The 26th UN Climate Change Conference of the Parties (COP26) set to run from October 31st to November 12th kicked off this week in Glasgow. The summit, formerly postponed due to the COVID-19 pandemic, is being held under the co-presidency of Italy and the UK and aims to enhance and accelerate efforts on climate change by building upon the 2015 Paris Agreement targets. Additional goals include “securing global net zero by mid-century and keeping 1.5 degrees within reach, adapting to protect communities and natural habitats, [as well as] mobilizing finance and working together to rise to the challenges of the climate crisis.” While there are mixed feelings about the likelihood of progress, especially with notable figures such as Chinese leader Xi Jinping, Russian President Vladimir Putin, and Brazilian President Jair Bolsonaro not in attendance, climate scientists warn that COP26 may be “the world’s best last chance” at high-level climate co-operation. 

The 2021 Emissions Gap Report by the UN Environment Programme (UNEP) found that the latest commitments on climate put the world on track for a temperature rise of 2.7°C by the end of this century. Even accounting for new nationally determined contributions, reductions of 30 per cent are necessary for a 2°C rise in temperatures and 55 per cent are needed for 1.5°C. While the report also mentions net-zero commitments could lead to an additional 0.5°C reduction, pledges remain vague and inconclusive. Secretary-General of the UN António Guterres recently stated “We are on a catastrophic path,” noting that the past year has proved that even current levels of warming are catastrophic. Extreme weather events such as wildfires raging in British Columbia, and California, massive levels of flooding in Germany and China, and the global loss of 1.2 trillion tons of ice per year spell out an imminent climate disaster.

One potential area where COP26 could make a substantive contribution to climate action is moving forward with Article 6 of the Paris Agreement. Article 6 lays out the option for international carbon markets and would allow parties to meet their targets through Internationally Transferred Mitigation Outcomes (ITMOs). International carbon markets would include tools such as carbon offsets, where credits awarded for emission reductions of one party can be sold to another party to compensate for their emissions. Originally set to come into effect during 2020, ITMOs under Article 6 were meant to replace the Clean Development Mechanism under the Kyoto Protocol. However, to date, no rulebook has been established on the functioning of such a market. 

Article 6 remains a contentious issue as states continue to disagree over key mechanisms, including whether to “accept some double counting of emissions reductions, the transition of old Kyoto-era credits into the Paris regime, and whether a share of revenue from bilateral carbon trading agreements should go to the Adaptation Fund.” Carbon markets have a fair share of critics who describe them as a “licence to pollute,” including Al Gore, who warned that carbon offsets shouldn’t “be a get-out-of-jail-free card.” Environmental organizations are also urging states to agree to more robust rules around Article 6 such as “preventing all forms of double counting of mitigation toward the achievement of Paris Agreement temperature goals, facilitating high-quality mitigation across all sectors, and ensuring comprehensive reporting and transparency.” 

If done right, however, Article 6 has the potential to greatly reduce global emissions and even make it cheaper for countries to do so. According to the International Emissions Trading Association, “Article 6 could more than half the cost of imposing the national climate goals agreed in Paris” and generate as much as $1 trillion per year by 2050. Furthermore, carbon markets could provide opportunities to channel much needed funds for low-income countries, incentivizing them to maintain biodiversity and fight off deforestation. 

As states continue to pledge new climate goals and discuss reduction schemes at COP26, the future of Article 6 and international carbon markets remains uncertain. After 6 years of stalled consultations, the clock is ticking. The disastrous effects of climate change are already impossible to ignore. If negotiators are able to ensure that carbon markets are strict, robust, and carefully monitored, carbon markets can serve as a fighting chance at remaining below 1.5°C.