Brazil Seeks to Revive $138 Billion Carbon Market
Brazil Seeks to Revive $138 Billion Carbon Market
(Bloomberg) -- Brazil said envoys at the United Nations climate talks should find a way of reviving credits generated under an early carbon trading system as they design a new mechanism.
Environment Minister Ricardo Salles’s remarks add to the difficulty facing delegates from almost 200 nations, who are meeting in Madrid this week and next to determine how carbon trading can work under the Paris Agreement on climate change.
Latin America’s biggest economy is one of the developing nations fighting to preserve the value of the Clean Development Mechanism, a program that channeled $138 billion into some 8,000 projects that cut emissions. That stemmed from the 1997 Kyoto Protocol and fell into disuse in the past few years, sending the value of credits generated under the CDP plunging.
“The recognition of past efforts that we have done is crucial for the success of the negotiation,” Salles said in an interview in Madrid on Tuesday. “Efforts made under the Clean Development Mechanism should have some sort of transition, and the recognition that they continue to be valid.”
CDM projects were built in developing nations and were designed to lower greenhouse gas. They were funded with credits, each representing 1 ton of carbon dioxide emissions. The credits peaked in value at more than 21 euros ($23) each in 2008 and plummeted to 17 cents after the European Union stopped accepting them over concerns projects weren’t actually cutting emissions.
Negotiators at the talks this year are working on fleshing out Article 6 of the Paris Agreement, which refers to the creation of a global carbon market. They’re attempting to create a Sustainable Development Mechanism that would build on the work of the CDM. What happens to leftover CDM credits remains uncertain but may be decided at this meeting.
The measures are key to establish the rules on how the billions of dollars in aid that flows to poorer nations is used to fight climate change. The delegates also want to ensure that the system they build triggers genuine emissions reductions, an issue where the CDM generated criticism.
In this context, what to do with the old, almost worthless credits, and how not to repeat the errors of the past has become a key issue. Friction over the nature of these and other rules already prevented a deal on Article 6 last year.
A prominent voice among developing nations, Brazil’s position is particularly relevant and its envoys have blocked other parts of the deal in the past.
“The specific terms are something that we’ll negotiate during this COP,” Salles said. “But we can’t disregard efforts done in the past -- this is something very important for credibility.”
The main objective of COP25 is to reach an agreement on Article 6, said Andres Couve, Chile Minister of Science and Technology. Chile holds the presidency of the conference, even after the biggest social outbreak in a generation forced the South American nation to move the talks to Madrid.
“The great ambition is to close the agreement for a methodology to set up a global carbon market,” Couve said in an interview on the sidelines of COP25. “That would be a great triumph.”
Chile is working with diplomats from the United Kingdom, which will host COP26 talks in Glasgow next year, Couve said. The move is aimed at ensuring a smooth transition if no agreement is reached this year, or if there are any issues left to debate.
--With assistance from Charles Penty.
To contact the reporter on this story: Laura Millan Lombrana in Santiago at lmillan4@bloomberg.net
To contact the editors responsible for this story: Aaron Rutkoff at arutkoff@bloomberg.net, Reed Landberg, Jeremy Hodges
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