BRICS advance common carbon market plans

In a recent CNBC Africa interview, Ignacio Carreras, Associate Director at AMEA Power, shared insights on the far-reaching implications of the BRICS climate pact. The pact aims to democratize green markets and counter protectionist trends, marking a significant milestone in the fight against climate change. The pact, still in its early stages, saw a memorandum of understanding signed in September of this year, outlining the development of an interconnected carbon market across the BRICS countries. This move will standardize tools and methodologies for carbon reporting, accounting, and setting homogeneous characteristics on carbon credits. Moreover, it will enhance economies of scale to bolster the carbon market in the region and enable the retention of revenues from carbon pricing within BRICS countries, signifying crucial steps in the right direction. As the discussion progresses, the possibility of trading in domestic currencies within the BRICS nations and holding reserves in another BRICS nation's currency has been raised. This move could facilitate the receipt of harsh currencies for industrial and decarbonization programs, providing a dual benefit of combating climate change while bolstering economic stability. The pact's significance is further underscored by its role in countering green protectionism, notably the carbon border mechanism being implemented in the EU. This mechanism taxes products based on their carbon footprint upon entry into the EU, retaining the revenues for decarbonization efforts within the region. The BRICS carbon market offers an alternative framework that allows for the access and breach of such protectionist measures while ensuring revenue retention within BRICS countries. The scale and intensity of interaction between the developed framework and existing mechanisms, such as the UN's Article 6 of the Paris Agreement, are key to accelerating global climate policy implementation. Standardizing carbon accounting reporting and pricing methodologies within the BRICS countries can expedite the fulfillment of Article 6 targets, serving as a catalyst in the fight against climate change. However, challenges persist, particularly concerning governance and credibility in carbon markets. Establishing clear methodologies for carbon accounting is essential to ensure market credibility and reduce unfair valuation. The development of a unified mechanism among BRICS nations holds promise not only for the region but also for the global south. By attracting capital to implement decarbonization policies and retaining value within respective countries, the pact has the potential to influence global climate policy positively and reshape global carbon credit pricing dynamics. Looking ahead, the pact's creation of a solid and credible market for carbon pricing could pave the way for additional nations from the global south to join, fostering fairer trade practices and sustainable environmental policies.