June 21, 2019

Brazil and EU Face Off Over Future of Carbon Trading

Nicholas Institute for Environmental Policy Solutions

This year’s U.N. climate talks could make or break the Paris Agreement, negotiators say, as they get down to the business of regulating carbon trading. Emerging economies, notably Brazil, are at loggerheads with the European Union and vulnerable countries over the role for old U.N. carbon market schemes in the Paris regime, according to a Climate Home News article

A key issue is the future for the Clean Development Mechanism (CDM), an offset scheme developed under the 1997 Kyoto Protocol. It allowed rich countries—back then the only group committed to emission reductions—to meet some of their targets by investing in green projects in developing countries. For every ton of avoided greenhouse gas, a carbon credit (CER) was issued.

Brazil is the most vocal advocate for modelling the new system on the CDM and allowing CERs generated through the scheme to continue to circulate, Climate Home News reports. Opponents, including the EU, warn that transferring the CDM wholesale would flood the market with credits of little environmental value and are calling for the creation of a new scheme from scratch.

“We particularly need to have a firm understanding if there are carbon credits that are being traded across boundaries, that they are accounted for in such a way that a ton [of CO2] is actually a ton, and that a tonis only counted once,” said Jackson Ewing, a senior fellow at the Nicholas Institute for Environmental Policy Solutions at Duke University. “Because if that isn’t the case, the entire operation is a house of cards.”