–At least some emerging countries are still skeptical
By Mathew Carr
Nov. 11, 2021 (GLASGOW) — The holy grail of climate solutions is still on the table at the United Nations talks in Glasgow this week.
Yet, it seems to be hanging by a thread.
China and the U.S. both touted a global carbon market yesterday as their apparent bitter rivalry ebbed away, at least briefly.
They are not completely seeing eye-to-eye yet. China press named it: China-U.S. Joint Glasgow Declaration on Enhancing Climate Action in the 2020s
U.S. version was America first: U.S.-China Joint Glasgow Declaration on Enhancing Climate Action in the 2020s
It includes this: Both countries will work cooperatively to complete at COP 26 the implementing arrangements (“rulebook”) for Articles 6 and 13 of the Paris Agreement, as well as common time frames for Nationally Determined Contributions.
Article 6 is about global carbon markets, while Article 13 is about enhanced “transparency” of climate solutions needed to build trust between nations.
The first section of Article 13 says this:
In order to build mutual trust and confidence and to promote effective implementation, an enhanced transparency framework for action and support, with built-in flexibility which takes into account Parties’ different capacities and builds upon collective experience, is hereby established.
Such a framework might be beginning to have an impact …boosting trust, though it’s not quite there yet.
The pandemic has made government finances acutely constrained, especially in poorer nations, which have not caused the climate crisis and where debt is more expensive.
Forty years after Mexico ran out of money and prompted a widespread emerging market debt crisis, developing countries have again built up high levels of debt.
According to The Economist, their government obligations average about 63% of their combined GDP. It cited IMF figures. It’s an increase of more than ten percentage points since 2018. Could the anniversary of one debt crisis be marked by another?
Egypt will not be able to achieve its climate agenda if it’s being hit with higher and higher debt, said Dr Hala Helmy El Said, minister of planning and economic development in Egypt.
Emerging countries need concessional finance or investments, she said in an interview at the Glasgow talks. “My preference is equity.”
Under Article 6, countries and companies around the world will be able to invest in emerging markets to cut emissions. Because costs are lower and the number of opportunities higher, it’s set to be cheaper to generate carbon credits in emerging nations.
El Said’s comment on equity is important because it potentially shows Egypt’s willing to let outside investors take equity in emission-reduction projects, from green-hydrogen plants to distributed energy that does not require expensive power grids. Egypt could get clean tech, a more sustainable economy and lots of well-paying jobs. Win win win.
There remains some skepticism.
“I’m not sure carbon pricing can be a solution or not,” said Sherif Dawoud, deputy head of the ministry’s sustainable development unit.
One area of concern is plans by rich nations to impose carbon border adjustment systems to protect their industries from unfair, dirtier competition located in emerging nations.
“We have a clear provision of the (UNFCCC) convention that measures taken to address climate change should not effect the flow of international trade. That’s very key for us. Because sometimes carbon taxes, border taxes, raising the bar with the standards does not allow the free flow of the trade. We are so concerned about that.”
At the COP26 talks, every measure has to be agreed by everyone — by consensus. That’s why the negotiations are still fraught after three decades.
Emerging countries have not received enough financial support, Dawoud said.
Developing country Nationally Determined Contributions (climate pledges) need about $5.9 trillion up until 2030, according to 1,782 costed needs from 78 NDCs analysed in a document seen by CarrZee. The Article 6 markets may provide some of that but not usually for adaptation.
Could Egypt join a G20 plus carbon pricing club and get equity investments in emission-reduction projects? Carbon credits could then be sold to allow big global companies to achieve their “net zero” targets. The resulting trading activity could help underpin sustainable growth and help boost tax revenues to repay debts.
“It’s still to be negotiated,” Dawoud said. “If it is agreed by everyone, we are happy.”
Another option is a regional trade deal in Africa, perhaps. There could also be regional trade deals in South America, North America, North Asia, etc.
What might seal the G20 deal is improved direct climate finance from rich countries for emission cuts, adaptation and potentially even “loss and damage,” as well as the transparency part.
Artificial intelligence and blockchain is making it much easier to track emissions cutting and also track the resulting carbon trades and goods — throughout their supply chains. It could also ease the concern about the carbon border adjustments and supply constraints caused by the pandemic.
Ports around the world are becoming digitized.
All of the emissions-cutting methodologies overseen by the UN and the World Bank could be placed into a database next year, according to a person familiar with the system, who I spoke with Nov. 10.
What’s more, it may be possible to input data into the same blockchain that will cover other sustainable development goals.
This could add to the value of certain carbon credits that also achieve other objectives, because companies realise that customers are clamoring for products that also “do good” in the world.
The blockchain will also cut the risks for banks in emerging countries, because the security of it limits the potential for corruption.
My sources are telling me that the last thing climate negotiators will do in Glasgow is join up the Article 6 and Article 13 pieces. Climate policy and trade policy is merging.
After a nasty period of Trump-inspired global tension, this may be just the medicine the climate’s doctor ordered.
(More to come)