Following the wake of the Montreal Protocol in 1987 the UN in conjunction with the World Meteorological Organization established the Intergovernmental Panel on Climate Change (IPCC) in 1988.

For a brief history of climate change before this, click here.

The IPCC’s first assessment report, released in 1990, would conclusively assert that human activities were the leading cause of global warming.

This report would set the foundation for the United Nations Conference on Environment and Development (UNCED) in RIO in 1992.

From that event three Conferences of the Parties or COP emerged, focused on desertification, biodiversity, and climate change.

United Nations Convention to Combat Desertification (the UNCCD)
The Convention on Biological Diversity (CBD)
The United Nations Framework Convention on Climate Change (the UNFCCC)

The first international climate change conference COP was held in Berlin in 1995. With 118 parties representing UN member states in attendance.

Among other things, on the agenda for COP1 was a review of the commitments made under the UNFCCC. And one of the first decisions agreed on at the first COP was that prior commitments made under the UNFCCC would not be adequate to combat climate change.

Discussions on what exactly would be adequate would continue at COP2 in Geneva. It was decided that flexible policies for each country would be preferable over a single unified policy. Legally binding mid-term targets would be required as well.

At the same time, the IPCC’s second assessment report was accepted by the parties.

The Kyoto Protocol: COP3 – COP20

COP3 would take place in Kyoto in 1997, and it was there, after extensive negotiations, that the Kyoto Protocol would be implemented.

An extension of the original UNFCCC commitments, the Kyoto Protocol was adopted that same year but wouldn’t come into effect until 2007.

Under the Kyoto Protocol, more economically developed countries would take the lead in limiting their greenhouse gas emissions. This reflected the fact that their higher level of industrialization would have given them historically higher emissions.

At the following meeting, COP4 in Buenos Aires in 1998, final details regarding the Kyoto Protocol were supposed to be resolved. But the remaining issues proved to be too difficult for the parties to agree.

As a result, these negotiations would carry forward into a “Plan of Action” through COP5 in Bonn in 1999 and COP6 in The Hague in 2000.

COP’s Plan of Action

Though this Plan of Action was supposed to be wrapped up by COP6, talks fell through at the conference and had to be continued in a “part 2” COP6 in 2001.

During this second COP6 meeting, which took place after the Bush administration withdrew the United States from the Kyoto Protocol. A number of key agreements were made there, such as those regarding the Clean Development Mechanism (CDM) that the Kyoto Protocol is notable for.

Under the CDM, the private and public sectors of high-income nations have the opportunity to purchase carbon credits from projects in middle and lower-income nations.

Further details regarding the Kyoto Protocol would be finalized at COP7 in Marrakech later that same year. This capped off the Plan of Action that had been established three years earlier at COP4.

COP8 in New Delhi in 2002 and COP9 in Milan in 2003 set some provisions. They require the more economically developed nations to assist developing countries in adapting to climate change through the transfer of technology.

Then came the ten-year anniversary of the climate change conference, the COP10 in Buenos Aires in 2004. It saw another special Plan of Action to continue supporting developing countries.

This was also the first conference where the parties began discussing the next step in their emission reduction efforts past the Kyoto Protocol, which was scheduled to end in 2012.

COP11, held in Montreal in 2005, was where the Kyoto Protocol was finally entered into force for the initial commitment period of 2008-2012.

Another Action Plan was devised. This time, the plan is to extend the Kyoto Protocol beyond its initial end date in 2012. Also, to negotiate even deeper cuts in GHG emissions.

Further refinements to the support for developing countries through processes such as the Clean Development Mechanism were made during COP12 in Nairobi in 2006.

During COP13 at Bali in 2007, a timeline and structure for negotiation of what to do after the expiry of the Kyoto Protocol was laid out through the Bali Action Plan. And a new working group was established to manage said negotiations.

This is the first conference held following the commencement of the Kyoto Protocol. The main issue discussed at COP14 in Poznań in 2008 was for a replacement agreement that would succeed the Protocol.

Going into COP15 at Copenhagen in 2009, the primary aim of all parties in attendance was to hash out an agreement for 2013 onwards.

However, the countries present could not come to an accord. And so, their discussions were continued at the next COP.

COP16 in Cancún saw the establishment of a “Green Climate Fund”. Under this Fund, the wealthier nations were supposed to provide US$100 billion to developing countries each year. The aim is to assist them in mitigating the impact of climate change.

However, agreement for the actual funding of this $100 billion a year was not actually reached.

COP17 in Durban in 2011 marked the beginning of negotiations for what would become the successor to the Kyoto Protocol – the Paris Agreement. It was set to be adopted in 2015 and go into effect after 2020.

Discussion also continued on an extension of the Kyoto Protocol. It covers the period between the end of the initial commitment period in 2013, and the start of the Paris Agreement in 2021.

COP18 took place at Doha in 2012, during the last year of the initial Kyoto Protocol commitment period. Negotiations were successful here to create the Doha Amendment to the Kyoto Protocol. It created a second commitment period from 2012 to 2020.

Unfortunately, a number of major countries such as the U.S., Canada, China, India, Japan, and Russia either did not commit to this second period, or were not subject to emissions reductions under the Protocol. This makes the Doha Amendment somewhat of a stopgap measure.

The next COP, COP19 in Warsaw in 2013, continued discussions regarding the proposed international agreement in 2015. But the talks were marred by a series of walkouts from poorer developing countries. They accused the most industrialized countries of putting too much of the burden on them.

Further groundwork was laid for what would become the Paris Agreement at COP20 in Lima in 2014.

The Paris Agreement: COP21 – COP26+

Discussions that first began at COP17 in Durban would finally conclude at COP21 in Paris in 2015. This COP established what we now know as the Paris Agreement.

The Agreement was ratified by 194 parties – all but four member nations of the UNFCCC. Its primary goal is to limit global warming below 2°C above pre-industrial levels and, ideally, below 1.5°C if possible.

In order to achieve this, global emissions would roughly need to halve by 2030, and be completely net zero by 2050.

The Paris Agreement consists of rolling five-year periods in which each country agrees to a reduction plan. It’s what they referred to as their Nationally Determined Contribution (NDC).

A new NDC must be submitted every five years, and each NDC must be more ambitious than the last.

Set up this way, the Paris Agreement is the “final” international climate change agreement for the foreseeable future. It was also the first one to be legally binding and hence enforceable.

Several countries and even oil majors like Shell facing climate litigation on the grounds of violating the Paris Agreement.

The Paris Agreement entered into force in November 2016. This is when further work on the actual implementation and details of the Agreement would take place at COP22 in Marrakech later that month. Then COP23 was held in Bonn the next year.

Rules governing the implementation of the Paris Agreement were mostly settled at COP24 in Katowice in 2018. One notable exception was Article 6 of the Agreement, the rules covering the establishment and management of an international carbon market.

Discussion over the particulars of Article 6 was the primary focus of COP25 in Madrid in 2019. Yet, the issue went unresolved. Talks were supposed to resume at COP26 in 2020, but the conference was delayed due to the COVID-19 pandemic.

It wouldn’t be until 2021 in Glasgow that the issue of Article 6 of the Paris Agreement would finally be settled at COP26, setting the foundation for an international carbon market.

What to Expect From COP 27 in 2022

Up next on the calendar is COP27. It will take place in Sharm El Sheikh in Egypt from Sunday, November 6 to Friday, November 18.

Usually, there are dozens of topics of discussion at each annual COP. The abbreviated summary provided above highlights just one or two major points of interest from each previous conference. However, there are often several different minor agreements and details addressed at each COP.

Likewise, there are a couple of different things we’ll probably see on the agenda for COP27:

The IPCC’s sixth assessment report was released just earlier this year. And it’s expected that the parties will recognize the report’s results.
There is scheduled to be a “global stocktake” of climate action at COP28 in Dubai next year. The aim is to measure the actual progress made by the Paris Agreement towards combating climate change. The focus will be on results at COP 27, and whether or not countries are actually hitting their targets.
Back at COP16 in Cancún, a Green Climate Fund was established that was supposed to provide $100 billion a year in climate assistance. However, this fund still remains some $17 billion short. And this will likely be addressed once again as it has been regularly since 2010.
“Loss and damage”, or permanent harm caused by climate change is a term that was coined back at COP18 in 2012. An example is sea level rises rendering areas uninhabitable. There’s an expected financial responsibility for the wealthy industrialized nations, who were the primary drivers of climate change in the past, to assist lesser developed nations suffering from loss and damage; but the exact particulars remain unresolved.
There has been the recent bouts of inflation and food/energy shortages. So, expect a further focus on climate finance particularly from developing nations.
Taking all current climate change pledges and NDCs into account, it’s been calculated that global warming will still exceed the 2°C target set by the Paris Agreement. Expect to see further rhetoric revolving around the Paris Agreement’s mechanism of increasing ambition.

All in all, the key themes of COP27 will likely revolve around Implementation and Climate Finance.

The post The Timeline of the COP Conferences Leading to COP27 appeared first on Carbon Credits.

The federal government of Nigeria is pioneering a billion-dollar worth of voluntary carbon market on the African continent.

The news was announced in a statement from the Office of the Vice President.

“It is an innovative climate change solution which will create, over the period of energy transition, millions of new jobs in Nigeria alone, according to estimates of the international experts.”

The establishment of the voluntary carbon market (VCM) is one of the efforts of Nigeria to help achieve the global net zero emissions target.

The Africa Carbon Markets Initiative (ACMI)

Led by a 14-member steering committee of African leaders, CEOs, and carbon credit experts, the Africa Carbon Markets Initiative (ACMI) seeks to expand Africa’s participation in the global VCMs.

Members include the VP of Nigeria, the former President of Colombia, the President of the African Development Bank, U.N officials, USAID, the Gates Foundation, and other international private sector participants.

ACMI will be launched during the upcoming COP27 (International Climate Change Conference of the Parties) in Egypt in November. It will lead the way in making carbon credits an effective tool to reduce emissions while financing green initiatives across Africa.

The launching is in collaboration with several organizations namely:

Global Energy Alliance for People and Planet,
Sustainable Energy for All,
UN Climate Change High-Level Champions, and
UN Economic Commission for Africa

This African carbon credit initiative will promote the use of eco-friendly energy sources both for domestic and industrial purposes.

Nigeria Carbon Credit Potential

ACMI estimated that Nigeria itself can generate as much as 30 million carbon credits every year by 2030. Using a price of $20 dollars per credit, the country’s VCM will be worth over half a billion dollars per year.

According to ACMI’s estimates:

“At this level of production, the industry could potentially support over 3 million Nigerian jobs… And Nigeria has only a portion of Africa’s total potential – the impact for the continent as a whole could be far greater.”

The number of jobs supported will be from the time when the Nigerian VCM will start to kick off until 2060. It‘s also the period covering the nation’s energy transition.

Part of this vision is the nation’s goal to pioneer climate solutions that will benefit the continent and the world. And one key solution is the generation and sale of carbon credits. This financial instrument offers Africa a great potential to be explored.

Nigeria’s carbon credit potential will come mostly from the forestry sector and household devices. Projects in both sectors deliver significant climate benefits.

For instance, carbon credits from clean cookstoves and solar lamps help expand access to clean energy and improve health outcomes. Likewise, forestry carbon credits will help conserve the nation’s rich biodiversity and support sustainable livelihoods.

Most remarkably, carbon credits will support Nigeria and other African countries’ nationally determined contributions (NDCs) under the Paris Agreement.

Boosting Nigeria Voluntary Carbon Market

Nigeria commits to support the development of its domestic voluntary carbon credit market. It explores strategies for how the credits can best spur investment and economic growth in the region.

Both leaders of the federal government, President Muhammadu Buhari and Mr. Osinbajo’s have won applause for their climate leadership. They put in place policies that support the development of the carbon credit industry.

In August this year, Nigeria took its first major step to benefit from the over $175 billion global carbon trade by developing the country’s own Emission Trading Framework.

Building on its previous climate actions, Pres. Buhari signed the Climate Change Act of 2021. It provides a framework for national coordination on climate change issues.

The current administration of Buhari is known to achieve significant climate efforts. These include the creation of the National Council on Climate Change inaugurated last month. The council will oversee actions that reduce emissions.

As for the Vice Pres. Osinbajo, he also launched Nigeria’s Energy Transition Plan. It details the roadmap Nigeria will follow to reach net zero emissions by 2060.

To further encourage the production of carbon credits, the federal government is also devising a carbon credit activation plan. It will determine who will be responsible for the regulation and promotion of carbon credits,

The plan will also outline actions the government can take to support the industry.

The post Nigeria Pioneers a Billion-Dollar Voluntary Carbon Market appeared first on Carbon Credits.

A group of U.S. lawmakers are pushing the Commodity Futures Trading Commission (CFTC) to deal with the integrity of carbon credit markets and regulate them.

Senators Cory Booker, Elizabeth Warren, Edward Markey, Richard Blumenthal, Bernard Sanders, Jeffrey Merkley, and Kirsten Gillibrand sent a letter to CFTC Chairman Rostin Behnam.

They requested that the CFTC establish “rules governing the carbon market.” They refer to the schemes that are used by firms to offset their carbon emissions.

Carbon offsets are carbon credits in the voluntary carbon market (VCM). Unlike the compliance carbon market, the VCM works based on market dynamics.

The Plea to Regulate the Carbon Credit Markets

In the letter, the U.S. senators stated that buying offsets enables companies to:

“…make bold claims about emission reductions and pledges to reach “net zero”, when in fact they are taking little action to address the climate impacts of their industry…”

Carbon credits are designed to provide offsets from actions that reduced or removed CO2 from the atmosphere.

Theoretically, one carbon credit represents one tonne of carbon removed or avoided. But in practice, the lawmakers claim that carbon offset projects are illegitimate and can often represent the broader ‘pay to pollute’ schemes.

While carbon credits fall under the CFTC-regulated derivatives, the agency only has anti-fraud and anti-manipulation authority over the VCM. Also, the Commodity Exchange Act doesn’t directly govern a registration and oversight structure on cash or spot markets.

In a sense, the lawmakers’ requests to act on the carbon credit markets go beyond the statutory authority of CFTC. And so, it’s the U.S. Congress that has to act.

But the CFTC continues to consider whether the offsets market is indeed “susceptible to fraud and manipulation” as the senators said in their letter.

They letter stated that offsets that didn’t deliver the environmental benefits they promised constituted “fraudulent investments”. And that they served as:

“… a convenient and profitable way to market climate consciousness without requiring real action to reduce emissions…”

Carbon Offsets: A ‘Pay to Pollute’ Permit or a Path to Net Zero?

Carbon offsets have grown so popular over the past two years. According to the Ecosystem Marketplace, trading of voluntary carbon credits increased from $520mn in 2020 to $2bn in 2021. 

Here’s the VCM transaction volumes, prices, and values by category, comparing 2020 and 2021 results.

Along with its growth, however, is the criticism about a lack of market standards. Critics say that the market is unregulated and very fragmented.

In the UK, a similar trend is happening. The country’s Climate Change Committee (CCC) had warned that without reform, the offsets market may risk challenging net zero plans.

Hence, the CCC also requested the British government to provide guidance, regulation, and standards to the market. This is to improve market transparency and boost standards.

Meanwhile, supporters of the VCM noted that greenwashing could destroy the offsets market.

Amid all the scrutiny, several initiatives from the private sector draw rules to improve market credibility.

Proponents of carbon credit markets say they help channel money into the right projects. Plus, a carbon price urges firms to curb their emissions.

They also argue that while entities should reduce emissions as much as possible, offsets offer a solution to deal with hard-to-abate emissions.

Right now, carbon credits trade in various voluntary markets. This means that the markets are not governed by federal regulations like the ones that regulate derivatives and securities markets.

The lawmakers recommended the following to CFTC to deal with their concerns on carbon credit markets.

Investigate the integrity of currently approved derivatives and their underlying carbon offsets;
Develop standards for carbon offsets that reduce emissions and can serve as underlying commodities for approved derivatives;
Create a registration framework for offsets, offset brokers, and offset registries;
Pursue cases of individual project fraud; and
Develop a working group to study both the risk to investors associated with carbon offsets and derivatives and the climate financial risk they may bring.

The CFTC’s focus on carbon credits is part of its broader role in managing climate-related financial risks. This is evident in its various efforts such as establishing the Climate Risk Unit, hosting the Voluntary Carbon Market Convening, and its most recent request for information on climate risk in the nation’s financial system.

The senators’ letter responds to the CFTC’s public call for information on climate-related financial risks.

The post US Senators Plead CFTC to Govern Carbon Credit Markets appeared first on Carbon Credits.

Saudi Arabia’s Public Investment Fund (PIF) auctioned off 1.4 million tons of carbon credits, the largest-ever in the world, during the 6th edition of the Future Investment Initiative (FII) conference in Riyadh.

A total of 15 Saudi and regional firms took part in what has been considered as the biggest ever carbon credit auction as per a press statement.

Carbon credits allow entities to emit a certain amount of CO2 or other potent gases — with one credit equal one ton of emissions. They’re designed as a mechanism to reduce carbon emissions via a market where firms and individuals can trade their emissions permits.

Saudi Aramco Buys the Most Carbon Credits

The FII forum held the auction of 1.4 million tonnes of carbon credits registered under Verra and comply with the CORSIA.

The sale of these high-quality carbon credits support companies from various industries in Saudi as they strive to reach net zero emissions.

The auction also has a crucial role to play in PIF’s wider efforts to help drive investment and innovation to support the Kingdom’s pursuit of net zero by 2060.

Of all the participants in the sale, oil giant Saudi Aramco, mining firm Ma’aden, and Olayan Financing Company bought the largest number of carbon credits.

Other winning bidders included ENOWA (NEOM subsidiary), ACWA Power Co., Gulf International Bank, SABIC, Saudi National Bank, Saudi Motorsport Co., and Yanbu Cement Co.

Alongside the carbon credits auction is Aramco’s announcement of launching a $1.5 billion fund to support an inclusive global energy transition. The fund is under the management of Aramco Ventures.

Saudi officials said that the shift will take decades to happen. It will also need continued investment in conventional resources.

For Aramco’s CEO Amin Nasser:

“The current transition plan is flawed honestly. It is not really delivering. What we need is an optimal, realistic transition plan… We need to realise that today alternatives are not ready to shoulder a heavy load of the growing energy demand and therefore we need to work in parallel until alternatives are ready.”

The Aramco sustainability fund targets global investments in support of energy transition. It will initially focus on areas such as carbon capture and storage, GHG emissions, hydrogen, ammonia, and synthetic fuels.

Saudi Arabia and other Gulf Arab states have been boosting their green credentials.

Saudi Finance Minister Mohammed al-Jadaan told the FII gathering that the outlook for Gulf oil producers was “very good” and will remain so for the next 6 years.

He also added that they’re investing as much in conventional energy and are also doing the same in climate change initiatives in the region.

PIF’s New Voluntary Carbon Market

The carbon credit sale was part of the Voluntary Carbon Market (VCM) Initiative by the PIF and Saudi Tadawul Group in September 2021, an attempt to back Saudi Arabia’s green journey.

It also follows the Wealth Fund’s past announcements which include the $3 billion inaugural green bond. These are all part of PIF’s commitment to develop 70% of the Kingdom’s green energy capacity in line with the Vision 2030.

The new VCM company, headquartered in Riyadh, will facilitate the efforts of the auction. It will also offer guidance and resources to help firms and industry in the region as they move towards net zero.

PIF will hold 80% stake in the new company, while Saudi Tadawul Group will hold the remaining 20%. 

Yazeed A. Al-Humied, head of MENA investments at PIF, noted that the new regional VCM firm is a major milestone for the MENA region. He further said:

“We are passionate about the potential for voluntary carbon markets to deliver additional carbon reduction benefits throughout the region… thereby ensuring the MENA region is at the forefront of climate action and that Saudi Arabia is a leading force in solving the climate challenge.

The CEO of Saudi Tadawul Group, Khalid A. Al-Hussan, said that they are working towards encouraging the adoption of ESG disclosures in the Saudi capital market.

While for the VCM Initiative director, the auction represents the first step for the region to have a leading presence in the global VCM ecosystem.

Indeed, with over one million of carbon credits to trade in Saudi, it will be the largest auction to date.

The purchase agreements will ensure that the offsetting that carbon credits offer go beyond meaningful emission reductions in companies’ value chains.

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