Carbon Market Watch Newsletter – January 2020

The year of climate ambition

Dear friends,

One year from now, the landmark Paris Agreement will have entered into force and before that, governments should have announced higher climate pledges to put the world on track to limit global temperature rise to 1.5 degrees. 2020 has already been dubbed as the year of climate ambition – not the least because, after another year of record-breaking heat, we really have no more time to waste.

The marathon talks at the COP25 in Madrid last month, however, ended without an agreement on global carbon market rules – article 6 of the Paris Agreement. While far from an ideal outcome, the decision to continue negotiating was the only right one. What was on the table at the end of the talks would have presented a real risk for climate action overall. Damaging rules spearheaded by countries such as Brazil and Australia would have allowed claiming the same emission reduction more than once while taking only very timid steps away from offsetting to ensure carbon markets reduce emissions globally. Also references to the need to uphold human rights were dropped from the text which is unacceptable and must be corrected.

The fact that there are no rules, of course, doesn’t mean that there are no carbon markets. It means that the main responsibility to ensure that markets benefit people and the planet now lies with individual governments wanting to buy international offsets.

This outcome also has implications for the International Civil Aviation Organisation (ICAO) and the aviation carbon market CORSIA that kicks off next year as well. In March, ICAO needs to decide which programmes are eligible to sell offsets to airlines under this scheme. The biggest risk directly linked to the UN talks is that in the absence of rules on global markets, (here too) emission reductions can be counted towards multiple climate commitments. This happens if a country where an emission reduction takes place reports it towards its climate target under the Paris Agreement but also sells it to an airline that uses it under CORSIA. In this article, we propose a way forward to ensure that this “double-counting” is avoided.

In Europe, it’s all about the Green Deal and the upcoming EU Climate Law. But what happens at the international level has also significance for the success of this promising climate package. While the EU has banned the use of international offsets by its member states for reaching their climate targets – and must stick to this as it ratchets up its climate ambition – it is through CORSIA that they can find their way into European climate action. Weak or non-existent rules on article 6 could thus undermine the EU’s climate efforts and the Green Deal. It is, therefore, in Europe’s interest to not give in to pressure and demand that the global rules are transparent and robust so that the use of carbon markets furthers climate action, and doesn’t pull the rug from under it.