Written by Jake Spring, William James

GLASGOW, Reuters – It is believed that COP26 at Glasgow will be able to seal a global carbon market agreement that would unlock trillions in green investment. Even Brazil, which has been a holdout country since the beginning of time signaled a willingness for compromise.

After a flurry in speeches and announcements, world leaders have left the UN Climate Summit. Diplomats at COP26 are currently engaged in two weeks-long negotiations about how to put into practice key elements of the 2015 Paris Agreement.

The Paris Agreement left many questions unanswered six years ago. However, the Paris Agreement leaves one important question unanswered: how do we fix the rules on carbon markets according to Article 6?

Article 6 is designed to establish the complex rules necessary to regulate global carbon markets. This could result in billions of dollars worth of investment.

Carbon trading, which is a form of carbon swapping that does not comply with established rules could lead to the “greenwashing,” or false appearances of action.

Article 6 aims at linking global emissions trading systems, allows international transfers of carbon credits, and establishes a new mechanism for carbon credit trade from emission reductions from low-carbon project.

Some experts in carbon markets consider Brazil the strongest opponent to Article 6. Many nations view Brazil as an obstacle to any deal. This includes a rule that accounts for trades, and honors credits from older schemes.

However, Leonardo Cleaver de Athayde from Brazil was the top negotiator and told Reuters that Brazil had arrived at COP wanting to reach a compromise.

Athayde indicated that they are willing to accept significant concessions provided other delegations do the same. He also said it was a poor negotiating tactic for revealing what such concessions may be.

He stated that “We should be more positive this time around regarding the Article 6 negotiations.”

OLD CREDITS

Brazil is not in agreement with the majority of countries on accounting for trades between them, according to Pedro Martins Barata (an expert on carbon markets at Environmental Defense Fund, and a former negotiator representing Portugal).

EU members and countries around the world want to avoid double counting. Double counting means the reduction in emission is counted for both the buyer of the credit as well as the sale country.

Brazil, however, argues against the unfair penalization of not allowing credit to be added by the selling nation.

Brazil also claims that any credits from the Kyoto Protocol should be carried forward, and they should be honored under the new system.

Although China and India have used the same arguments in the past as well, the majority of countries believe that the floodgates would be opened by the large number Kyoto credits. It is possible for countries to buy credits at low prices rather than take action to curb their emissions.

Athayde indicated that they are open to considering a partial transfer.

Brazil’s willingness to compromise could mean that a deal can be made if the other countries are willing to meet in the middle. This was according to Yamide Dagnet (an ex-EU negotiator).

Dagnet stated, “If Brazil really comes with the view of compromising to get this deal, there’s hope.”

LUKEWARM

Brazil’s problems are not the only ones that concern all the parties. Each word in the accord is being closely scrutinized.

Barata, who witnessed some open proceedings, said that overall reaction to Monday’s first draft of Article 6 regulations was “overwhelmingly warm”.

They were open to working on that basis. “That’s what you can get at this stage in negotiations,” he stated.

On Friday, a second draft was released to allow delegations to examine. It took into consideration initial feedback.

A second dispute point is the Paris Agreement, which stipulates that some of the carbon market profits should be diverted into a fund that helps developing countries adapt to climate changes. The former negotiators stated that this was also disputed.

It is politically more important than science to determine what percentage. However, there will be no progress next week until environment ministers are present with the goal of closing a deal.

Jacob Werksman is a leading EU negotiator. He stated, “The progress that we will see this week involves narrowing and clarifying our options and making sure those options are expressed clearly and making sure that that these options are articulated as clearly and as clear as possible and creating negotiating text to make the work of ministers easy.”

According to Brad Schallert, a carbon market expert and non-profit World Wildlife Fund, negotiations must also address a request from Canada or New Zealand to resolve human rights concerns in Article 6.

Schallert stated that this could be a problem for countries like Egypt, China, and Iran.

Athayde indicated that for any deal to become possible, all countries would need to agree to concessions.

He stated that the best solution would not be the most satisfactory for all parties. It is important to ensure everyone leaves feeling satisfied.