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Strong carbon-trading rules could help the planet avoid dangerous levels of global heating
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Strong carbon-trading rules could help the planet avoid dangerous levels of global heating


Despite recent reports of government decisions to shutter coal-fired power plants in Canada, the United States and the European Union, coal remains the source of almost 40 per cent of the world’s electricity. The world’s coal-powered electricity capacity has increased by nearly 40 percent in the past 20 years to approximately 2,050 gigawatts. 247 gigawatts in planning or under development in China alone.

President Xi Jinping announced in September that China would not build coal-burning power plant overseas. However, China and India continue to consume large amounts of thermal coal, which is the largest source for carbon dioxide emissions. To reach the 1.5 C global warming limit, thermal coal use would need to drop by about 80 per cent by 2030.

With the United Nations-led climate talks in Glasgow (COP26) here, there’s a way for governments to work with industry. One paragraph in Paris AgreementThis document lays the foundation for an international emissions trading system that could end the production of coal-fired electric power.

How would it work, you ask?

Since 1997, the popularity of emission-trading systems has grown since their establishment. Kyoto Protocol. They offer incentives to participants to reduce carbon dioxide emissions in innovative ways and the possibility to trade excess carbon with other nations.

International carbon trading has had mixed results due to oversupply and lack of accounting rules. This problem was solved by the Paris Agreement. Countries agreed to reduce national emissions and set climate targets, also known as Nationally Determined Contribution (NDC).

Article 6.2 of the Paris Agreement says that countries can use “internationally transferred mitigation outcomes” (ITMOs) — traded emission reductions generated by one party — towards the nationally determined contributions of the acquiring party. This means that two countries could work together to reduce global carbon emissions, and meet their NDCs.

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For example, A and B could sign an agreement to make it easier for A to switch to cleaner, more efficient electricity produced by B. Country A is able to reduce its emissions and meet its NDCs. The agreement also gives country A ITMOs to be sold, which country could then buy.

Canada could reap the benefits

Canada has set a goal to reduce its greenhouse gas emissions 40 per cent, relative to 2005 levels, by 2030. Based on the 2020 National Inventory ReportCanada will however miss its mark.

Canada’s oil and gas sectors would have to drastically reduce their emissionsFor Canada to be able to meet its NDC targets, it must use ITMOs. Given Canada’s ambitious commitments, the use of ITMOs gives Canada a viable opportunity to achieve its targets through international co-operation.

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As an example, natural gas consumption in emerging economies continues to rise. China, for instance, has pledged to increase its natural gas consumption by 15% in 2030 and switch to gas. in industry and buildings. China currently depends on imports for about half of its domestic consumption. Given its recent energy crisisChina is expected to be more dependent on external energy sources, including natural gas, in order to meet its basic energy needs.

Canada will soon be producing natural gas. increase around 20 per cent over the next 20 years, while domestic consumption is predicted to decline. This opens up the possibility of significant growth in liquefied petroleum gas (LNG), exports.

Canada and China could sign a bilateral agreement that would allow Canada to export LNG from Canada to China in order to replace coal use. This would allow China achieve its NDC goals.

Writing the rulebook

The rules are still being developed. The UN-led climate talks in Glasgow, November will see the completion of the rule book for emission cuts.

In the meantime, pilot projects and other initiatives — in a variety of industries, from waste management to transportation — have emerged worldwide to show how an ITMO transfer would function in practice. The example of the Canada-Chile ProgramThis system provides technical innovation for reducing emissions in the waste management industry and a system to track, monitor and report emission reductions.

Many questions remain about the benefits of carbon transfer, including whether governments should support transfers among companies.

An area destroyed by fire smoulders.
The Bootleg Fire, which occurred in July near Paisley, Ore. destroyed more than 61,000 hectares trees that were designated for carbon offsets.
(AP Photo/Nathan Howard).

The rules should guarantee “environmental integrity.” This means that any ITMO exchange should make sure there have been environmental gains — that the reduction in greenhouse gases would not have occurred without the transaction — and that it does not lead to more greenhouse gas emissions.

Environmental integrity can be addressed by ensuring the accounting and quality of emissions, their transfer and the long-term mitigation effects. The rule book writers must also establish clear registries and define how emissions are reported to ensure that no emissions reductions are counted twice.

Some see Article 6 as a violation. way to failIt is a good idea but has no clear rules. It should provide clear incentives for countries to reach ambitious targets without compromising competitiveness.

What are the next steps?

The negotiations at COP26 will be crucial for governments to revise the agreements and cooperate to reach their targets. The latest Intergovernmental Panel on Climate Change (IPCC) reportCalls for urgent global climate action are being made, and ITMOs offer a promising opportunity for countries to collaborate in achieving their climate targets.

Government and industry must work together to create models to incentivize carbon trading mechanisms that transfer ITMOs. This will also bring economic and environmental benefits. Corsia, a market mechanism developed by the UN International Civil Aviation OrganizationIt is leading the charge. It wants to make all international flight growth carbon neutral after 2020. Corsia currently has an estimated 81 countries participating in it, which accounts for 75% of global aviation industry emissions.

Canada’s 2030 climate targets have been rapidly approaching. The government must leverage ITMOs in order to work with the industries and come up with solutions that will support a transition to cleaner energy. Canada must set short-term and longer-term goals, including the transfer of ITMOs in the oil and natural gas industry, and collaborate on solutions to support its climate goals.

Yukinori Kinoshita was an undergraduate student in international economys at the University of British Columbia. He co-authored the article.

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