Negotiators at the COP29 climate change conference in Baku have reached a landmark agreement on rules governing global trade in carbon credits, ending nearly a decade of debate over the controversial system. It put an end to it.
The agreement paves the way for a system in which countries and companies can buy credits to remove or avoid greenhouse gas emissions elsewhere in the world and count those reductions as part of their own climate efforts. It opens.
Some argue that the deal will provide crucial certainty for countries and companies seeking to reach net zero through carbon trading, and will unlock billions of dollars for environmental projects.
However, this rule contains several serious flaws that have not been corrected even after years of debate. That means the system could essentially give countries and companies permission to continue polluting.
COP29 concluded over the weekend, including agreement on rules for global carbon trading. Rafiq Maqbool/AP
What is carbon offset?
Carbon trading is a system in which countries, companies, or other entities buy and sell “credits” or permits that allow buyers to offset the greenhouse gas emissions they produce.
For example, an Australian energy company that burns coal and emits carbon dioxide could, in theory, offset its impact by buying credits from an Indonesian company that removes carbon dioxide by planting trees.
Other carbon removal activities include renewable energy projects and projects that preserve vegetation rather than cut it down.
Carbon trading was controversial as part of the global Paris climate agreement signed in 2015.
The relevant part of the agreement is known as “Article 6”. It sets the rules for a global carbon market overseen by the United Nations and open to companies as well as countries. Article 6 also includes the direct trading of carbon credits between countries, which is operational even though the rules have not yet been finalized.
Carbon trading rules are notoriously complex and difficult to negotiate. However, they are important to ensure that planned greenhouse gas emissions reductions are achieved not just on paper but in reality.
Maintaining vegetation is one way to store carbon. australian parks
long history of debate
Over the past few years, COP annual meetings have made some progress in promoting carbon trading rules.
For example, an independent supervisory body was established at COP26 in Glasgow in 2021. It also had other responsibilities, including recommending standards for carbon removal and methods to guide the issuance, reporting, and monitoring of carbon credits.
However, the recommendation was rejected at the 2022 and 2023 COP meetings, as many countries considered it weak and lacking scientific basis.
At a meeting in October this year, the regulator published its recommendations as an “internal standard”, bypassing the COP’s approval process.
At this year’s COP in Baku, there were widespread claims that due process was not followed as the Azerbaijani host country rushed to adopt standards from the first day.
In the remaining two weeks of the meeting, negotiators worked to further develop the rules. The final decision was adopted over the weekend, but has drawn criticism.
For example, the Climate Land Ambition and Rights Alliance says the rule risks “double counting.” This means that only two carbon credits will be issued for one unit of emissions reduction. They also argue that the rules fail to prevent harm to the community. Damage can occur, for example, if indigenous peoples are prevented from accessing land where afforestation or other carbon storage projects are being carried out.
Carbon trading rules have been controversial at past COP meetings. Anatoly Maltsev/EPA
Understanding carbon dioxide removal
The new agreement, officially known as the Paris Agreement trade mechanism, is fraught with other problems. The most obvious is the details regarding carbon removal.
For example, consider the previous scenario in which an Australian coal-fired power company offsets its emissions by purchasing credits from an Indonesian tree-planting company. To benefit the climate, the carbon stored in trees needs to stay there for as long as the emissions produced by companies burning coal remain in the atmosphere.
However, carbon storage in soils and forests is thought to be temporary. To be considered permanent, carbon must be geologically stored (injected into underground rock formations).
However, the final rules agreed in Baku do not specify a period or minimum standards for “durable” carbon storage.
Temporary carbon removal to land and forests should not be used to offset fossil fuel emissions that remain in the atmosphere for thousands of years. But governments are already relying too heavily on such methods to meet their Paris commitments. Weak new rules will only exacerbate this problem.
To make matters worse, climate warming has intensified droughts and wildfires, so that by 2023, Earth’s forests and soils will have absorbed almost no carbon.
This trend raises questions about plans that rely on these natural systems to capture and store carbon.
Temporary carbon removal to land and forests should not be used to offset fossil fuel emissions. shutter stock
What’s next?
Countries can and do already trade carbon credits under the Paris Agreement. Once the United Nations sets up the register, expected next year, transactions will be centralized under the new scheme.
Under the new regime, Australia will have to exclude the purchase of credits for land-based offsets (such as forests and soil) to offset long-term emissions from the energy and industrial sectors.
Australia should revise its national carbon trading system along similar lines.
We can also set a precedent by establishing a framework that treats carbon removal as a complement to, rather than a substitute for, emissions reductions.
