Implementing Article 6 after the COP28 setback

Fundamental disagreements among Parties resurfaced in Dubai and led to a failure to adopt decisions relating to Article 6.2 and Article 6.4 of the Paris Agreement at COP28 in Dubai. The lack of consensus is a matter of deep regret for IETA and all carbon market advocates [IETA’s press release can be found HERE]. However, this does not mean that international compliance carbon markets will have to wait another year to move forward.?

This post aims to reflect two key points. Firstly, Article 6.2 – already operational since COP26 – will continue to be implemented without further guidance from CMA. Secondly, both Article 6 and national compliance systems will be able to build on, and be supported by, the progress achieved in the voluntary carbon market. IETA’s side event on Article 6 at COP28 [HERE] reminded that the current implementation of Article 6.2 was already establishing ground rules for buyers and sellers, just as the VCM is.?

As highlighted by representatives from the government of Singapore and Sweden during IETA’s post-COP28 briefings [HERE], Article 6.2 is operational and can move forward delivering on high integrity. Cooperative approaches would have benefitted from an Agreed Electronic Format (AEF) for reporting and clearer rules on the authorisation of Internationally Transferred Mitigation Outcomes (ITMOs), but this is not vital.

A look at the new MoUs and bilateral or implementing agreements signed during COP28 speaks to the momentum. The nine new deals represent an increase of almost 20% compared to before COP28. Several new countries, such as Norway, Kuwait, Tunisia and Rwanda, have also entered the dance recently, on both the buyer and seller sides.

Figure 1: IETA’s International Cooperative Approaches Tracker (HERE)

More than merely reflecting intention to pursue cooperation under the Article 6 of the Paris Agreement, countries have already begun paving the way for concrete implementation, taking the lead in operationalisation efforts. Three projects have already been authorised between Switzerland and Ghana, Vanuatu, and Thailand [HERE], and the first ITMO transactions are expected very soon. Singapore has signed its first implementing agreement with Papua New Guinea [HERE] and will allow Singapore-based companies to use eligible Article 6.2 compliant carbon credits to offset 5% of their domestic carbon tax obligations [HERE].

While the delayed operationalisation of the Article 6.4 mechanism is a missed opportunity to establish a crediting programme that would have set a high bar on integrity and may have acted as a benchmark for the entire market, significant work on market integrity is underway and is starting to bear fruit. Already before COP28, in April 2023, the IC-VCM launched its ten Core Carbon Principles. They represent a global benchmark for high-integrity carbon credits, setting rigorous thresholds on disclosure and sustainable development. At COP28, six of the world’s leading independent crediting programmes went a step further and launched a collaboration on integrity? [HERE: “Integrity Collaboration”]. The thread is clear – as countries gear up to work with Article 6 and fulfil their NDCs, the experience accumulated over two decades in the voluntary carbon market provides a reference and an established infrastructure governments can rely on. Initiatives such as the Climate Action Data Trust [HERE] leverage technology to further enhance transparency by connecting and publishing data from decentralised national and independent registries. The CAD Trust Data Dashboard was launched on December 15 [HERE], featuring four independent registries including Verra, and one national registry, Bhutan.

Over the next 12 to 24 months, early movers must show that Article 6 implementation and markets can move forward and scale, consistently raising ambition. While some Parties and stakeholders might have sought to block the implementation of international carbon markets by obstructing the COP28 decisions and delaying the operationalisation of the Article 6.4 mechanism, governments and the private sector have alternative options to move forward. The first Global Stocktake exposed the blatant inadequacy of current NDCs in achieving the goals of the Paris Agreement and acknowledged Article 6 as one of the tools close these gaps.? The question now is not if countries and companies should raise ambition through carbon markets, but how fast this can be done.?

IETA will continue to support Parties and market participants who want to engage in cooperative approaches under 6.2 through high-integrity crediting programmes.?

The time to scale up carbon markets is now. Not tomorrow.