Since the early years of the UN climate talks, governments responsible for needing to make the deepest emissions cuts have repeatedly attempted to divert this responsibility. They have done so in several faulty and flawed ways: by creating and advocating for “market mechanisms” to trade units of carbon, by incorporating carbon capture technologies into emissions reductions plans, and by advocating for “techno-fixes” including dangerous and untested geoengineering technologies. 

The underlying feature of all of these is the principle of offsetting – outsourcing emissions to elsewhere or trading credits to buy permission to emit. Sort of like the indulgences of the 12th century Catholic Church. 

Offsetting emissions through market mechanisms is the antithesis to a true climate response from the global community, and from industrialized countries in particular. The science is clear: keeping warming below 1.5 degrees Celsius will require strong emissions cuts, beginning in the developed world, which needs to achieve actual zero emissions as soon as possible. Mechanisms that rely on offsetting delay meaningful action and don’t address the fundamental gap between the 1.5 degree target and countries’ weak progress in emissions reductions. 

Furthermore, these mechanisms are rife with loopholes and often allow polluters to increase their emissions and profit from participating in such schemes, all while claiming the false banner of climate leadership. More recently, so called ‘Nature Based Solutions’ have formed the battleground in the fight to extend the concept of commodification of carbon to all ecosystems, with soil carbon, biodiversity and other values being measured and commodified.

What is a carbon market?

A carbon market is a scheme that views atmospheric space in “units”. These units are essentially the right to pollute for a price. The assumption of a carbon market is that if polluters are made to pay per unit of emissions, they will be incentivised to invest in alternatives or pollute less. Yet the opposite has proven true.

There's a lot of propaganda being put out to promote false solutions & dangerous distractions like carbon trading, offsetting, and geoengineering. Educate yourselves about their dangers with resources like this: https://t.co/8skM9YfapI #COP25Madrid #COP25

— Demand Climate Justice (@gcdcj) December 3, 2019

For industries and countries with more wealth, carbon markets simply allow them to continue with business as usual while outsourcing their emissions elsewhere. The established market mechanisms, such as the Clean Development Mechanism (below) are riddled with loopholes and have actually resulted in an increase in emissions.

Repeating the same mistakes

The 1997 Kyoto Protocol established the so-called Clean Development Mechanism (CDM), a highly controversial, contested scheme which eventually proved to be ineffective in meeting the targets of the Kyoto Protocol.

The intention of the CDM was to help developed countries meet their emissions reductions targets under the Protocol through the purchase of emissions reductions credits, but the actual result was that some businesses made a lot of money selling “credits” to entities who wanted to pollute more but not have said pollution on their books. The CDM was also widely criticised for harming local people and violating human rights, especially the rights of Indigenous Peoples, as well as failing to actually cut emissions.

For years afterwards, international negotiations on markets usually ended in no agreement between countries, although of course some countries did set up their own domestic markets which they hoped would one day allow for international trading. 

Countries that are strongly in favour of market approaches include the European Union, Japan, New Zealand, Australia, Norway and the US, while countries including Venezuela and Bolivia have strongly resisted such offsetting mechanisms. It is not clear how the recent turmoil will affect Bolivia or whether its “transitional” government will do a u-turn or simply remain silent.

After a frenzied two weeks of negotiations in 2015, Article 6 of the Paris Agreement ended up allowing countries to “choose to pursue voluntary cooperation in the implementation of their nationally-determined contributions (NDCs) to allow for higher ambition in their mitigation and adaptation actions and to promote sustainable development and environmental integrity,” and to engage “on a voluntary basis in cooperative approaches that involve the use of internationally transferred mitigation outcomes (ITMOs)” which can count towards their NDCs so long as they promote sustainable development, avoid double counting and ensure environmental integrity. 

Thus the door was opened to conflate carbon trading and offsetting with “cooperative approaches” to tackling climate change. The reference to “ITMOs” has also opened the door for the establishment of an international carbon market – contentious given the years of debate on this matter never arriving at an agreement, and laden with pitfalls and risks.

The ITMOs also pose the difficult question of whether a country can use such international transfers for anything other than fulfilling its Paris pledge. Can they, for example, be used in the global offsetting scheme under the International Civil Aviation Organisation, known as ‘Carbon Offsetting and Reduction Scheme for International Aviation’ (CORSIA), which is not under the UNFCCC and which could potentially rely on 2.6 billion tonnes of ‘credits’ from supposedly avoided deforestation. 

Similarly, can carbon credits from other schemes outside the Paris Agreement also be traded alongside credits generated in the PA? Such schemes include the reduced emissions from deforestation and forest degradation or REDD+ scheme, also highly criticised for leading to increased emissions and harm to forest communities and indigenous peoples.

Rather than focus on more meaningful, equitable methods of cooperation like technology sharing, capacity building, and finance, Article 6 decided that a “Sustainable Development Mechanism” should be set up. Like the CDM before it, this new market mechanism, if it is established, is likely to fail in delivering emissions reductions targets outlined in countries’ National Determined Contributions under the Paris Agreement.

COP25 and the fate of Article 6

Last year at COP24 in Katowice, the section of the “Paris rulebook” dealing with Article 6 was not agreed and became a major sticking point. The talks nearly collapsed in spectacular fashion as Brazil wanted the certified emission reduction credits (CERs) it had obtained under the Kyoto Protocol’s Clean Development Mechanism to be counted towards its pledge under the Paris Agreement, and refused to accept rules to prevent double-counting. Eventually the formal conclusion was that no agreement could be reached. The same thing happened at the next round of talks in Bonn this June. 

The scene is therefore set for a pressurised round of talks in Madrid, as COP25 is the deadline to conclude this last remaining section of the Paris rulebook. Agreement will be difficult as double counting remains an unresolved issue and wealthy countries such as Australia continue to insist on double-counting their Kyoto credits towards their Paris commitments.

Carbon Market Watch estimates that there are some 20 billion units under the Kyoto mechanisms that could potentially be transferred into the Paris mechanism, rendering the Agreement’s 1.5 degree C goal impossible to achieve. But it gets worse.

[s]ome countries’ Nationally Determined Contributions under the Paris Agreement have low targets which will be easy to over achieve. This means that these countries could potentially create between 18.7 and 28.3 GtCO2e worth of credits – or ‘hot air ’- that they can sell without reducing a single tonne of greenhouse gas emissions.

Market fundamentalists will want to leave Madrid with detailed technical guidelines to allow them to forge ahead with international carbon markets. Many others, notably those who do not stand to profit financially from these market mechanisms, will want only general guidance to try and ensure that if, or when, international markets are established they are regulated and do not threaten human rights or environmental integrity as they have under Kyoto.

Guidance, such as that offered by Carbon Market Watch below, can be quite simple:

1. Only emission reductions that take place after 2020 can be used towards the NDCs
2. Countries that over achieve their targets because they were set below business-as-usual emission levels in the
   first place should not be allowed to transfer these hot air credits to other countries that have adopted more
   stringent targets
3. Countries with hot air in their current NDCs should not be allowed to transfer it to subsequent NDC periods to
   meet future targets
4. Emissions should not be compensated through the use of excessively old credits, representing emissions
   which took place a decade or more earlier

With everything else in the Paris rulebook “package” having been wrapped up, it’s hard to see what exactly the horse trading will be but we can be sure of some.

Real solutions

The only way to reach real zero emissions as quickly as possible is to reject these dangerous distractions outright, and simultaneously for developed countries to embrace meaningful, real solutions to achieve the deep emissions cuts they are responsible for, while unconditionally financing the same in developing countries. There is an abundance of real, feasible, cost effective action across all sectors that can be implemented here and now, many of which will have immediate effect. 

These include things like but not limited to investing in infrastructure of electrified, mass public transit, with free or heavily subsidized fares; rapidly transforming industrial agriculture towards agroecological practices through proper incentives and policies combined with removal of perverse subsidies, and phase out artificial fertilizers; embracing community governed forest conservation; planning for and transforming energy systems away from centralized corporate-controlled fossil fuels and other harmful technologies to clean, safe systems that empower people and communities. 

Article 6.8 of the Paris Agreement provides an opportunity to address the real drivers of emissions by advancing policies and practices via voluntary cooperation among countries that can help deliver deep emissions cuts while advancing equity, environmental protection, and wellbeing. A work programme on how to enhance linkages and create synergy between inter alia, mitigation, adaptation, finance, technology transfer and capacity-building and how to facilitate the implementation and coordination of non-market approaches is under discussion at COP25.

Further reading

Click here to learn more about what carbon markets are and how they work

Click here to learn more about how carbon markets are a threat to people and planet

Click here to learn more about what real international solutions to the crisis look like

Click here to learn more about the nitty gritty of Article 6 negotiations