But as both the EU and Germany are criticised by NGO’s for not pulling their weight in the negotiations and other countries having vested interests in the use of existing carbon credits, observers fear that an agreement will be the very lowest common denominator and leave loopholes that could severely harm future emission reduction efforts.
The first allows for the creation of a carbon offset market where emission reductions from either states or private entities can be traded.
Ensuring that double counting – using the same emission reduction to fulfil the climate targets of two countries or entities – is avoided is one of the main sticking points of the Article 6 negotiations in Glasgow.
Details on how to determine the number of credits generated by a project will also be part of the new mechanism body’s methodology.
Jennifer Tollmann from E3G told journalists in Glasgow that it was of the utmost importance to have robust rules for the carbon market, because a later revision would likely not be possible.
“This solution is very ominous because it incentivises countries to have NDCs that do not fully cover their emissions,” Fearnehough told CLEW.
The second type of credit would be a “support credit” , which essentially provides a climate finance contribution to another country by the company which buys the credit but cannot be used as an emission offset by the buyer.
But Fearnehough still warned: “Our position is very clear, these units should not be carried over, there is no provision in the Paris Agreement for them to be carried over.” If the outcome in Glasgow signals to the market that the value of these potential CDM credits is increased they could flood the market and hamper ambitious emission reductions.
The German government’s general position on the trade of carbon offsets is that it wouldn’t use them towards achieving the country’s climate targets.
Environment state secretary Jochen Flasbarth called it an “interesting proposal” to allow emission reductions generated outside of a country’s NDC to be traded with private entities.
Markus Götz from sustainable AG said: “Decisions at climate conferences set a course, but they take time to reach the markets.” It would be interesting to ask the suppliers’ opinion again after the COP, he added.