U.N. Carbon Market Talks To Drag Beyond COP27 As Deals Elusive

Talks to establish carbon offset markets to allow countries to buy credits to partly achieve their climate pledges are set to drag on beyond the COP27 summit and into next year, according to observers and a negotiator in the U.N. talks.

It might still be years before countries can offset their emissions with credits based on greenhouse gas-reducing projects elsewhere, under an international carbon market first called for in Article 6 of the 2015 Paris climate accord.

"After years of negotiations about whether carbon markets under the Paris Agreement would actually exist, now they are at the stage of actually setting them up," said Jonathan Crook, policy analyst at the non-profit Carbon Market Watch.

A draft document of around 60 pages, published on Wednesday, outlined how inter-country carbon trading might function, but it is riddled with sections still up for debate and pointers to future decisions.

"The Article 6 texts are all open," Andrea Bonzanni, international policy director at the International Emissions Trading Association (IETA), said on Thursday.

Pedro Barata, carbon markets specialist at the Environmental Defense Fund, said that while he was impressed by the size of the draft document, he said it was clear that "this is not leading up to a decision here that would clear away all of this."

Key outstanding issues include the extent to which countries' registries, or digital ledgers of carbon trades, might be exposed to outside scrutiny.

Matt Williams from the Energy and Climate Intelligence Unit said he was worried about transparency and the potential for double-counting the same credit in two countries.

The slow progress in the carbon markets talks comes as countries struggle to agree a long list of climate issues while the scheduled end of the summit on Friday looms.

"It's a step forward, but I don't know that it's (the) big jump that was probably needed," said one negotiator who declined to be named.

Wednesday's draft document only referred to the subsection of Article 6 that deals with how countries can use the carbon market.

Talks on another subsection linked to the interaction of countries' carbon credit registries and the so-called voluntary carbon market, where carbon offsets are already traded between private parties, are also lagging.

A draft negotiating text that delegates had expected at midday on Thursday still had not been circulated at the time of writing. Part of those rules, to define what constitutes a carbon removal project, are likely to be scrapped and redrafted ahead of more talks in 2023, observers said.

"There is also an opportunity for Article 6... to set a high bar on transparency and integrity that would improve on the wild west of unregulated voluntary carbon markets," Crook said.