One of the stumbling blocks in reaching agreement this week at COP26 is likely to be the Article 6 provision on cross-country trade in carbon credits. Some countries will be pushed to the limit to achieve their national commitments to reduce carbon while others have the potential to act as carbon removers.

In the absence of trade or a massive transfer of funds, the global reduction in carbon may be missed

A halt in deforestation for instance can create carbon credits that have an economic value provided the credits can be traded. Those countries with removal potential lack the investment that will be needed. In the absence of trade or a massive transfer of funds, the global reduction in carbon may be missed.

But managing an international credit trading system is challenging. The Kyoto Protocol saw the introduction of the Clean Development Mechanism (CDM) which was essentially a carbon trading system, although agricultural projects were effectively excluded.

Another obstacle is the problem of double counting

However, it resulted in extensive gaming whereby, for example, some counties deliberately created high emission sources in order to get paid to shut them down. There is also a legacy of unused CDM credits that have to be accounted for if there is to be an agreement this week on a bold new international trading system.

Another obstacle is the problem of double counting. This occurs where a country sells a carbon credit that is part of its own national commitment. Can it still retain this credit or does it accrue to the purchasing country?

Another sticking point is whether the trade should be taxed and the revenue earmarked for adaptation investment in exposed countries.

Whatever is agreed will clearly require that these transactions will have to be subject to rigorous monitoring and the utmost transparency

But probably the biggest difficulty is the charge by critics that cross-country trade will allow the carbon emitters to slacken their commitment to mitigation.

Whatever is agreed will clearly require that these transactions will have to be subject to rigorous monitoring and the utmost transparency.

Many of the difficulties that attach to international trade in credits don’t of course apply to trade within countries.

Professor Gerry Boyle is the former Director of Teagasc and former member of the Climate Change Advisory Council, and is at COP26 in Glasgow, Scotland.