Analysis: Can a COP29 deal clean up scandal-ridden carbon offsets?

Interface

18/11/2024 17:47

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      Countries seek deal this week on U.N.-backed carbon market
    

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      Carbon offset trading has been plagued by scandals
    

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      Market size could hit $250 billion - industry group
    

  
 (Updates to include WWF quote in paragraphs 14-15)
    By Kate Abnett and Virginia Furness
       BAKU, Nov 18 (Reuters) - A deal at the COP29 climate
talks on trading carbon credits could see billions of dollars
move into emissions-reduction projects this decade but after a
string of scandals, the market will first need to win over wary
countries and communities.
    Carbon trading is seen as one way for richer countries to
meet their emissions reduction targets at the same time as
helping poorer countries move to greener energy and to improve
their resilience against climate change.
    A U.N.-backed global market for creating and trading carbon
credits has been discussed for at least 10 years. In its
absence, a patchwork of voluntary standards has led to a number
of situations where credits were found to not be delivering the
climate benefits they claimed.
    While an early deal last week saw nations agree on some
quality standards, points still to be hammered out include what
a global registry to track trades and label carbon credits would
look like, and what information projects will need to disclose.
    If a deal can be reached this week in Baku, Azerbaijan, "the
main impact would be a confidence boost", said Andrea Bonzanni,
international policy director at the International Emissions
Trading Association (IETA).
    "It would provide both countries and the private sector with
the signal that there is consensus on the rules of the game. And
that would mean that companies would invest with more
confidence," he added.
    IETA has said a U.N.-backed market could be worth $250
billion a year by 2030, and count towards offsetting an extra 5
billion metric tons of carbon emissions annually.
    Governments including Bolivia, Singapore and Switzerland
have struck dozens of agreements already to do carbon credit
trades under the impending U.N. rules, backing investments in
clean cookstoves and solar power.
    Others are expected to join in as they face pressure to show
progress towards their national emissions-cutting targets. 
    Private sector buyers could include airlines, under a
U.N.-backed plan to scale up their purchases launching in 2027,
as well as companies looking to burnish their green credentials
with customers and investors. 
    The boss of carbon project backer Key Carbon, Luke Leslie,
said his firm would look to expand its investments in countries
that quickly get their local market up and running.
          
    CAUTION REMAINS 
    While the prospect of selling credits could offer a boost to
cash-strapped governments, some remain wary - or outright
opposed.
    Environmental group Greenpeace has called offsets a
"smokescreen" while the WWF opposes the use of most offsets.
Some local communities are also against using them.
    Marty Spitzer, senior director for climate and renewable
energy at WWF U.S., said companies could use credits and other
market methods in a limited manner to directly reduce activities
like deforestation or land degradation if they are directly
linked to their businesses.
    "Offsets are only appropriate for the last mile of residual
emissions," he said.
    Eriel Deranger, executive director of campaign group
Indigenous Climate Action, and a member of the Athabasca
Chipewyan First Nation in northern Alberta, Canada, said carbon
credits distracted from calls for more public funds for climate
action, and for companies to simply cut their own emissions.
    "It's going to do substantively nothing to actually reduce
our emissions," she said.
    For those countries which do opt to sell credits, African
Development Bank Chief Executive Akinwumi Adesina warned against
doing so too quickly or too cheaply, to avoid being "short
changed".
    Uganda's energy minister, Ruth Nankabirwa, said her country
was seeking to attract investment in clean cookstove projects,
but had yet to use credits.
     "It isn't clear how one can benefit, how the auditing is
done of carbon credits," she said.
    Nkiruka Maduekwe, director general of Nigeria's national
council on climate change, agreed, describing high integrity
carbon credits as "the key".
    The rules of the registry being addressed at the COP talks
this week will be central to answering those concerns, but
governments are struggling to agree.
    The European Union - which has ruled out using credits to
meet its domestic climate goals - wants a registry that can
issue and manage credit trades, to help poorer countries access
the market, people familiar with the negotiations told Reuters. 
    The United States, however, is advocating for a registry
that only tracks credit trading, arguing that empowering it to
execute trades could risk giving a U.N. seal of approval to
credits with weak environmental credentials, the sources said.
    Even if a deal is reached between countries, companies may
still need government incentives to buy in, given their pledges
so far have been voluntary and boards are concerned about
reputational risk, said Sheri Hickok, chief executive at carbon
project developer Climate Impact Partners.
    Flooring company Interface  TILE.O  and Australian telco
Telstra Group  TLS.AX , previously big buyers of credits, both
told Reuters a U.N. deal would not change their decisions to
exit the carbon markets, as they focus on cutting their
emissions directly.    

 (Additional reporting by David Stanway in Singapore, Gloria
Dickie and Millie McCaughan in Baku, Gayatri Suroyo in Jakarta;
editing by Simon Jessop, Kirsten Donovan and Tomasz Janowski)
 ((Kate.Abnett@thomsonreuters.com;))