Under the United Nations Framework Convention on Climate Change (UNFCCC), countries have created international market mechanisms to provide an economic incentive to reduce emissions in countries which (before the Paris Agreement) had no climate target. The next generation of global carbon markets has its foundation in Article 6 of the Paris Agreement.
One of the biggest global carbon market is the UN Clean Development Mechanism (CDM), which was set up under the Kyoto Protocol. The idea was that rich countries could finance climate projects in developing countries in order to compensate for continuing to pollute at home. The CDM is riddled with problems. It has not reduced emissions globally and projects funded under it have been linked to human rights violations and environmental destruction.
As opposed to the Kyoto Protocol that required emissions reductions only from rich countries, the Paris Agreement markets must function in a world where all countries make contributions towards the overall goal of limiting global warming to 1.5 degrees.
For two years in a row, the UN talks on Article 6 rules have ended without an agreement. The most contentious issues include the carryover of old, Kyoto-era credits into the Paris Agreement and how to avoid that emission reductions are counted towards multiple climate commitments. Another key element is how to ensure that global carbon markets reduce emissions globally and uphold and promote human rights. Due to the coronavirus pandemic, the negotiations will continue only in 2021.
Carbon Market Watch advocates for excluding old credits from the new system and introducing strong rules to avoid double counting and to make carbon markets reduce emissions globally. Furthermore, strong social and environmental safeguards are needed to ensure that any climate project upholds and promotes human rights, protects the environment and benefits local communities.
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