Carbon Market Watch Newsletter – January 2021

New Year New Climate Momentum

The private-sector task force, led by Mark Carney, has published its roadmap for “scaling up voluntary carbon markets”. More investments in climate action are, of course, more than welcome. But the task force should pay more attention to quality – instead of focusing on quantity. One striking omission in the new report is that it sets no clear restrictions against dubious project types, such as forestry projects that come with severe environmental concerns.

Voluntary markets are already booming but paying someone else to reduce emissions does not equal climate action. Therefore, we propose alternatives for corporate offsetting: Using the existing structures, companies could provide climate finance without claiming that this cancels out their products’ or their activities’ harmful climate impacts. It would make companies’ climate claims more honest and transparent. Furthermore, the emphasis on global carbon markets currently is simply to find the cheapest reductions. In our alternative scenario, companies could finance more expensive high-quality projects that cut emissions and benefit local communities.

While voluntary markets are getting a lot of attention recently, this year will also need to finally see an agreement on the Paris Agreement Article 6 rules that provide the framework for trading between countries. A good deal from the next UN climate summit in Glasgow would also help guide the use of voluntary markets. It is particularly relevant for avoiding the risk of double-counting whereby one emission reduction is used towards multiple climate commitments. Finalising the Paris Rulebook is essential already for the deal’s credibility. However, governments’ most significant political task ahead of COP26 is to put forward high enough climate pledges to set the world on track to keeping global temperature rise below 1.5 degrees.

For its part, Europe has kicked off its climate action super year by asking stakeholders’ views on the upcoming legislative revisions. In this context, the EU Commission seems to want to scrap binding national climate targets, in favour of the EU carbon pricing system. It would be a bad idea, and a petition by a group of NGOs allows everyone to tell the Commission that!