Carbon Offset Market Goes GLOBAL - COP26

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The UN's plans for a global offset market, and what might - and might not - happen at COP 26.

It's all about Article 6.

That's Article 6 of the Paris Agreement - approved on the final day of that meeting back in 2015 - which lays out, broadly, the goal of the UN-administered international carbon trading scheme.

Everyone agrees on the need for a rulebook that lays everything out in black-and-white. But nations tend to prefer grey areas, and a carbon market would cover a lot of those.

Setting the table

The broad outline of the discussion runs like this:

Every nation has NDCs - Nationally-Determined Contributions - that outline exactly how much each one is able and willing to reduce their CO2 emissions.

Each NDC is broadly determined by the goals of the Paris Agreement.

Given that those NDCs are different, there's room for some countries to cut emissions faster. That opens the door for a system in line with a traditional cap-and-trade system.

Entities that cut emissions quickly come in under the cap; they can trade their excess credits to other entities that need a bit more wiggle room.

That's all well and good in practice. But governments aren't your normal entities.

First off, those NDCs aren't created equal - some countries are doing more to cut emissions than others.

How are those efforts graded and measured?

What should each country be doing?

Should some offsets count for more than others, since some countries can meet their reductions targets more easily?

All of those are thorny questions for the leaders gathered in Glasgow to consider. But the problem goes even deeper.

International markets meet the VCM

What about private efforts within those countries? After all, carbon offset projects, particularly involving nature-based offsets like forestation efforts, are nothing new. They've been around for decades.

Do those projects count? Institutions like the Gold Standard have been heavily involved in measuring those early offsets. How much do they carry over?

COP 26 needs to define the guidelines by which an internationally-regulated offset market will operate. In doing so, they'll have a chance to set the standards for the broader Voluntary Carbon Market (VCM).

The VCM has already seen explosive growth. If the leaders at COP 26 can establish a good framework, that growth rate could skyrocket.

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