As the 29th Conference of Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCCC) enters its second week of negotiations, a contentious proposal made it to the draft text on Article 6.4 of the Paris Agreement, which will create a global carbon market under the United Nations.
The text requesting the Supervisory Body [a UN body tasked with overseeing the market] to “strive to ensure regulatory stability by avoiding frequent substantive revisions” to the adopted rules that govern carbon markets that will be established under Article 6.4. Down To Earth (DTE) has learned that the proposal was made by the United States last week.
Article 6.4 will allow countries to trade carbon credits for climate action. Carbon credits represent a tonne of carbon dioxide or equivalent greenhouse gas emissions (CO2e) reduced or avoided. Credits are issued for activities that either avoid emissions (such as using efficient cook stoves or lighting systems) or remove greenhouse gases from the atmosphere (such as planting trees).
“There was a pushback by other parties [present at the informal consultation a few hours after the draft text was uploaded],” Injy Johnstone, Research Associate in Net Zero Aligned Offsetting at the University of Oxford, told DTE. “This is a cause for concern in terms of having a system that is informed by the best available science,” she added.
“Many parties expressed their concerns with it,” Isa Mulder, an expert on global carbon markets at Carbon Market Watch, told DTE. Some proposed to make inclusions that provide room for improvements based on the best available. Other parties wanted this [proposal] to be omitted entirely, she added.
“The language is problematic as it discourages the supervisory body from periodically making revisions. This is essential for ensuring that Article 6.4 remains a robust mechanism for markets,” Trishant Dev, programme officer, Climate Change, Delhi-based think tank Centre for Science and Environment.
This proposal comes only a week after the COP29 presidency Mukhtar Babayev announced that countries have reached a consensus on the rules governing Article 6.4 and requested the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement to provide further guidance on the rules. “This was based on assurances that there would be opportunities to further improve these standards,” he added.
At the opening ceremony, COP President Mukhtar Babayev announced that parties endorsed standards for methodologies (calculating emission reductions) and carbon removal (to remove carbon dioxide from the atmosphere), which were adopted by the supervisory body in October.
Mulder expects that the proposal may change in a future iteration of the text. For instance, if new scientific consensus such as an IPCC report would run counter to existing 6.4 rules, the supervisory body may revise those rules. Dev also pointed out that several parties would demand for allowing constant refinement of standards as and when they are required.
Further, this proposal in the draft text has raised more questions. For instance, Mulder is unsure of how this [proposal] would sit with the work that already requires periodic revisions. Already, the procedure for appeals and grievances and the sustainable development tool have built-in review cycles. “Does this mean the supervisory body should not do the review? It does raise some questions about what changes can be made,” she said.
Then there are other issues concerning transition of afforestation or reforestation projects from the Clean Development Mechanism (CDM) to Article 6.4. Parties were not agreeing on that. CDM allowed trading of credits from developing to industrialised countries for meeting a part of their emission reduction targets under the Kyoto Protocol, which entered into force in 2005 to operationalise the UNFCCC by committing industrialised countries and economies to limit and reduce greenhouse gas emissions in accordance with agreed targets.
“India opposes the requirement for an additionality check, as it would apply newly developed criteria to much older projects, rendering many projects ineligible for transition,” Dev said. Additionality requires greenhouse gas (GHG) emission reductions or removals from the mitigation activity to be additional, which would not have occurred in the absence of the incentive created by revenues from trading carbon credits.
He added that other developing country groups such as the Arab Group, the African Group, China, and Brazil are also not in favour of including additionality check provision for transition projects.
Experts told DTE that parties will likely have informal sessions and bilateral meetings behind closed doors to iron out differences on Article 6. “There is no transparency for observers and for parties to know what is being discussed,” they told DTE, on condition of anonymity.
Meanwhile, parties also seem keen on completing negotiations on Article 6. In a press conference held on the same day, the European Union stressed the need to conclude negotiations on Article 6, suggesting that market mechanisms could bring in additional financing for the new climate finance goal being negotiated at COP29: the New Collective Quantified Goal on climate finance.
“Developed countries should not shirk their responsibilities to provide real money to developing countries and carbon markets are not representative of real finance for supporting climate mitigation and adaptation,” Erika Lennon, Senior Attorney at the Center for International Environmental Law, a public non-profit law organisation based in the United States, previously told DTE.