The latest IPCC report brought into sharp focus the global need to rapidly reduce carbon emissions and other greenhouse gas emissions in line with science-based targets and limit global warming to within 1.5 degrees Celsius. For this to be achieved, greenhouse gas (GHG) emissions need to be halved within the next nine years. This equates to a decrease in global emissions of around 8 per cent every year between now and 2030. Simultaneously, regeneration of nature and resilience to floods, droughts, extreme temperatures and other environmental impacts must be scaled-up.
Making this goal a reality, through Nationally Determined Contributions (NDCs) is a core part of the discussions expected to take place in November’s COP26 summit in Glasgow.
However, it’s unlikely that the environment and clean energy policies currently in place in carbon-intensive economies can achieve these targets in time. A robust set of measures to decarbonise every area of business, agriculture, conservation and transport must be implemented to ensure this goal is met. That’s where carbon offsetting can be an instrumental part of net zero strategies.
It is widely accepted that high-quality carbon offsets are a vital part of any transition to a net zero future. In many cases, it is not possible for companies and nations to entirely eliminate carbon emissions. Carbon offsets offer corporates and national governments a mechanism to compensate for their unavoidable emissions and also contribute meaningfully to other conservation and sustainable development goals.
Carbon markets in the spotlight at COP26
There are already a number of companies and institutions that are taking positive steps toward decarbonising their operations and purchasing carbon credits through the Voluntary Carbon Market to offset their remaining emissions. This kind of offsetting is not legally required or mandated, hence it is traded on the ‘voluntary’ market.
This international carbon emissions trading is partially covered by Article 6 of the Paris Agreement. Discussions around Article 6 are set to be an important talking point at COP26 and could trigger an even greater surge in interest in the sector.
The main driver of discussions will be the need for transparent rules and effective accounting in offsetting. This will cover a range of topics like how emissions reductions are counted and who can claim them. With these rules in place, international emissions trading can mobilise large amounts of capital from the private sector to help the world meet ambitious climate and development goals. But countries first need to agree on these rules at COP26 and for them to be enshrined into Article 6 of the Paris Agreement as legally binding rules of carbon market mechanisms.
Investing in voluntary climate projects, like carbon offsetting, has been described by environmental organisations as ‘rocket boosters to accelerate climate action.’ But there are legitimate concerns around how to safeguard the efficacy of these actions. One of the goals of the COP26 discussions is to formally agree on an international set of rules for sound carbon accounting. This will eliminate these concerns and boost climate ambition, to get the world on-track to hit 2030 goals.
Cutting out ‘double counting’ of carbon offsets
One of the cornerstones of high-quality carbon offsets is the certification of their uniqueness. This means that every carbon credit is equivalent to 1 tonne of carbon dioxide removed, reduced, avoided, sequestered or prevented from entering the atmosphere. When it comes to compliance based international emissions trading schemes, emission reductions can be generated in one country and then traded to another to offset their emissions. Transparency in this process is key. Without clarity around which country can claim these emissions offsets as part of their Nationally Determined Contributions, there could be instances of ‘double counting.’ In this scenario, ‘double counting’ or ‘double claiming’ essentially means emissions that are reduced in one nation are traded to another, but are still claimed by both the recipient nation and the issuing nation when they report their own emissions cuts.
The COP26 talks will cover the details of accounting and transparency for carbon markets under the Paris Agreement, and how they can be implemented to avoid this double counting of emissions reductions.
Ultimately, COP26 will inevitably see countries champion high-level climate action and headline climate targets. But it is the nuts and bolts of the legislation, like agreement on critical mechanisms that govern emissions trading, that will have huge impacts on reaching these climate targets.
If parties are successful in agreeing to these rules at the UN summit, this will mean the building blocks to scale the global carbon market will be set in stone, boosted by confidence and trust in the system. This could unlock a huge amount of private capital from investors, businesses, cities and national governments, and renew hope in reaching climate targets.
