From carbon markets to CBAM, where we stand on climate finance after COP28
EVEN if all the many government and corporate pledges made at COP28 were to come good, there is nowhere near enough money on the table to meet the scale of the challenges faced.
Hundreds of billions of dollars will be needed annually to help the Global South transition to green energy, adapt to the heating of the planet, and rebuild after disasters.
Many hundreds of billions more every year will be needed to spur efforts to decarbonise and to restore and preserve nature.
So there was disappointment that COP28 yet again failed to reach agreement on operationalising Article 6 of the 2015 Paris Agreement, which would provide a high integrity framework for countries to trade carbon credits generated by the reduction or removal of greenhouse gases from the atmosphere.
According to the International Emissions Trading Association, Article 6 has the potential to halve the total cost of implementing nationally determined contributions to US$250 billion by 2030.
There are several components to Article 6: Article 6.2 is intended to guide carbon trading between any two countries, but a disagreement over how much control should be exercised over those trades meant no consensus was reached.
Article 6.4 is intended to set up a new high-integrity international market for both carbon reductions and removals. It too failed to reach agreement, this time due to diverging views over recommendations on methodologies and carbon removals — be that nature based or engineered removals.
Eve Tamme, founder of climate policy advisory Climate Principles, had expected recommendations on emissionsreduction methodology to be agreed, which would have allowed them to move forward. But removals and reductions were tied together, so neither got the goahead.
“It is unfortunate because it means we will lose another year. But countries will go ahead with the 6.2 trading that had been happening already. What we will miss out on is the opportunity to have more robust UN-led standards that would inform these trades.”
It means“there’s one tool less on the table that everyone was hoping would help to raise the quality on carbon markets,” she adds. There’s a lot of work ahead to bridge the substantial divides between nations.
Meanwhile, in the runup to COP28 one newly set up UAE company, Blue Carbon, controversially signed memorandums of understanding with several African governments, including Zimbabwe, Liberia and Kenya, to sell carbon credits covering large tracts of the African continent.
A coalition of non-governmental organisations issued a statement in July, warning that the deal poses a threat to the livelihoods of up to one million people and would extinguish community land ownership in some areas.
Mohamed Adow, director of Power Shift Africa, wrote in a letter to the Financial Times that a “narrative is emerging that suggests our development depends on carbon credits.”
Alongside the failure of the Article 6 negotiations, “it’s all signalling one thing very clearly — the cowboys are going to come knocking at Africa’s door in force”.
Carbon markets, he said, are not the solution to a “very real financing problem. Developed countries need to stop looking for ways to dodge their responsibilities and instead actually deliver on their financing promises.”
Voluntary carbon markets
But what of the potential for voluntary carbon markets to channel climate finance from companies seeking to get to net zero emissions to carbon reduction projects in the Global South?
The £2 billion voluntary carbon market has taken a hit this year, as many companies have withdrawn from purchasing offsets, beset by revelations that many credits may not reflect genuine reductions in emissions.