Conflict of Interest is inherent in Carbon Markets within the UNFCCC


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Carbon market mechanisms are well entrenched within the United Nations Framework Convention on Climate Change (UNFCCC). Trading of carbon emissions is permitted by the Kyoto Protocol, 1997, an agreement under the UNFCCC that requires specified rich industrializedcountries – those listed in Annex I of UNFCCC – to limit and reduce their greenhouse gas emissions to 1990 levels. The Kyoto Protocol was to be implemented in two phases, the first of which is over. In Phase I, Annex I countries committed to limit and reduce emissions by 5 % below 1990 levels during 2008 to 2012. Composition of parties in the proposed second phase – between 2013 and 2020 – was changed by the Doha Amendment and parties were committed to reduce greenhouse gases by 18 % below 1990 levels. The Amendment, however, has not still entered into force for want of requisite ratifications.

Article 3 of the Kyoto Protocol mandates that Annex – I countries, jointly or individually, shall not exceed the aggregate man-made CO2 emissions limit as laid down by Annex B to the Kyoto Protocol. To achieve these commitments, these countries are further exhorted to implement policies and measures such as enhancement of energy efficiency, GHG sinks, carbon dioxide sequestration, afforestation and reforestation. In addition to domestic commitments, the Kyoto Protocol allows countries to use three market based mechanisms:

a) International Emissions Trading (Article 17) that permits countries with emission reduction commitments under the Kyoto Protocol can purchase spare emissions units from one another.b)Clean Development Mechanism (Article 12) that allows Annex – I countries to implement emissions reduction projects in developing countries and earn Emission Reduction Units that can be traded.c)Joint Implementation (Article 6) permits Annex – I countries to implement emissions reduction projects in other Annex – I countries in order to earn tradeable Emission Reduction Units.

A registry created under the Kyoto Protocol keeps track of the trading of emissions trading.

Carbon markets in the Paris Agreement

Carbon markets continue to remain in the Paris Agreement, albeit under different nomenclature. Little thought was given to the inherent conflict of interest that carbon markets have with objectives of both the UNFCCC and the Paris Agreement. This is not surprising given the tremendous influence wielded by rich and powerful polluting countries and the groups that lobby on their behalf. While there was enoughevidence to show that carbon markets mechanisms had failed to deliver the expected results in terms of limiting and reducing emissions, and in fact had led to millions of tons of excess emissions, the US, EU, and their lobbyists were successful in placing carbon market mechanisms at the heart of the Paris Agreement.

Although, Article 6 of the Paris Agreement does not create a carbon market, it recognizes that ´some Parties choose to pursue voluntary cooperation in the implementation of their nationally determined contributions’, and such approaches ‘involve the use of internationally transferred mitigation outcomes towards nationally determined contributions’. The usual rider of integrity, transparency, and accounting practices that ensure avoidance of double counting applies. Article 6 also envisages the establishment of a sustainable development mechanism to mitigate greenhouse emissions, and the creation of a new body that will supervise the working of the mechanism. It will also ‘incentivize and facilitate participation’ of entities, including private ones, authorized by countries.

The language of Article 6 is wide enough to accommodate the various market mechanisms already in place such as carbon taxation policies and cap-and-trade systems. It will also leave the new system created open to abuse by big polluters as they can trade emissions in international markets under the guise of meeting countries’ Nationally Determined Contributions domestically. Since, unlike the Kyoto Protocol, there is no distinction between developed and developing countries, carbon markets can unravel the Paris Agreement.

Continuing Conflict of interest

Conflict of interest tends to be exacerbated by the fact that observer organizations such as the International Emissions Trading Association (IETA) are present at each session of the UN climate talks. The IETA has been founded and funded by some of the biggest polluters such as Shell, Total, and Chevron, and continues to be controlled by them. Groups such as the IETA benefit from delaying climate action and their massive lobbying efforts helped put carbon markets right at the center of the Paris Agreement. The recent Bonn intersessional was no different. Proponents of carbon markets were present when country representatives met in order to hold further negotiations. Pertinently, negotiators could not reach a consensus and the informal notes from the meetings show that more work is needed.

As admitted by the UNFCCC, carbon market mechanisms effectively reduce the climate to a commodity. These mechanisms allow the global north to purchase the right to pollute. Previous attempts at monitoring carbon market emissions have had less than successful results. As noted, carbon markets have failed and instead of providing real solutions with tangible effects, they simply move emissions around from one country to another. Combined with reluctance of the UNFCCC to adopt a ‘conflict of interest’ policy, carbon markets pose a serious threat to the Paris Agreement’s potential to prevent the world from reaching the 2 degree temperature threshold. Countries must, thus, completely reject the notion of carbon markets within the Paris Agreement.

( Zeenat Masoodi is a Lawyer living in Srinagar
Email: )


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