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Complex decisions on carbon markets and transparency deferred to COP26, Glasgow

Talks on transparency and carbon markets continue to confound climate negotiators – during May-June technical sessions – leaving hard work ahead at COP26 in Glasgow, UK. Mairi Dupar of CASA reports.

The sessional meetings of the UNFCCC, which spanned three weeks in May and June, came to a close late last week – with a reflection from Patricia Espinosa, Executive Secretary of the UNFCCC that: “While a significant amount of work remains, good progress has been made on many issues. My overall assessment is positive.” 

The meetings were held in fully online format, rather than in person, because of the Covid-19 pandemic. Ms Espinosa praised governments for their commitment to making progress – despite the change in format.

However, Least Developed Countries and others were less upbeat. They noted that the May-June technical meetings still left an overwhelming amount of negotiation to be achieved at COP26 in Glasgow, UK.

The May-June meetings failed to resolve (or, at least, make definitive progress) on two sets of rules for implementing the Paris Agreement: 

  • The further development of the transparency framework, or how countries report progress against their Paris Agreement commitments to each other (Article 13); and
  • The rules for how international carbon markets will work (Article 6). This element of the ‘Paris rulebook’ has been outstanding since the other rules were agreed at COP24 in Katowice in 2018.

Transparency – reporting on progress under the Paris Agreement

The transparency discussions have long been difficult because countries have high expectations of each other. However, some countries have much greater data availability and capacity for reporting, than others.

Low income countries are eager to play their part, but face gaps in data and in human resource capacity, which hinder reporting. They say they need significant capacity building and finance to meet robust reporting demands.

The ‘Modalities, procedures and guidelines’ for the Enhanced Transparency Framework were agreed three years ago in Katowice. Now, countries have been discussing how to develop and use common reporting formats, e.g. for reporting on national greenhouse gas inventories, progress against their national plans, the NDCs, financial disbursements, and so on.  During the May-June meetings, as reported extensively by Earth Negotiations Bulletin, there was lack of agreement on common reporting formats despite multiple discussions.

In a statement, the Alliance of Small Island States (AOSIS) has flagged that any new system of reporting  must provide flexibility to developing countries “in light of their capacities and recognising the special circumstances of the least developed countries (‘LDCs’) and small island developing States (‘SIDS’)”.

On the reporting of national greenhouse gas inventories, for instance – the Common Reporting Tables proposed would depart from a previous system based on IPCC methods, and “AOSIS countries will require capacity building to bridge the gap between Intergovernmental Panel on Climate Change (‘IPCC’) reporter and new system,” the AOSIS statement said.

In closing remarks to the May-June meetings, the Least Developed Countries Group Chair, H.E. Sonam P. Wangdi of Bhutan, said:

“Discussions have helped to deepen dialogue and understanding on this vital item. However, we have only five months to COP26, and we still see that divergent positions remain. It is urgent to find common ground, narrow down options and accelerate progress on the remaining technical work through the inter-sessional work. Parties must begin domestic preparations to transition to the Enhanced Transparency Framework by 2024, and COP26 is our last opportunity to finish outstanding issues to put the system into action. In completing this work, we must ensure that developing countries, and especially LDCs, are provided with the resources and capacity building support needed to produce BTRs [Biennial Transparency Reports] and to sustain reporting capacity on a permanent basis.”

This explainer from the UNFCCC lays out how Parties to the Paris Agreement will need to start reporting under the Enhanced Transparency Framework – and how the framework compares to the previous monitoring, reporting and verification systems.

Article 6 – carbon markets

The accounting rules on carbon markets under the Paris Agreement have proven particularly thorny because there must be a way to stop double counting; ie, the purchasing and the selling country cannot both claim the same carbon credit. Another sticking point is how the carbon credits that were generated and traded under the previous international climate accord, the Kyoto Protocol (known as Certified Emission Reductions or CERs), should be treated. Should any of them carry over from the Clean Development Mechanism under Kyoto, to the Paris Agreement?

Michelova et al, in their just published report, Volumes and types of unused Certified Emission Reductions (CERs) find that there are 0.95 billion unused units left over from the Kyoto Protocol period, and they explain why the treatment of these carbon credits is so contentious:

“Some Parties demand that (part of) these unused CERs are made eligible for use towards post-2020 NDC targets, to ensure that investors in the [Clean Development Mechanism under the Kyoto Protocol] and programme developers can secure a return on their investment.”

“Other Parties are rejecting this due to concerns about environmental integrity due to the risk of (a) reducing post-2020 mitigation efforts as CERs are used to offset emissions that would otherwise be reduced and (b) CERs being used post-2020 while the emissions reductions underlying the CERs have been used to derive the emission scenarios of the NDCs, which leads to intertemporal double counting. Parties to the Paris Agreement have a broad range of options to allow for a restricted eligibility of CERs in the context of NDCs that can be combined to achieve a compromise acceptable for all Parties”.

(When it comes to trading credits on the voluntary carbon market, things get even more complicated – as many of these credits are scooped up by multinational companies (ie. non-state entities). So, should the credit for the emissions reduction be counted against any country at all?  Climate Focus’ primer outlines the key issues and some pragmatic routes to untangle the politics of voluntary carbon credits.)

Meanwhile, as reported by Earth Negotiations Bulletin, the COP26 Presidency team will begin a ministerial initiative on Article 6, co-chaired by Norway and Singapore.

Of the latest efforts to resolve the carbon markets issue, Mr Wangdi expressed his grave disappointment. In a post-meeting announcement, he said:

“This year’s COP is a particularly important one. At COP26 we must finalise the remaining rules to enable the full implementation of the Paris Agreement, including the rules on global carbon markets under Article 6 and on ensuring transparency of each Party’s climate action and support under the agreement. Raising ambition remains key in all these discussions and to the lead up to COP26. We are greatly concerned that some countries during the May-June session, continue to push for a carry-over of Kyoto Protocol units, despite the downward pressure this would place on ambition.”

Variable foundations

Other key issues of concern for least developed and small island countries were not formally negotiated, but rather, were the subject for informal talks and informal note-taking by the Chairs in May-June. These left variable foundations, on which COP26 Glasgow must build – with observers saying that some notes read like draft decision texts, while others were ‘laundry lists’ of issue to consider. They included informal talks on the Nairobi Work Programme on impacts, vulnerability, and adaptation to climate change; the Koronivia joint work on agriculture; and sources of input for the Global Stocktake under the Paris Agreement (2023). The UNFCCC Secretariat also convened two key meetings on climate finance: on long term climate finance and on Article 9.5, the communication of forward-looking climate finance by developed countries.

“Slow progress at this [May-June] session leaves a daunting task ahead to conclude the remaining work of the Paris Agreement rulebook and other issues for progressing climate action by COP26. The informal notes that capture progress from this session on various topics, have broadened options rather than convergence,” reflected Mr Wangdi “ — which requires more work from now up to COP26 to narrow the divergences and prepare clear options to help make decisions.” 

How to reach Glasgow safely?

Meanwhile, a significant logistical question lies heavy on the minds of LDC negotiators as they look ahead some 4+ months to their planned arrival in Glasgow by the 31 October start date of COP26. What is the plan for them to receive vaccinations and participate in talks in a Covid-safe way?

The UK COP26 Presidency has stated its support for an in-person meeting of negotiators. A meeting of the UNFCCC Bureau and the COP26 Presidency is due shortly, to confirm the format of COP26 and lay out arrangements. However, with the clock ticking, impatience on the part of LDCs is tangible: “We need to hear from the UK government how various issues will be dealt with including equitable access to vaccines, ensuring delegates’ safety in Glasgow, and the higher costs of the flying, hotels, testing and quarantining in this COVID-era, ” H.E. Wangdi said.

Alok Sharma, MP, the COP26 President has stated his determination that COP26 will be inclusive – telling The Guardian that “I am determined it will be the most inclusive COP ever.” But, the meeting’s ability to be so will depend on the detail of logistics packages for the least developed and climate-vulnerable country negotiators.

Image: Glasgow, credit Holly Hayes

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