In 2015, the Paris Agreement was established, with countries and the European Union committing to reducing greenhouse gas emissions to limit global warming to below 2 degrees Celsius. To achieve these emissions reductions, each signatory submitted their Nationally Determined Contributions (NDCs), outlining their specific targets.
Countries are now seeking ways to work together to achieve their NDCs and are considering the creation of a global carbon market. This market would allow one country’s emissions reductions to count towards another country’s climate progress. For example, a country might invest in tree planting or renewable energy projects in another country and earn carbon credits for the emissions reductions achieved. These credits could then be used to offset their own emissions.
The idea behind this market is to make emissions reductions more cost-effective by incentivizing wealthy countries to invest in the least expensive emissions reduction strategies in developing countries before pursuing more costly options. An analysis suggests that a UN carbon market could reduce the cost of fulfilling NDCs by 50%, saving $250 billion by 2030.
A UN panel of experts has been working to design this new carbon market, aiming to have it operational by next year. However, many experts and advocacy groups are skeptical about whether this market will effectively address climate change. Existing carbon markets have faced various issues, and critics worry that a new one could lead wealthy countries to rely on unreliable and potentially harmful carbon removal projects in developing countries instead of reducing their own emissions.
Carbon credits are already in use in compliance and voluntary markets, and the UN’s new efforts are based on Article 6 of the Paris Agreement, which envisions international cooperation to promote emissions reduction and sustainable development. However, defining the types of carbon removal projects eligible for credits and their potential impact remains a contentious issue.
Two broad categories of carbon removal are under consideration: biological removal, which involves sequestering carbon in ecosystems or changing agricultural practices, and engineered removal, which uses chemical reactions to capture CO2 from the air. The latter category includes direct air capture and bioenergy with carbon capture and storage (BECCS).
Biological removal projects face concerns about reversibility, where the stored carbon could be released due to factors like wildfires or logging, as well as potential harm to local communities and Indigenous rights. Some environmental groups want most land-based removal projects excluded from the new market or limited to activities that genuinely remove carbon from the atmosphere.
Engineered removal is considered more likely to achieve permanent carbon sequestration, but it is still in the demonstration phase. Environmental groups and some experts call for a ban on these techniques to prevent them from justifying continued fossil fuel extraction or harming biodiversity.
The UN’s Article 6.4 Supervisory Body has expressed skepticism about the role of engineered removal in the new carbon market, considering it unproven and economically challenging at scale.
The design of the carbon market, particularly regarding carbon removal, remains a contentious and complex issue, and its effectiveness in addressing climate change is subject to ongoing debate.
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