mentioned that modern carbon markets cannot be used to free fossil fuel companies, financial institutions and emission intensive corporations from changing their business as usual operations. We strongly agree to this position and want to point to a declaration of 170 NGOs stressing the adverse effects carbon markets can have. This makes clear that every project developer in the market has an enormous responsibility to holistically understand all parameters around a project he is implementing and that credit buyers should be well chosen.
Now to the bad news: The CORSIA program, aiming at offsetting all emissions from international flights and probably one of the biggest upcoming demands for carbon credits, constitutes a serious loophole where double counting of credits can be continued. This is mainly due to the inclarity if the program is relevant on state level or airline level. Here further clarity is necessary, especially in relation to which credits, voluntary or compliance, can be used in the context of CORSIA. The saddest outcome from the conference in terms of carbon has been the allowance to use past CDM projects (mainly hydro and wind power) for future crediting periods. This means that clearly non-additional credits, also called “zombie credits” (read more about additionality here) could be flooding the international markets in the future which could discourage the crucial new investments in future projects. Carbon Market Watch called it a “travesty” that will dilute the positive impact. In this context we call on the responsibility of every actor on the market looking to abate his emissions: Buy only additional credits, especially from recent projects focussed on carbon removal! Another result that caused us a slight stomach ache was the idea to find governmentally authorized and non-authorized projects on the voluntary carbon market. Authorized credits could then be used for nationally determined contributions. This could encourage quite some mingling between project developers and politics, a development which we don’t necessarily find recommendable. We would have found an independent body, authorizing credits and projects, the better solution. Ultimately this also raises the question what non-authorized credits can be used for. The Öko-Institut e.V. writes in this context that “governments or courts may start regulating what claims companies can truthfully make in association to carbon credits (…)” (Source). This clearly shows that a big part of the voluntary carbon markets will continue in legislative inclarity. Consequently this means for project developers like us to work with the highest possible transparency and strictly follow the triple bottom line in all our activities until further regulation will probably be implemented throughout the next conferences of the parties.
“[It] will be the job for the civil society to create the norms and for national governments to create the regulations to make sure that those emissions-reduction claims are appropriately accountable.” (Kelly Kizzer, Vice President for Global Climate)
In case you want to discuss the results from COP26, understand more about carbon markets or want to know how you can create a fruitful carbon removal project with us, get in touch!