UN summit edges towards article 6 agreement

  • Market: Emissions
  • 06/26/19

UN negotiators have produced new draft texts for article 6 of the Paris climate agreement, bringing countries closer to agreement on rules that could set up a global carbon market.

Negotiators are meeting in Bonn, Germany, in an attempt to iron out the rules on article 6 ahead of the annual UN climate summit in December (Cop 25), when ministers will sign off on the final texts.

Countries had hoped to finish article 6 at last year's UN climate summit, but decisions were postponed after the issue threatened to derail negotiations in the final hours of the meeting.

Article 6 sets out how carbon markets will function under the Paris agreement, and contains rules that would allow countries to trade emissions reductions. This could provide the foundations for an international carbon market.

The latest texts are still only drafts and contain options that negotiators will need to narrow down, while some issues have not yet been resolved.

New texts are due to be published before the end of the Bonn summit, which concludes tomorrow.

Article 6.2

Article 6.2 contains rules allowing countries to trade emissions reductions — known as Itmos — and count them towards their nationally determined contributions (NDCs) under the Paris agreement.

Negotiators have not yet decided whether countries will be allowed to use Itmos for purposes outside of their NDCs. Failure to allow this would mean credits could not be used for compliance with the UN aviation agency's Corsia scheme for offsetting aviation emissions.

Various methods to avoid "double counting" emissions cuts also remain in the text. Double counting occurs when a single emissions reduction is used for compliance with multiple climate schemes. And negotiators have not yet decided whether Itmos will be measured in tonnes of CO2 equivalent only, or by using other measurements as well.

Article 6.4

The UN will set up a sustainable development mechanism (SDM) to enable CO2 cutting projects to generate emission reduction credits, under article 6.4 of the Paris agreement.

This will replace the Kyoto protocol's clean development mechanism (CDM). A key issue in the negotiations is whether CDM projects, and the emissions reduction credits they have already generated, will be transferred to the new SDM.

The latest 6.4 text includes three options — allowing all CDM projects to transition to the SDM; allowing only CDM projects that meet the 6.4 criteria to transition; or banning CDM projects from transitioning.

Similarly, the text includes three options for the transfer of CDM credits — allowing all CDM credits to be used for compliance with the Paris agreement; only allowing credits issued before 2020 or 2021; or banning all credits from being used for compliance.

The EU and non-governmental organisations have urged the UN to ban pre-2020 credits from being used for compliance.

The first CDM projects were registered in 2001, so some credits represent CO2 cuts achieved nearly two decades ago.

Supply in the certified emissions reduction (CER) market could swell to 4.6bn credits by 2020, according to some estimates. And with CER prices currently around €0.20/t CO2, critics worry that countries will buy large quantities of cheap credits to meet their Paris targets, instead of investing in new projects to cut emissions.

But other parties in the UN talks worry that if CDM credits are not transferred to the new market, the system will not contain enough supply to set up a functioning carbon market. It could take years for SDM projects to start issuing their first credits, meaning the new market could struggle with low liquidity.


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02/22/24

Ship speeds on Red Sea rerouting to 'erode' GHG cuts

Ship speeds on Red Sea rerouting to 'erode' GHG cuts

Edinburgh, 22 February (Argus) — Ships increasing speed as they are forced to sail longer routes to avoid Houthi attacks in the Red Sea could "erode" environmental gains in shipping, the United Nations Conference on Trade and Development (UNCTAD) said today. The shipping sector has for over a decade reduced sailing speeds to cut fuel costs and reduce greenhouse gas (GHG) emissions, UNCTAD said. Speed optimisation is one of the solutions shipowners can consider to improve their rating under the International Maritime Organisation's (IMO) carbon intensity indicator (CII) measures which came into force in January 2023. Container ships' speeds for voyages around the Cape of Good Hope at the southern tip of Africa have increased since the Red Sea disruption started late last year. Container trade flows measured in tonnes account for over half of traffic through the Suez Canal, according to the Suez Canal Authority. Higher speeds are likely being used as a way of adhering to delivery schedules but also to manage fleet capacity, as longer routes mean vessels are employed for a longer period of time. UNCTAD said that these trends could erode environmental gains previously achieved by ships reducing speeds, or slow steaming. The organisation calculated that a ship increasing speed to 16 knots from 14 knots would increase bunker fuel consumption per mile by 31pc. "In this context, longer distances travelled due to rerouting away from the Suez [Canal] and through the Cape of Good Hope imply that greenhouse gas emissions for a round trip from Singapore to northern Europe would rise by over 70pc," it said. Ship tonnage entering the Gulf of Aden declined by over 70pc between the first half of December 2023 and the first half of February 2024, while ships passing the Cape of Good Hope increased by 60pc, UNCTAD noted. The security issues in the Red Sea have also affected insurance costs for shipowners, UNCTAD said. "By early February 2024, some reports indicate [risk] premiums rising to around 0.7pc to 1pc of a vessel's value, from under 0.1pc previously," UNCTAD said, citing a report by ratings agency Moody's. Ships avoiding the Suez Canal, particularly container vessels, also pose a risk to "global supply chains, potentially leading to delayed deliveries, heightened costs and inflation", it said. "The war in Ukraine had already shown the impact of longer distances and freight rates on food prices." UNCTAD estimates that about half of the increase in food prices observed in 2022 resulted from increased transport costs caused by longer distances and higher freight rates. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Australia’s Santos joins OGCI zero methane initiative


02/21/24
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02/21/24

Australia’s Santos joins OGCI zero methane initiative

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Marine fuel global weekly market update


02/20/24
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02/20/24

Marine fuel global weekly market update

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Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Time to turn pledges into plans: Climate leaders


02/20/24
News
02/20/24

Time to turn pledges into plans: Climate leaders

Edinburgh, 20 February (Argus) — The UN climate summit Cop 28 has delivered historic commitments, but pledges need turning into action, with the deadline for parties to submit new climate plans only a year away, energy and climate leaders told delegates at a high-level roundtable hosted by the IEA. "Now is the time for all stakeholders to step up", Cop 28 president Sultan al-Jaber said today, after listing progress made during the summit last year. Almost 200 countries agreed to triple renewable energy capacity by 2030 and transition "away from fossil fuels in energy systems" in a "just, orderly and equitable manner" under the UN Framework Convention on Climate Change's (UNFCCC) first global stocktake. The historic outcome was dubbed the UAE Consensus. Al-Jaber said that all the parties who signed the consensus must start working on new Nationally Determined Contributions (NDCs) — countries' climate plans — and "adopt comprehensive, economy-wide emission reduction targets that cover all greenhouse gases, and are aligned with the science and keep 1.5°C in reach." But he also warned that a balanced approach must be taken. "The energy transition will lead to energy turmoil if we only address the supply side. We must tackle the demand side at the same time," he said. NDCs are submitted every five years, with the next round due in February next year, ahead of Cop 30 in Brazil. "Everybody needs to have a plan," US climate envoy John Kerry said, adding that what has been agreed at Cop 29 must be implemented to avoid disappointment. "How many countries since the Cop 28 decision was made have implemented plans to transition away from fossil fuels," Kerry asked. He said that G20 countries have a key responsibility, reiterating the need for some large countries to move away from coal. "NDCs are key and need to reflect the decision of the consensus including on plans to move away from fossil fuels," Denmark's climate minister Dan Jorgensen said. Brazilian national secretary for climate change Ana Toni said that parties "need to become real in their second NDCs", and need to produce detailed plans, including on investments. She said Brazil was hoping to have the international community and international agencies such as the IEA helping some countries to develop those plans. The IEA said today that ahead of the next round of NDCs the agency has received "several requests" from countries asking for help on data, analysis and policy advice and will offer some support. It will also keep track of all the pledges made during Cop 28 in co-ordination with the UNFCCC. The IEA will also look into new financial mechanisms to support the energy transition, especially in developing countries. "This is where the IEA can play a big role," Jorgensen said. "We need [the IEA's] data and input in regard to the financing question" and also on the "dangers for countries in not choosing the right path". Al-Jaber pointed out that Cop 29 is "mandated" to deliver the NCQG — the new finance goal moving beyond the previous $100bn/yr target. He reiterated that parties need to move from billions to trillions, but also "activate every source of finance, including policies and incentives to attract private capital. Cop 21 president Laurent Fabius agreed that "billions not trillions" will be needed, but said that Azerbaijan might face a difficult task "because time is short and the international situation is not good". "This is the reason why the Troika will be decisive," he said. Toni said one of the missions of the newly formed Cop presidencies Troika — comprising Cop 28, 29 and 30 hosts the UAE, Azerbaijan and Brazil — is to keep the 1.5°C goal on track. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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EU agrees carbon removals framework


02/20/24
News
02/20/24

EU agrees carbon removals framework

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