A lack of transparency, accountability and environmental integrity have emerged as major issues in the draft text on carbon markets under Article 6.2 at the 29th Conference of Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCCC).
With just one day left for the negotiations to close, experts have flagged concerns over draft text Article 6.2. A new draft text incorporating views of various countries was released in the early hours of November 21. The COP29 Presidency identified the full operationalisation of Article 6 as a key negotiating priority this year.
“The text overall is worse,” Jonathan Crook, policy expert on global carbon markets at the Carbon Market Watch told Down To Earth (DTE).
Injy Johnstone, Research Associate in Net Zero Aligned Offsetting at the University of Oxford, also agreed. “The new text shows where new lines have been drawn and some safeguards have been dropped,” she told DTE.
“The latest draft looks like it has the potential to being worse than the Voluntary Carbon market [VCM, which has issues with integrity and transparency],” Erika Lennon, a Senior Attorney at the Center for International Environmental Law, told DTE. VCM is a decentralised market that allows private actors to voluntarily buy and sell carbon credits that represent removals or reductions.
For most part of this week, countries have been having closed door meetings facilitated by ministers to find a common landing ground.
Article 6.2 of the Paris Agreement allows countries to trade mitigation outcomes generated from projects that reduce emissions and remove CO2 from the atmosphere. Mitigation outcomes represent emissions reductions or removals of CO2 and are measured in metric tonnes of carbon dioxide equivalent (t CO2 eq) or non-GHG metrics. Once traded between two countries, mitigation outcomes become Internationally Transferred Mitigation Outcome (ITMO). These cooperative approaches between countries can help them achieve and enhance their NDC targets, according to the United Nations Environment Programme Copenhagen Climate Centre (UNEP-CCC).
There are already 91 bilateral agreements between 56 different countries, shows data collated by UNEP-CCC. For example, Switzerland has signed a bilateral deal with Ghana for a project that would provide cookstoves to people in rural Ghana.
The first major issue is that the latest version of the text has removed the definition of cooperative approaches.
“This system is generating ITMOs which can be used to fulfil NDCs. But if there are not clear parameters about what could constitute a cooperative approach, we could see it abused and the integrity and oversight of NDC progress undermined,” Johnstone explained.
The other issue is that the countries participating in Article 6.2 do not have to disclose how they would avoid double counting. The rules require that the selling country deduct mitigation outcomes from its own greenhouse gas inventory so that the country (or airline) buying them can count them towards its NDCs. The latest draft also does not require countries to quantify the mitigation outcomes and how they monitor and quantify reversals (escaping of captured or removed CO2 back into the atmosphere, for example, where trees in an afforestation project burn), to name a few.
One major issue is the inconsistency check that will be carried out by an expert review team composed of UN technical experts. The new version “requests” countries not to count ITMOs as part of their NDCs if the expert review team flags inconsistencies that impact the counting of emission reductions. The previous version had stronger language, saying nations “shall” not use the ITMOs for achieving NDCs until the issues are addressed.
“I would have liked the document to use strong language in terms of preventing the use of ITMOs if a project activity causes violations of human rights, including the rights of Indigenous Peoples, or overestimates emissions. Only if the issue is remedied, should the ITMO be counted,” Lennon said.
Proposals that would prevent ITMOs with inconsistencies from being used (towards NDCs and/or “other international mitigation purposes”) are needed, reads a statement from Carbon Market Watch.
One of the major thorny issues that emerged at COP29 was about the functioning of the registry, which is meant to track emission reduction activities, issue ITMOs and the transactions between countries. “This was the biggest blocker for political reasons more than environmental issues,” Johnstone said.
Earlier, the United States was opposed to having the international registry recording transactions between countries, which was opposed by many developing nations, that might not have the capacity to have a national registry.
“Countries that cannot have their own national registries do not want to rely on third party registries like those operating in the VCM space. A lot of credits issued in the VCM are not good quality. They instead want the international registry to serve the function of VCM, where they will have far less control than a system that they manage themselves,” Crook explained.
Johnstone explained that the concern is that a private party would set up a registry, making it hard for the government to have more control over the day-to-day operational oversight.
The latest version appears to have reached a middle ground. The Secretariat has been asked to provide an additional service for countries that requests for registry services through which they could issue mitigation outcomes as units, the use of which it has authorised or intends to authorise, in order to support the participation of the Party in cooperative approaches.