UN Climate Talks Aim to Pave Way for Global Carbon Market

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On a chilly afternoon in late November, Jan Gerrit Otterpohl eyes the chimneys of Berlin’s Heizkraftwerk Mitte, a state-of-the-art energy plant that provides town with warmth and electrical energy. It’s not the billowing steam he’s focused on, however the largely invisible carbon dioxide that the facility station exhales because it burns pure fuel.

Under European Union guidelines, the plant’s operator, Vattenfall, wants a allow for every ton of carbon dioxide it emits. Otterpohl’s job is to preserve prices low by ensuring the corporate buys solely as many permits as essential, on the present market value.

Economists say that carbon markets just like the one Otterpohl makes use of can change into a strong instrument within the struggle towards local weather change, by giving emitters a monetary incentive to scale back greenhouse gases. But regardless of making progress in different areas, governments have for years been unable to agree on the principles that will enable really international commerce in carbon permits to flourish.

Negotiators at a U.N. assembly in Madrid this month are aiming to lastly sort out the difficulty, after final yr agreeing on nearly all different components of the rulebook governing the 2015 Paris local weather accord.

“There are reasons to be optimistic and to think that there could be some progress because of the political attention that it’s getting,” stated Alex Hanafi, a lead counsel on the New York-based Environmental Defense Fund.

Many governments are struggling to make the emissions cuts essential to meet the Paris accord’s objective of protecting international temperatures from rising greater than 1.5 levels Celsius (2.7 Fahrenheit) by the top of the century.

The hope is that placing a value on carbon will unlock billions of {dollars} in investments as international locations and corporations search probably the most cost-effective method to lower emissions. By capping the variety of permits available in the market and decreasing it steadily, the motivation to save on emissions would develop over time.

“There is tremendous potential for carbon markets to contribute to the achievement of the Paris agreement goals,” stated Hanafi.

But he warned {that a} dangerous deal on carbon markets, identified in local weather diplomacy parlance as ‘Article 6,’ can be “worse than no deal at all.”

That can be the case, for instance, if airways discover it cheaper to offset their emissions than scale back them; or if international locations defend giant areas of carbon-absorbing forests, promote the ensuing permits to different nations and concurrently depend them towards their very own emissions-reduction efforts.

Brazil has lengthy pushed again towards among the stricter accounting guidelines demanded by the EU and the United States. The Latin American nation, criticized by environmentalists for failing to correctly defend the Amazon rainforest, additionally insists that it must be allowed to preserve huge quantities of carbon credit amassed below a now-discredited system, a stance shared by China and India.

“It’s very important to really avoid these kind of negative impacts,” stated Claudia Kemfert, a senior vitality professional on the German Institute for Economic Research.

Kemfert famous that it took greater than a decade to tweak the emissions buying and selling system that thus far solely covers the facility and heavy trade sectors in 27 European Union international locations— all, besides Britain — plus Norway, Iceland and Liechtenstein — a area with well-functioning markets and low ranges of corruption.

Otterpohl, who oversees emissions at Vattenfall’s Berlin energy plant, agreed.

“As far as the EU (emissions trading system) is concerned, there’s now a mature and functioning market in the areas it covers.”

Expanding that market to cowl different sectors within the EU, equivalent to transportation and residential heating, or linking it up with different present emissions buying and selling techniques in China, California and elsewhere must be doable, stated Daniel Wragge, the director of political and regulatory affairs on the European Energy Exchange in Leipzig, Germany.

“Technically speaking, it’s not a challenge,” stated Wragge, whose firm manages {the marketplace} for European emissions, the place a ton of carbon dioxide is at present traded for about 25 euros ($27.70). “But, of course, there are certain conditions and the key is, of course, that the certificates are mutually recognized.”

Kemfert cautioned that placing a value on emissions alone gained’t cease local weather change.

“What we need are many, many activities to reduce emissions,” she stated. “If we reach a carbon market, that’s fine. But we should go for other solutions very urgently.”

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