COP Braces for All-Nighters as Carbon Markets Take Center Stage

(Bloomberg) -- COP climate talks are about to get messier with negotiators bracing for all-night sessions. Top of their list to pin down: how to create a global carbon market and who will pay for the ravages of rising temperatures.

"It is tense right now," U.K. lead negotiator Archie Young said at the weekend. “People are having to take tough decisions."

If the first week of COP was all about net-zero goals and world leaders signing up to deals that turned out to be a bit weaker than advertised, the second week gets down to serious haggling. In a sign of how tense negotiations will be, COP President Alok Sharma all but aligned himself with the protesters who marched through Glasgow this weekend demanding more urgent action. “They want to see delivery,” he said. “This is the COP when we need to see delivery.” 

Six years after the Paris Agreement was signed, some of the rules that go with it are still to be nailed down. The big piece is how to create a global carbon market, with the aim of  bringing rigor and scrutiny to trading in offsets and making sure there’s no double counting when countries essentially pay others to do their emissions cuts for them.

“If there’s no deal at the end of the week it means it’s still the Wild West and countries have a free pass to trade emissions reductions however they want,” said Gilles Dufrasne, policy officer at the non profit Carbon Market Watch. “It’s a completely unregulated market.”

Carbon markets are important for companies and countries that want to use them to help meet their goals. But it’s also crucial to poor nations most affected by climate change, who hope to use a kind of transaction tax to pay for infrastructure to protect against rising sea levels, floods and storms. These adaptation projects struggle to win private finance as they don’t tend to be profitable, and are often neglected in favor of projects that cut emissions. So vulnerable nations are keen to make the deal on carbon trading work for them.

While an agreement had looked within reach in the run-up to COP, talks this week have hit trouble over just how much poor countries can expect to gain. The U.S. is lined up behind the European Union, with developing countries on the other side. As always at COP, the issue of fairness is key to the negotiating dynamics: Developed countries wrecked the planet as they got rich and the countries most affected by climate change — and least equipped to deal with it — are the poorest.

Read more: COP Carbon-Market Talks Struggle as U.S. Lines Up Behind EU

There’s a longer list still of rules to write in the few days left, and talks are already behind schedule as energy ministers are set to arrive.

The Paris Agreement also left dangling the issue of how to make sure countries do what they say they will, and how to hold laggards to account. Some kind of centralized review and reporting system is meant to be set up to check on progress. There’s also a push to make countries use the same baselines and deadlines, to make it easier to compare. Not everyone is on board.

As one session of COP after another fails to nail down the rules, the risk is that the delay gnaws away at the credibility of the Paris Agreement.

"The rulebook has been hanging over this for several years. It's really three strikes and you're out, so it has to get done,” said Alden Meyer at think tank E3G, who has been following the UN talks for more than two decades.

Here’s what else to watch this week as negotiators start drafting conclusions:

• Some countries are pushing for a reference to limiting warming to 1.5 degrees. That would be a tightening compared with the Paris Agreement, which calls for warming to be kept  well below 2 degrees, but preferably to 1.5 degrees
• Rich countries failed to come up with $100 billion a year by 2020. Now they have to discuss how they are going to ramp up financing in future
• Some countries want everyone to re-do their national climate plans as soon as next year. That’s because current plans put the planet on course for 2.7 degrees of warming 
• There’s also debate about when the subsequent set of national climate plans — known as Nationally Determined Contributions — should be due, and what period they should cover
• … And finally, will India file a revised NDC  that backs up the pledges Prime Minister Narendra Modi made last week?
   

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