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Highlights

Projected emissions growth leaves urgent policy gap

International emissions trading can slash climate costs

Incentives for emissions removals can enable net zero

London — Governments urgently need to agree policies to reduce greenhouse gas emissions to avoid adding to a build-up of atmospheric emissions that would push the world over dangerous temperature thresholds, according to Stefano De Clara, director of international policy at the International Emissions Trading Association.

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Failure to agree on a system of international emissions trading under the Paris Agreement would risk missing out on large-scale emissions reduction options that would slash the cost of seeing off the threat of climate change, he said.

"It is a big challenge. Getting towards 2 degrees Celsius will already be challenging, and getting to 1.5 degrees will require a huge effort," De Clara said in an interview Monday.

"It's also pretty clear from the [Intergovernmental Panel on Climate Change] reports, and from all the various scenarios, that we don't have much time to waste," he said.

Global efforts to rein in emissions from fossil fuels use and other sources under the Paris Agreement on climate change so far fall short of what's required, leaving a policy gap that governments must fill, he said.

"Whether we are on track to meet the 2 degrees or 1.5 degrees scenario will depend on what we do this coming decade. And if you look at the commitments that are on the table, and the commitments that are likely to be on the table in the first 10 years of the Paris Agreement, it is clear that there is quite a gap to fill," he said.

TECHNOLOGY AND POLICY NEEDED

The falling cost of technologies including solar panels, wind turbine components and electric batteries have helped deliver part of the work required, but these will not be enough to get the world on track to avoid dangerous climate impacts, he said.

"Technology developments can help, and this makes it easier to some extent. But what is needed – given that it's a 30- or 40-year game – is strong policies that can drive deployment of technologies and policy frameworks that can drive what you are trying to achieve," said De Clara.

S&P Global Platts Analytics' forecasts for carbon dioxide emissions from global energy consumption indicate a likely global peak will be achieved in the late 2020s, with a gradual decline out to 2040.

The figures also show that emissions reductions in more developed countries are likely to be overshadowed by rising emissions in fast developing economies.

That suggests more needs to be done to reach global net-zero emissions by 2050 – a goal that an increasing number of governments are targeting, including the UK and the European Union countries.

That's where the Paris Agreement's Article 6 comes in – the section of the 2015 climate accord that sets out a global system of emissions trading between governments.

Article 6 is needed to achieve larger emissions reductions at scale, allowing a balance between emissions that are difficult to reduce and emissions removals from the atmosphere using forests and other land use projects that absorb and store CO2, said De Clara.

"If you look at it more closely, there are a number of things that Article 6 can do and facilitate. It can, of course, be a driver of uptake of more domestic carbon pricing policies and carbon markets. If you have a pathway to link policies, more and more countries will be encouraged to go down that path," he said.

The potential that can come from the use of markets, both in terms of cost savings and of additional emissions mitigation, is quite significant, he said.

"Then there is a third element, which over time will become the most important one, which is that effectively the notion behind the long-term goal of the Paris Agreement is to reach a balance between emissions and removals – net zero effectively – in the second half of the century," according to De Clara.

"That is what would make the 2 or 1.5 degrees possible," he said.

That idea of balancing out emissions and removals can be made possible with Article 6 by allowing governments with cheap emissions reduction potential to sell emissions credits to others that have fewer options – creating a carbon market between governments.

"As we get closer to 2050, we would have some economies that have decarbonized, and other economies or sectors that will have more difficulties to decarbonize and to remove any leftover emissions. So you need a framework that can connect, even internationally, countries that have that sink capacity that can remove emissions," he said.

"That is what will enable net zero to be reached as soon as possible," De Clara said.

STALEMATE OVER ARTICLE 6

International negotiations on the Paris Agreement's rulebook hit a stalemate in both 2018 and 2019 over Article 6, with countries holding very different views on how the system should work.

De Clara is cautiously optimistic that the 26th Conference of the Parties (COP26), to be hosted by the UK – and delayed due to the coronavirus pandemic – will go ahead in early 2021, with potential for agreement on the technicalities.

And further deadlock would risk more delays to agreeing the accounting systems that would make international carbon markets work.

"It would be a missed opportunity," said De Clara.

"But also it would make reaching the goals of the Paris Agreement way harder, more expensive of course, but also we will get there much later in time. And time is a key factor in the equation, if you look at the IPCC science," he said.

Old divisions are still likely to be present at the next UN climate summit, but a larger work program could mean related issues can move forward alongside Article 6, he said.

"I think we will be in good hands with the UK Presidency. The UK government has been a market champion for a long, long time, so they definitely know the topic. And they also have some diplomatic capital to invest in this," he said.

"One thing that's been missing from the overall climate diplomacy picture has been a real political driving force behind the process," De Clara said.

Under the Obama administration, the US established a strong bilateral working dynamic with the Chinese government to get the Paris deal over the line. That changed with President Donald Trump, who decided to pull America out of the international treaty early in his presidency.

"Since then, we haven't really had anything similar, meaning that there are no champions out there that are trying to move this forward," said De Clara.

"Something like that – a new dynamic of that kind – could really push more and more countries to put forward stronger commitments, which is really what we need to close that emissions gap," he said.

PANDEMIC'S IMPACT UNCERTAIN

De Clara also said the pandemic, although very significant for energy demand and emissions in the short and medium term, would change little for the overall international policy direction on climate change.

The pandemic has already reduced global emissions in light of a collapse in air travel, road transportation and parts of industry, but it is too early to understand its full implications, he said.

Adding: "In the long term, one key principle is that we have quite a detailed framework [in Europe] and any recovery measures have to be informed in that perspective and aligned to meet those objectives."

"For the EU 2030 targets and 2050 framework, I don't think they are changed by this," he said.

According to Platts Analytics, the pandemic could lead to structural change in industry across the world in addition to its immediate impacts.

"Platts Analytics is expecting global GHG emissions to decline in 2020 as a result of the coronavirus and the lockdown measures," said Jeff Berman, director of emissions and clean energy.

"While a rebound in emissions during 2021 is possible, our March 24 Scenario Planning Service report also discussed how the pandemic could also lead to more structural changes in transportation, consumption habits – and therefore long-term emissions trajectories," he said Monday.

Moreover, an international carbon market developed under Article 6 can clearly be a useful tool for achieving emissions reductions and encouraging low-carbon investment, Berman said.

"However, there is no enforcement mechanism in the Paris Agreement, and so an Article 6 market will still need to be supported by firm national commitments and policies," he said.