The Conference of the Parties in Dubai will clearly not mark the end of the fossil-fuel age. But what are the subjects organisers will want to push forward, if only as cover to dampen the attacks on oil?
Forests have grabbed a prominent spot. There are many reasons why forests are important for governments. Home countries of major forests see an opportunity to benefit from new funding from developed states, oil-producing countries look for solutions to offset their carbon emissions while continuing extraction, and developed countries hope to finally implement a market for carbon credits for their companies.
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Countries’ common interest in forests presents an opportunity to achieve significant milestones, but disagreements and even conflicting interests will make the path difficult.
In the context of this new COP, there is no doubt that finalising the implementation of the future carbon market will be at the heart of discussions. Following several years of negotiations, we seem to be close to an agreement. The supervisory body responsible for defining the framework of this market reached a consensus on November 18 and decided to send its recommendations to the COP with a view to them being adopted by governments.
Ratifying this definition could provide a new structure for the global carbon market.
It could have a significant impact on the voluntary carbon market, which enables companies committed to carbon neutrality to “neutralise” the residual part of their emissions (once they have been reduced), by acquiring credits from reforestation or conservation projects.
Over the past two years, however, this market has experienced many headwinds. Several scientific studies and press reports have questioned its effectiveness and integrity.
Nevertheless, several initiatives aimed at improving the quality and integrity of this market, both on the supply side (quality of projects) and the demand side (verification that companies have made every effort to reduce their emissions) have emerged and the implementation of future recommendations could allow the voluntary carbon market to continue its reform and grow stronger.
The need for forests is not in doubt
One thing is certain: the need for funding to restore and conserve forest ecosystems is enormous.
The current market for voluntary carbon credits is far from meeting these needs, with investments of barely EUR 2 billion ($3.27 b) a year.
Furthermore, forests cannot be reduced to carbon sinks. They also play a major role in maintaining biodiversity. For this reason, an international working group was launched last June, aiming to set up a market for biodiversity credits – in other words, financing projects to safeguard biodiversity, without referring to carbon storage.
These credits could be of interest to companies which, in addition to their carbon-neutrality commitments, are beginning to make positive commitments to nature. It remains to be seen whether it will be possible to develop this new market without first settling the issue of the carbon credit market.
This search for funding, particularly the transfer of capital from the developed to the forested countries of the South, sparks interest. It is believed by some that developed countries must “pay rent” to countries with large areas of forest to encourage conservation.
This is the claim put forward by Brazil, which is proposing the creation of a fund financed according to the surface area of forests, considered standing carbon.
This rent-seeking approach is different to the vision of developed countries and carbon credit markets that link financing to concrete actions to avoid deforestation.
The risk of land grabbing and more
This attempt to turn forests into rental income could nonetheless tempt oil producing countries such as the Emirates, which recently acquired 10 per cent of Liberia, to carry out projects to combat deforestation and benefit from carbon credits, but with a high risk of land grabbing to the detriment of local populations.
There are so many issues at stake. Forests are essential both for achieving climate objectives and safeguarding biodiversity, but also risk being instrumentalised in complex geopolitical manoeuvres.
Against this backdrop, companies have an important role to play in clarifying their commitments to the climate and nature, and by weighing-in on building high-quality, transparent markets that will enable them to achieve these objectives.