To close Trench Rossi Watanabe participation at the Climate Week NYC 2022, in the last two-days we attended the North America Climate Summit, organized by International Emissions Trading Association – IETA and International Carbon Action Partnership – ICAP.
If you didn’t see our highlights about the other events, be sure to take a look (Brazil Climate Summit and The Hub Climate Group).
The North America Climate Summit brought a high-level group of speakers, that covered hot topics, including what climate leadership looks like, market trends, developments and outlooks across North America, voluntary markets, digital innovations and much more.
Below we highlight some of the main points discussed, that in our view could be relevant from a legal perspective:
- Carbon markets are definitely part of the solution we need, but critics may be right in some aspects. Companies need to take a hard look into their goals and commitments, and stop using junk and low quality credits. Communication skills need to be improved, so narrative barrier don’t get in the way.
- At the same time, companies need to invest in new technologies and innovation, and diversify their portfolios. We don’t have the luxury to wait for a perfect solution.
- Command and control doesn’t appear to be an effective instrument into this new reality, and in fact may ever harm innovation initiatives. Compliance flexibility, collaboration and partnership seems like a better approach.
- 3/4 of the emission reductions we need are in developing countries, where are not where investments are. Bilateral and multilateral instruments are essential to promote the transfer of large-scale high-integrity ITMOs, capacity building, mutual trust and exchange of knowledge. There are tremendous opportunities in the global south. Companies need to step-up, invest and transfer aid to other non-rich countries, as governments won’t move as fast as we need.
- As recent developments from the SEC look to impose more stringent reporting guidelines, supporting documentation for general trading, offsets and transparent retirement of credits become more important. The creation of tokens that represent credits from the Voluntary Carbon Market (VCM), with a blockchain technology, will bring transparency and liquidity that will facilitate corporate footprinting, bring more agility to the market and help scaling it.
- Following the path of the European Union regarding the Carbon Border Adjustment Mechanism (CBAM), the United States began engaging in discussions to develop its own Border Carbon Adjustment (BCA) to shore up carbon leakage and ensure domestic competitiveness. Inspiration is the Montreal Protocol, that sets targets for phasing out the production of substances responsible for ozone depletion. This new mechanism is not seen as a protection measure, but rather as a way to level the field and enable fair trade. Measurement, Reporting and Verification (MRV) will be essential for the phase in of BCA, as it will be a way to allow comparison of relative emissions intension.
- The VCM and regulated markets will probably coexist, instead of merge. It would be easier if there was a fungible type of credit, but the market doesn’t seem to be heading in that direction. Both markets are needed for climate goals be achieved. It’s important, however, to better communicate with people, so different type of credits can be accurately compared (including those that takes into consideration co-benefits, such as biodiversity conservation and benefit sharing).
Our Environment, Sustainability and Climate Change team followed the discussions closely, and remains available to assist in these new challenges.