COP28 text silent on carbon markets

COP28 text silent on carbon markets

Subject : Environment

Section: Climate change

System of Carbon Credits:

• An entity that does an activity that reduces emissions of greenhouse gases (or removals from the atmosphere) is given a ‘credit’ that can be bought by another entity that must reduce emissions — either by law or voluntarily. This way, money flows into climate action.
• COP28 climate talks is silent on carbon credits because the parties could not come to an agreement on Art­icle 6.2 (bilateral trading) and Article 6.4 (carbon markets) of the Paris Agreement.
  • There is a reference to Article 6 .1 (vol­untary cooperation) and Article 6.8 (non market approaches, such as technology transfer), but nothing on Articles 6.2 and 6.4, which are the operative provisions of the Article.
• A vibrant system for trading in carbon credits (or carbon offsets) is a key mechanism for fin­ancing climate action projects.
• The World Bank has estim­ated that carbon credits could reduce the cost of countries’ cli­mate action commitments (Nationally Determined Contributions or NDCs) by about $250 billion by 2030.

Internationally Transferred Mitigation Outcome (ITMO):

• Article 6.2 of the Paris Agreement allows countries to trade in carbon credits with one another through bilateral or multilateral deals. These traded credits are called Internation­ally Transferred Mitigation (ITMO).
• The issue is whether non­govern­ment entities, including the private sector, can buy offsets from a country or not.
  • For example, can the Carbon Offsetting and Reduction Scheme for International Avi­ation (CORSIA), or Google, buy carbon credits from, say, the Indian govern­ment, to offset its own obliga­tions? Such a deal comes under the head Other International Mitigation Purposes (OIMP). ITMOs can be transferred for NDC compliance or for OIMP.
• There are some technical issues such as author­isation of credits and interoper­ability of registries.
• Article 6.4  of Paris Agreement is even more com­plicated, it deals with a market mechanism for trading in carbon credits. Rules need to be set up for measuring baselines and recognising addi­tionality.

CORSIA:

• CORSIA is the first global market-based measure for any sector and represents a cooperative approach that moves away from a “patchwork” of national or regional regulatory initiatives. It offers a harmonized way to reduce emissions from international aviation, minimizing market distortion, while respecting the special circumstances and respective capabilities of ICAO Member States.
• CORSIA complements the other elements of the basket of measures by offsetting the amount of CO₂emissions that cannot be reduced through the use of technological improvements, operational improvements, and sustainable aviation fuels with emissions units from the carbon market.
• CORSIA is applicable only to flights originating from one country to another.

LTAG:

• 41^stICAO Assembly adopted LTAG for international aviation of net-zero carbon emissions by 2050 in support of the UNFCCC Paris Agreement’s temperature goal.
• The LTAG does not attribute specific obligations or commitments in the form of emissions reduction goals to individual States. Instead, it recognizes each State’s special circumstances and respective capabilities e.g., the level of development, maturity of aviation markets.