Cash Is Now the Main Question as Talks Run Over: COP26 Update

Bloomberg — COP26 talks are now in the final stretch, with negotiators haggling over money, coal, and carbon-trading.

Two proposals that have faced resistance -- calling for a shift away from fossil fuels and for countries to upgrade their climate plans -- survived another night of talks. The main issue now is how the rich world will help poor countries withstand the worst effects of climate change. Vulnerable island nations are enraged by the lack of new funds.

But negotiators are moving closer to a deal on global emissions trading that could speed reductions of greenhouse gases. While environmentalists say it still needs to be strengthened against the risk of greenwash, the latest draft offers a compromise.

As talks run well into overtime, some top officials from smaller countries are already heading home. Covid rules on tests, flights, and quarantine are adding extra logistical hurdles right to the end.

Key developments:

• Latest draft on carbon-trading shows signs of progress
• COP set to call for phase-out of unabated coal and “inefficient” fossil-fuel subsidies
• Countries told to strengthen climate plans next year
• Maldives says it’s not good enough
• EU, Italy are hatching a plan to solve the finance gap
• Activists warn that carbon-trading deal could lead to greenwash...
• ... while delegates got through 11,000 liters of disinfectant

How Good is the Carbon-Trading Deal?

As negotiators close in a deal on a global carbon market, activists and experts are pouring over the detail.

The new proposal has been praised by some activists for offering stronger provisions on accounting -- a key issue. Another important element of the draft is also an obligation to cancel 2% of newly issued credits -- a step that would ensure pollution is cut, rather than just offset elsewhere.

Kelley Kizzier, vice president for global climate at the Environmental Defense Fund and a former negotiator, called the new draft text a good deal.

“It gives us a robust accounting framework, especially for compliance markets,” she said in an interview. “I think it also provides the opportunity for avoiding double counting for voluntary markets for the first time. But that will definitely be the job for civil society and national governments to make sure that that’s implemented.”

Yet some activists voiced concerns over the treatment of old carbon credits generated under the now-defunct Kyoto Protocol-era offset market. Up to 4 gigatons of old units could be carried over -- more than the annual emissions of Russia and Indonesia combined, according to WRI’s Helen Mountford.

“This is a concern, and we need to ensure that this is as limited as possible” lest it undermine ambition,” she said.

Maldives Laments Lack of Progress

With just minutes to go before countries take to the floor to take stock, the Maldives have signaled their unhappiness with the amount of adaptation finance provided for in the draft text, setting the stage for a potential showdown.

“We know through the trillions that are invested in fossil fuels every year that money is not the question -- the question again is one of political will,” said Shauna Aminath, environment minister for the chain of 26 atolls in the Indian Ocean, which are threatened by rising sea levels.

“We have 98 months to halve our emissions. We are not there. The difference between 1.5 and 2 degrees is a death sentence for us.”

Saudi Arabia Doesn’t Reject Fossil-Fuel Line

Saudi Arabia doesn’t object to the line in the text that calls for a phase-out of “unabated coal power” and “inefficient” fossil-fuel subsidies, according to a person familiar with the country’s position.

The coal line would be a big win for the summit as it would make the first time a final COP text references the need to move away from the dirtiest fossil fuel. Still, the fossil-fuel language matches what the G-20 has been saying for years, even as members continued to pump billions of dollars into subsidies.

Greenpeace Celebrates Fossil-Fuel Language

“The key line about fossil fuels is still in the text,” says Greenpeace International Executive Director Jennifer Morgan

“It’s weak and compromised, but it’s a breakthrough, it’s a bridgehead and we have to fight like hell to keep it in there and have it strengthened.”

The Risk of Compromise

The draft compromise proposal on a UN-supervised carbon market is a good start but still needs stronger provisions on the use of credits from a previous program, according to Gilles Dufrasne of Carbon Market Watch. Under the new documents, offsets from projects registered under the Clean Development Mechanism in 2013 or later could be transfered to the new market.

The controversial, technical issue of provisions to avoid double counting also needs more analysis, according to Dufrasne. “It looks like the risk has been reduced but the devil is in the detail and we will need to see how this can be implemented in practice.”

New Ad Hoc Finance Group

Climate finance has been one of the thorniest issues at COP26, and newly released drafts are unlikely to mollify poor nations angered by wealthy countries’ failure to fulfill a pledge for $100 billion annually that was supposed to start flowing by 2020.

Under draft documents released Saturday, an ad hoc group would work to develop a new climate finance plan for the second half of the decade with the new collective funding goal established in 2024.

But negotiators have dialed back any commitment on what that plan would actually look like -- including by omitting proposed language to set the floor at $100 billion annually and mobilize at least $1.3 trillion per year by 2030.

Coal and Fossil Fuel Phase-Out

COP26 is set to call for a phase-out of “unabated” coal and “inefficient” fossil-fuel subsidies, according to the latest draft. It will likely be considered a win after the line faced fierce resistance from some countries. If it survives until the end, it will be the first time a final COP text references fossil fuels.

Still, the G-20 has been calling for an end for inefficient fossil-fuel subsidies for a decade, and the latest numbers show those countries spent $600 billion subsidizing fossil fuels.

“It’s a major shift if it survives since it’s been so verboten,” said Collin Rees, a senior campaigner at the environmental group Oil Change U.S. Even if the language won’t “deliver much tangible change by itself,” he said, the real value is in signaling the shift away from fossil fuels and setting a precedent to build on.

Paying for Climate Damage

Negotiators have moved closer to a plan for compensating climate-vulnerable countries for the damage caused by global warming. A new draft has countries committing for the first time to provide funds to a program that was set up years ago but still doesn’t really work.

Under the latest draft text, the so-called Santiago network “will be provided with funds to support” efforts to avert, minimize and address loss and damage associated with climate change.

It still falls short of the demands from climate-vulnerable countries.

Gaps Are Closing on Carbon Trading

Envoys moved closer to a deal on launching a global carbon market market, according to a new draft.

The document outlines solutions to some of the biggest sticking points, including the accounting rules. Here, negotiators backed provisions endorsed by Brazil, Japan and the U.S., which environmental activists say creates the risk of lax accounting -- or greenwashing.

Negotiators kept a rule that 5% of revenues from offset trading under the new UN-supervised program would have to be channeled to developing countries to help them adapt to climate change. And to ensure that the market accelerates pollution cuts, 2% of newly issued offsets would have to be canceled.

There’s also a draft compromise on the use of old Kyoto Protocol-era offsets. The unused so-called Certified Emission Reductions would only be authorized for use to meet nations’ first climate plans under the Paris Agreement. To qualify, the offsets would have to come from projects registered no earlier than 2013.

New Steps on Carbon Trading

Negotiators are making progress on creating rules for international carbon markets. A new draft proposal published on Saturday moves ahead on the thorny issue of how to use cash generated from bilateral emission trades.

Instead of channeling a fixed share of revenues to developing countries, a demand voiced by African nations and other developing countries, now they are “strongly encouraged to commit” to contributing funding for adaptation, particularly through the Adaptation Fund.

EU, Italy Seek Band-aid on Finance

The European Union and Italy are rushing to draft a last-minute climate finance proposal that would help rich countries make good on failed funding promises -- and perhaps rescue COP26 negotiations.

(Michael Bloomberg, the founder and majority owner of Bloomberg LP — the parent company of Bloomberg News — committed $500 million to Beyond Carbon, a campaign aimed at closing the remaining coal-fired power plants in the U.S. by 2030 and halting the development of new natural gas-fired plants. He also started a campaign to close a quarter of the world’s remaining coal plants and cancel all proposed coal plants by 2025.)