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Carbon Market Watch Newsletter – May 2021

Time to tackle the thorny issues at UN carbon market talks 

Next week, UN negotiators continue the talks on the Paris Agreement’s Article 6 which lays the foundation for future global carbon markets. It is the last open element of the so-called Paris Rulebook to implement the global climate deal. Political leaders have failed to agree on the rules at two previous UN climate summits and it’s unlikely that the remaining thorny issues will be solved during June’s technical discussions. Still, one should hope for some progress ahead of COP26 in Glasgow at the end of the year to finally get robust rules in place for global carbon trading. For the UN carbon market to deliver real climate action, it is paramount that the rules exclude old (junk) carbon credits, avoid double counting of emission reductions and go beyond simply offsetting pollution. And climate action is not “real” unless it promotes human rights and upholds the rights of local communities.

The International Energy Agency made headlines this month with its call for an immediate stop to investments in and production of fossil fuels. The “Net Zero by 2050” report details more than 400 sectoral and technology milestones to guide governments climate policymaking. The report is in many ways groundbreaking. But when it comes to heavy industry decarbonisation, it relies too much on the future use of unproven technologies like carbon capture and storage. There are measures that can be deployed today to reduce industrial carbon pollution. They include increasing energy savings, scaling up the use of renewable energy and applying circular economy models. An adequate carbon price would incentivise companies to deploy already existing clean technologies.

Finally, while major banks have also started making grand climate pledges, their investments in fossil fuels continue to increase. No wonder, as massive fossil fuel subsidies – that for example the G7 governments have pledged to phase out – still keep the polluting energy sources artificially profitable. Therefore, at least part of the answer to how to stop the private financing of climate chaos also lies with governments: An end to fossil fuel subsidies and internal carbon price for banks would help direct investments into a clean transition to a climate-safe future.

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