(Bloomberg) — Talks at COP26 on international carbon markets are running into difficulties, as the U.S. lines up behind the European Union with objections to a key demand from developing countries, according to people familiar with the situation.
At issue is a proposal for a kind of transaction tax on carbon trading, with proceeds going to help nations struggling most with the ravages of climate change.
How a Global Carbon Market Could Accelerate Net-Zero: QuickTake
Making progress on carbon trading is the key benchmark of success at the Glasgow climate talks. A deal would help cut emissions, drive investment into low carbon projects and make what’s potentially a $100 billion offset market more transparent and rigorous.
There are two main tracks of the talks: one is focused on bilateral exchanges of carbon credits to help countries meet their national climate targets. The other is about creating a global marketplace for trading offsets.
Developing countries want a percentage of the proceeds from trading all types of carbon credits to be channeled to poor nations. But the U.S. — along with the European Union — has objected to applying such a levy to the bilateral exchanges.
In plenary discussions this week, U.S. officials have said it is technically unfeasible, according to people familiar with the discussions. The U.S. has said it is worried that the federal government will end up on the hook for levies generated by transactions conducted by states, local governments and companies. U.S. State Department spokespeople did not respond to emailed requests for comment.
The U.S. federal government doesn’t intend to use offsets to hit its emission-reduction targets through 2050. And there is no U.S. regulation or law that would compel states and companies to steer revenue from bilateral trading agreements to adaptation projects overseas.
COP President Alok Sharma told reporters on Saturday that while some progress had been made on the issue, there was more work to be done, and the final negotiations would be conducted by ministers next week.
“Clearly there’s a political consensus that has to be built on this,” he said.
Read more: Can COP Finally Clinch a Deal on Carbon Trading?
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