Significant gains but work to do, spotlight on fed gov and business.
After six years, the Paris Agreement, a rulebook that can guide a transition to net-zero emissions capable of limiting average global temperature rises to 1.5 degrees, including the rules for global carbon markets, has been finalised.
The Carbon Market Institute (CMI) welcomes this historic moment, and looks ahead to the much needed increase in ambition and action required for Australia to play its role.
The following is attributable to CMI CEO John Connor:
Announcements at COP26 and the final decisions themselves, including the substantial conclusion of international cooperation and carbon market rules, allow a platform for action with the spotlight now on new responsibilities and opportunities for Australian government and business.
COP26 concluded with significant achievements but still leaves the world short of the ambition and action required to avoid massive climate costs and missed economic opportunities for Australia.
Particularly we note with disappointment the last minute intervention by India resulting in a weakening of the Glasgow Climate Pact’s text from a ‘phase out’ to ‘phase down’ of unabated coal power and inefficient fuel subsidies.
Despite this setback, the achievements at COP26 have put a strong spotlight on the need for new targets and timelines as well as new policies to boost carbon markets, capacity building, and technology deployment in 2022.
Critically for business, the rules of Article 6 are now in place, providing a framework to enable immediate operationalising of global carbon markets. Further details will continue to be developed and there will need to be an ongoing focus on integrity, however business now has certainty that global carbon markets:
- can support the trading of emissions reductions units without double counting;
- will enable hybrid models for corresponding adjustments made for transfers between countries, as well as non-country actors;
- provide a flexible approach to funding global adaptation finance through markets; and
- will enable an orderly transition of Kyoto Mechanism activities into Paris-guided markets by the mid-2020s.
Under Article 6 carbon market rules, COP26 has delivered a platform for greater international cooperation and established a governance framework for international emissions trading capable of high integrity. Booming voluntary global and Australian carbon markets will now need to appropriately align with these rules to ensure verified emission reductions and other social and environmental benefits are achieved in industrial decarbonisation and natural climate solutions.
Other important achievements or outcomes from Glasgow include:
- Deepened focus on the Paris Agreement temperature goal to pursue limiting average global warming to 1.5oC, a goal not mentioned once in modelling for the Australian Government’s “The Australian Way” net-zero 2050 pledge;
- Projections from national and other pledges shifting from above 4oC pre 2015 to 1.8oC at their most optimistic, but a still devastating 2.4oC on a more sober assessment of 2030 goals and policies, important progress nonetheless;
- Glasgow Financial Alliance for Net-Zero with USD $130 trillion in funds under management pledging to assist achievement of Paris temperature goals;
- US-China Joint Glasgow Declaration on Enhancing Climate action in the 2020s;
- Extension of carbon border adjustments and trade instruments including the EU-US Steel and Aluminium tariff agreement announcement;
- The Glasgow Leaders’ Declaration on Forests and Land Use, seeking to reverse deforestation by 2030, endorsed by Australia; and
- The Global Methane Pledge seeks to cut methane by 30% by 2030, not endorsed by Australia.
The Glasgow Climate Pact makes clear that Australia, like many other nations, is expected to develop and deliver an enhanced 2030 nationally determined contribution and enhanced 2030 target before COP27 next November in Egypt.
COP26 also means responsibilities and opportunities for Australian business and carbon markets to deliver decarbonisation and carbon sequestration outcomes with urgency, integrity and transparency. With the Paris rulebook now certain, increased action in the next decade will be critical to stay on a 1.5 degree pathway.
A range of policy options that could enhance Australia’s existing policy suite towards these clear goals, is outlined in CMI’s policy position.
Carbon Market Integrity Roundtable announced
Australia has abundant opportunities in clean energy, technology and natural climate solutions and a decade of considerable experience and achievement in monitoring, reporting and verification. This expertise and experience is an important potential export opportunity. Regional contributions, such as the Indo-Pacific Carbon Offset Scheme, can deliver significant economic, social and environmental benefits.
However, we must also recognise and respond to the fact that aspects of Australia’s own crediting mechanism have recently been the subject of increased scrutiny. CMI is seeking to engage openly with these challenges and will also host a Carbon Market Integrity Roundtable in advance of its forthcoming Australasian Emission Reduction Summit to chart a pathway for reviewing and building on Australia’s integrity framework.
This Summit on 9 and 10 December 2021 at the Sydney International Convention Centre is a unique opportunity to explore the outcomes of COP26 and implications for Australian governments, business and the region.
Speakers include the Chair of the Pacific Island Forum, Fijian Prime Minister Hon. Frank Bainimarama; Co-Chair of the Voluntary Markets Integrity Initiative Rachel Kyte; Australian Energy and Emissions Reduction Minister Hon. Angus Taylor; NSW Treasurer, Energy and Environment Minister Hon. Matt Kean and Opposition Energy and Emission Reduction Spokesperson Hon. Chris Bowen.
COP26 in Glasgow was never going to resolve all issues in the pursuit of Paris Agreement temperature goals but it has galvanised significant action and provided a rules based framework for international cooperation and carbon markets. The challenge is now clear for governments, business and other carbon market participants to deliver investment and markets that achieve these climate goals.
The Carbon Market Institute is the independent industry association for business leading the transition to net zero emissions. Its over 120 members include primary producers, carbon project developers, Indigenous corporations, legal and advisory services, insurers, banks and emission intensive industries developing decarbonisation and offset strategies.
CMI will shortly release a Key Takeaways from COP26, providing more detail on the implications of COP outcomes for Australian business including the role of Article 6 markets for Australia and the region.
For more information please contact John Connor on 0413 968 475