Carbon Market Negotiations Move to High-Level Negotiators

GLASGOW | 8 November 2021 | The draft text on implementing Article 6 of the Paris Agreement has passed from the technical negotiating track to the policy-level negotiating track with the same key issues still unresolved – namely, the role of corresponding adjustments, the fate of old Kyoto credits, and the shares of proceeds from trading markets.

Article 6.2 covers internationally-transferred mitigation outcomes (ITMOs) between countries; Article 6.4 covers the creation of a centralized hub; and Article 6.8 covers non-market mechanisms.

Here are the Saturday afternoon texts that were passed to high-level negotiators:

• Article 6.2
• Article 6.4
• Article 6.8

Share of Proceeds

One area of contention is whether to impose a global transaction tax on cross-border carbon transactions under Article 6 in order to fund general adaptation in developing countries. Such a tax is embedded in Article 6.4, where the disagreement isn’t over whether it should exist but how high it should be. A proposal to implement such a tax on all transactions, however, drew pushback from developed countries, primarily the United States and Europe. They argue that such a tax would be unmanageable, while developing countries have countered it’s no less manageable than is the challenge of tracking emission reductions. One proposal calls for a global registry to not only track trades to prevent double-counting but also to coordinate a transaction tax.

Corresponding Adjustments

While everyone agrees that corresponding adjustments should be required for emission reductions that pass between countries for compliance purposes, there is disagreement over how to handle reduction credits that take place outside a country’s NDC, including in voluntary markets.

Developing countries generally don’t want corresponding adjustments applied to voluntary markets because it means they will be transferring their emission reductions abroad. Developed countries do want them because they see it as a way of avoiding double counting.

Negotiators are exploring the creation of a “bridging mechanism” that will eventually require corresponding adjustments for voluntary markets as well, but the proposals, which are bracketed in the negotiating text, are diverse and often incompatible.

The argument in favor of requiring corresponding adjustments on voluntary transactions centers on concerns with the ways emissions are accounted for with countries, says Chirag Gajjar, who heads the sub-national climate program for the World Resources Institute (WRI) in India.

“It’s a legitimate concern because a lot of countries need capacity building for that,” he said.

Jos Cozijnsen, a longtime Dutch negotiator who now serves as an attorney and consultant to the Climate Neutral Group, disagrees.

“Corresponding adjustments make sense for compliance offsets and for some specific offsets outside NDCs, such as CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation), but not for voluntary transactions,” he says.

He argues that calls for corresponding adjustments on voluntary transactions are a remnant of “old Kyoto rhetoric” and a misunderstanding of the intricacies of carbon accounting on the part of some NGOs and governments.

“Under the Kyoto Protocol, companies looked for offsets that were additional to country budgets, but the Paris Agreement doesn’t have these,” he said.

As we now move to week 2, the discussions will be held mostly at the ministerial level on all major items. The following ministers are assigned to facilitate respective theme, some have already started the work:

1.5°C ambition
Facilitator: Grenada and Denmark

Loss and Damage
Facilitator: Jamaica and Luxembourg

Finance
Facilitator: Sweden and Egypt

Transparency
Facilitator Minister: Antigua & Barbuda and New Zealand

Common Time Frame
Facilitator Ministers: Rwanda and Switzerland

Adaptation
Facilitator Ministers: Maldives and Spain

For a deep dive into the intricacies of Article 6, check out Episode 71 of the Bionic Planet Podcast, available on all podcatchers, including iTunes, TuneIn, and Stitcher, as well as on this device here: