Opinion If the tree doesn’t fall into the woods …

Another puzzle: How many loans should countries get for emission reduction projects that have been implemented in the past under the so-called clean development mechanism, which is not working?

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The climate and the world are changing. What challenges will the future bring and how to respond to them?

No wonder expectations for a breakthrough in Scotland are low. Carsten Warnecke, founding partner of the NewClimate Institute in Cologne, Germany, told me that he has lost confidence in global emissions trading as a solution to climate change. He says rich countries should focus on reducing emissions at home, while giving money to poor countries to help them achieve reductions. (According to the Paris Agreement, rich countries are expected to give $ 100 billion a year, but so far they have not.)

Others share Warnecke’s pessimism. “If there are large financial flows across borders, you are creating voters in developing countries who are dependent on financial flows and will lie and cheat and do everything in their power to maintain those flows,” says Gernot Wagner, a climate economist with University of New York. . He says, however, that rich countries would like to save money by applying for loans for cheap, low-quality loans abroad. “Enforcing these rules is in no interest,” he says.

Some are more hopeful. “There are clear benefits from climate finance channels for things that would not otherwise happen,” says Roman Kramarchuk, head of future energy analytics at S&P Global Platts. Zack Parisa, founder and CEO of the Natural Capital Exchange, a San Francisco-based forest carbon market, says his company has developed standards and technology to ensure that forest protection loans are legitimate. But Paris also says that protecting trees is only a partial solution. “We shouldn’t make the mistake of thinking that forests are an endless sponge,” he says. “It’s an ambulance ride to the hospital.”

Today, there are two categories of emissions trading. There is one authorized by governments, known as compliance markets, where countries or companies have emission limits. Broadcasters can buy credits or allowances to cover their excess emissions and can sell credits or allowances to earn some money if they are comfortably below their ceilings. There is also a voluntary carbon market in which companies such as Delta Air Lines and JPMorgan Chase buy credits to achieve their own emission reduction targets. Negotiations are under way in Glasgow on how to take into account cross-border emissions trading and how these efforts can be seen as national targets.

I interviewed Sonja Gibbs, Head of Sustainable Finance at the Institute of International Finance. She said she and others have been developing rules for the voluntary carbon market over the past 18 months as part of an organization called Taskforce on Scaling Voluntary Carbon Markets. She is optimistic that when it comes to emission reduction credits, it will be a race for top quality and not a race for bottom. “Once you have a standard, there will be a huge demand for it,” he says. “There will be no demand for loans that do not have this recognition.”

Gibbs says that over time, there will be a single global carbon market that combines today’s compliance and voluntary markets: “What happens at COP26 will affect how credit demand develops. If countries set more ambitious targets, there will be more demand for credit.

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