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The 29th Conference of Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCCC) being held in Baku saw the adoption of Article 6 of the Paris Agreement after nine intense years of negotiations.
Article 6 of the Paris Agreement allows countries to voluntarily cooperate to implement their Nationally Determined Contributions (NDCs). While Article 6.2 is a decentralised system involving a bilateral agreement between two countries for trading carbon credits generated from emission reduction (like clean cookstoves) or removal (afforestation projects), Article 6.4 will set up a global carbon market. A carbon credit represents 1 tonne of CO2e that is reduced or removed.
But experts have voiced concerns over the adoption. “Despite the best efforts of activists and some climate negotiators, the agreement reached on Article 6 carbon markets at COP29 in Baku risks facilitating cowboy carbon markets at a time when the world needs a sheriff,” reads a press statement from Carbon Market Watch.
“The flaws of Article 6 have, unfortunately, not been fixed,” Isa Mulder, policy expert on global carbon markets, said in a statement. “It seems countries were more willing to adopt insufficient rules and deal with the consequences later, rather than prevent those consequences in the first place,” she added.
Countries were more positive. “Several developing countries were keen on Article 6. It was a nine-year debate,” the Brazilian delegation said at a press conference shortly after the adoption. They added that now it is key to implement carbon markets with integrity.
A few hours before the adoption, the Mexican delegation told Down To Earth (DTE) that they are okay with the draft text. “We have been working on it for more than eight years and rules guarantee environmental integrity,” Camila Isabel Zepeda Lizama, Party head, Mexico, told DTE.
During the adoption of the text at the closing plenary, the European Union’s Wopke Hoekstra said: “We did deliver in Article 6. This is a leap forward. We have completed the rulebook for article with UN stamp of approval. This will drive investments and bring transparency.” Previously at a press conference, the EU suggested that Article 6 could bring in additional financing for the new climate finance goal, New Collective Quantified Goal for Climate Finance (NCQG).
The adopted text only “requests” countries not to count credits or mitigation outcomes (represents emissions reductions or removals of CO2 measured in metric tonnes of carbon dioxide equivalent (t CO2 eq) or non-GHG metric) as part of their NDCs if the expert review team flags inconsistencies that impact the counting of emission reductions. This means there is nothing that can stop countries from counting them as part of their NDCs.
The other issue is that the countries participating in Article 6.2 are not mandated to disclose how they plan to 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.
“Article 6.2 still leaves a lot of latitude for potential misuse and must be ratcheted up over time to ensure environmental integrity,” Injy Johnstone, Research Fellow in Net-Zero Aligned Offsetting at the University of Oxford told DTE.
“Article 6.2 as adopted is a weak framework — weak on transparency, accountability and leaves a lot to be desired. There are no strong consequences of “inconsistencies” that are identified, that is, if parties misreport/ do not following the framework to the spirit. Above all, even though some transparency measures have been put in place, nothing in the current framework prevents parties from engaging in trade on low quality carbon credits,” Trishant Dev, Programme officer (Climate Change), Centre for Science and Environment, told DTE.
There are some wins. According to the Carbon Market Watch, countries are required to publish information when they formally approve the mitigation outcomes for use by other actors, such as companies. And importantly, any inconsistencies identified by the Secretariat in countries’ cooperative approaches will be made public.
On the first day of COP29, the president announced that nations agreed on the standards adopted by the Supervisory Body (SB) — a UN body responsible for overseeing the market — and the SB would be provided further guidance, drawing criticisms from experts.
This year, one main concern is with the transition of afforestation and reforestation projects from the Clean Development Mechanism (CDM) under the Kyoto Protocol, the world’s first international carbon finance scheme to Article 6.4. Projects registered with CDM in developing countries can earn certified emission reduction credits without passing the additionality tests despite the large body of evidence on shortcomings in the CDM underpinning the need for extra checks, according to Carbon Market Watch. Additionality means the emission reductions or removals would not have occurred in the absence of the incentive created by carbon credit revenues.
The text requests the SB to ensure regulatory stability by avoiding frequent substantive revisions to its adopted standards, tools and procedures while ensuring ongoing continuous improvements to reflect the best available science. This reflects the views of the US, which wanted to avoid making substantive changes, and a few other countries keen on ensuring that the SB revises its rules based on the best available science.
The adopted text also tasks the supervisory body to develop further standards, tools and guidelines like reversal risk tool. Reversal refers to captured carbon dioxide re-entering the atmosphere. “The environmental integrity will hinge on the SB’s further guidance,” Johnstone said.
While Article 6.2 is already operational, Article 6.4 is not ready yet. “It is unlikely to become operational until late next year and that means new projects probably can’t register until at least 2026, if everything goes according to schedule,” Jonathan Crook, Carbon Market Watch’s policy expert on global carbon markets, told DTE.
“On Article 6.4, there are positive moves such as the scientific expertise that SB should seek, SB to work on further guidance on removal activities,” said Dev.