Two weeks of negotiations in Madrid last December were not enough to reach an agreement on how the world should cooperate on cutting emissions. Representatives of more than 190 countries failed to reach a deal on guidelines for global emissions trading that sets the process back by a full year.
The collapse of the talks centered around two or three highly technical rules. The first, over accounting for emissions reductions, pitted Brazil against numerous other nations. Brazil didn’t want to have to subtract emissions reductions from its own national account if they were traded to other countries: the others were adamant that you can’t have double-counting of emissions reductions.
The second saw Australia seeking to carry over a significant surplus of emissions units from the Kyoto Protocol, the predecessor to the 2015 Paris Agreement, to use under the new deal. Allowing Australia to do this would have meant the country would already be half-way to its Paris target without having done anything yet.
And the third set Brazil, India and to a lesser extent China against a group of nations. The three largest developing economies want to transfer thousands of clean energy projects and the emissions credits that they’ve produced from the Kyoto Protocol to the Paris Agreement; they stand to earn billions from emerging carbon markets around the world, including the International Civil Aviation Organisation’s new system.
Critics said that these carbon offsets, while worthy, would simply reduce the amount of work needed to slash emissions and keep global temperatures less than 1.5 degrees above pre-industrial levels. A group of around 30 nations issued a pledge not to buy these credits during the second half of the negotiation session, ramping up the tension and eventually leading to the breakdown in the talks.
The Madrid summit wasn’t the first attempt to craft a set of rules for international emissions markets. Countries had already tried and failed in Poland in 2018 when these same three issues prevented a deal. The talks will resume in Glasgow, Scotland in November 2020.
Even after two additional days of talks, the negotiations ground to a halt without success. But numerous commentators and carbon market advocates were not as downhearted as expected.
Enough work has been done to agree to basic rules on reporting, on transparency and on verification for like-minded countries to go ahead and set up markets, and link them together, these market boosters said.
And that’s already happening. On January 1 Switzerland formally linked its domestic carbon market to the EU’s much larger system: the process has been going on for a number of years already, and Swiss carbon prices have been rising sharply to come into line with the current €25.00 price in the EU.
Talks are continuing amongst a group of Latin American countries to develop their national carbon tax regimes into a regional carbon market. China is about to replace nine pilot markets with a single, national emissions trading system that will dwarf anything we’ve seen so far.
Even African countries are getting into the carbon market mood. To be sure, many of them would prefer the security of a UN-sanctioned set of rules, but they see enough progress being made at a national level to be very interested in building their own systems.
The Kyoto Protocol was a “top-down” system, where the UN made the rules and everyone had to follow them. But the Paris Agreement is a voluntary, “bottom-up” arrangement, where countries actively decide to participate. Their commitment is stronger as a result.
And with nations taking the lead, the UN is going to have to play catch-up from now on.