Carbon markets seek boost at Cop 27

Carbon market supporters are hopeful the upcoming UN climate talks in Egypt will result in tangible progress toward setting up global emissions trading under the Paris climate agreement.

The Cop 27 meeting is likely to put less of an emphasis on the carbon market discussions as compared with previous Cops, particularly last year's session in Glasgow, where countries agreed to the "rulebook" for Article 6 of the Paris climate agreement, which address the use of emissions trading.

"There it will be a very different Cop for markets than past years. But it will be a very different Cop in general," International Emissions Trading Association (IETA) international policy director Andrea Bonzanni said today during an IETA webinar to preview the talks in Sharm el-Sheikh, which are scheduled to run from 6-18 November.

Egyptian officials are putting a heavy emphasis on implementation of the mitigation and finance pledges countries have made at past talks. Nonetheless, the Cop will still play a key role in advancing the role of carbon trading in reaching the Paris agreement's goals.

The top market-related issues at the talks this year are advancing rules around crediting for emissions reductions under Article 6.4 of the Paris climate agreement, which replaces the Kyoto Protocol's Clean Development Mechanism, and the overall accounting framework for global credit trading under Article 6.2. The latest draft texts to be used at the Cop, released last week, showed there may already be broad agreement on key issues.

For both 6.2 and 6.4 there were few inclusions of bracketed text, which in the UN process are used to propose various alternative wordings for contentious issues.

"That means there is at least a general agreement on what the text should include" Bonzanni said, adding he would be surprised if that is truly the case at this stage.

Some of the key issues include whether countries will be able to modify their authorizations for issuing credits under and how to treat trading of "non-authorized" credits, although it would only affect credits specifically issued under the new Article 6.4 mechanism and not credits from other standards, Bonzanni said.

However, despite the apparent relative lack of disagreement around the Article 6, other factors could slow progress.

First the advisory body set up for Article 6.4 only met for the first time this summer, which has limited its ability to tackle a "huge work program," said Amy Merrill, senior counsel at Climate Asset Management and co-chair of IETA's international working group.

In addition, lack of progress in other issues at the Cop, such as loss and damage, could become a "wrecking ball" used to hold up other discussions, including those around Article 6.

"That could sour the whole Cop very easily," said Merrill, who previously served as a lead negotiator on Article 6 for the UNFCCC.

IETA members remain hopeful of a positive outcome in Sharm el-Sheikh, given that progress that has been made to implement Article 6 and the fact that the vast majority of countries have signaled their support for using carbon markets to meet the Paris agreement goals.

"We think these are very very encouraging signs," said Malek Al-Chalabi, senior carbon pricing policy adviser at Shell and co-chair of the IETA international working group.

By Michael Ball