Global leaders on the first day of COP29 in Azerbaijan achieved a great success agreeing upon operational standards for Article 6.4 of the Paris Agreement. The decision impacts the building of a global framework, which would establish the tool to be deployed globally to enable countries and companies to achieve their reductions in emissions through international carbon trading. This is expected to facilitate and boost flows of climate finance, and promote further emission reductions. This shall be one step forward in making the pact under Article 6-a of the Paris Agreement operational after long-drawn negotiations and disagreements.
Article 6 and International Carbon Trading
Article 6 of the Paris Agreement introduces two mechanisms that can be used in emissions trading to support the global reduction in greenhouse gases. Article 6.2 allows for two countries to do their own carbon trading agreements with respect to each other. This approach allows bilateral transaction arrangements; however, both countries work under their climate goals. The autonomy in the structure and management of carbon trades allows countries to perform their carbon trade activities on their own; however, some remain concerned about transparency and accountability.
Article 6.4 takes the second approach by establishing a centralized, UN-managed system whereby countries and companies can participate in a structured carbon offset market. Such a system will provide a robust platform where entities can buy carbon credits from projects that have successfully reduced emissions, hence enabling progress toward their respective climate commitments or NDCs.
Adoption of the Article 6.4 standards and mandates of a supervisory body
This is the greatest step forward since Article 6.4 embodies guidelines on carbon removal projects, methodological assessments, and procedures for carbon removal activities. The Article 6.4 Supervisory Body set up to oversee this mechanism established fundamental standards related to methodology development, conditions for approval of carbon removal projects, and also rules and procedures to guide operations under the global carbon market. It will ensure streamlined activities and attract investments into the carbon reduction activities.
Other notable standards include “downward adjustment” to set up believable baseline measurements. Experts like Dhruba Purkayastha from Council on Energy, Environment and Water (CEEW) appreciate such measures which ensure emission reduction accounting so accuracy can be built up and investors will gain confidence. However, Purkayastha warned that a number of issues, such as post-crediting monitoring periods and assessments for reversal risk-the risk that emissions being subtracted will be re-released into the atmosphere-still lack clear standards, which may affect long-term reliability.
Problems with Procedural Speed and Transparency
While the general welcome to the standard adoption under Article 6.4, the rush initiated by the COP29 Presidency in its adoption has been vocal criticism by some critics. Many countries criticized the bypassing review and oversight with this expedient decision-making process that the rush would lose as result of it. Similarly, disputes over forest credits and deforestation risks had already been debated and discussed in previous COP28 debates when it initially stalled on a consensus.
Response is cautiously optimistic from some government representatives and environmental organizations. “Today’s court decision was an important step toward helping climate finance respond to the climate crisis,” says John Verdieck, Global Climate Policy Lead at The Nature Conservancy. Similarly, Florence Laloe, Senior Director of Climate Policy at Conservation International, opined that the process of adopting such standards for Article 6.4 removes the procedural barrier so that to focus more on pressing issues, such as climate finance and adaptation strategies, at COP 29.
Challenges and Unresolved Issues in Article 6.2
Therefore, it is a great achievement for the governments to accede to the Article 6.4 standards. However, the articles that present unresolved challenges are actually found in the section known as Article 6.2. Article 6.2 deals with facilitating bilateral trades across countries. Article 6.2 presents an advantage because of the flexibility concerning carbon trading agreements among the countries. However, disagreements relating to transparency requirements between the EU and the US have caused a stalemate in further progress. The above unresolved issues over transparency have caused huge concerns to the stakeholders over the fact that appropriate and strong reporting standards are essential for realizing accountabilities in international carbon transactions.
What role does Article 6.4 play in filling in the gap of climate finance?
The operation of Article 6.4 will likely figure large in closing the gap of climate finance because such a mechanism channels finance to countries whose carbon sequestration potential is among the highest, including these carbon-rich ecosystems. Carbon trading by such a mechanism can thus bring valuable resources to help countries adapt to, and mitigate, climate change while preserving their carbon-storing capabilities in their ecosystems.
Laloe insisted that Article 6.4 call for strong standards because the protection and conservation of natural resources remain crucial for achieving global climate goals. “It’s mathematically impossible to limit warming to safe levels without protecting natural ecosystems,” she cautioned.
Future Considerations for the Article 6.4 Mechanism
More work will have to be done in future sessions for the Article 6.4 mechanism to add more standards so that the market integrity and investor confidence will be ensured. There are, in fact, the insurance policies to shield the investors from the bad deeds of the carbon removal projects that might really go sour, strengthening the Reversal Risk Buffer Pool intended to mitigate the potential reversal of emissions. One very important component is the creation of monitoring frameworks so that there is long-term compliance and effectiveness in the carbon credits.
Stakeholders are further advocating enhanced standards for a boost to make the stress testing and credit insurance more robust, arguing that these would all the more make Article 6.4 an attractive proposition for investors. Enhancing these measures is reckoned to be the difference between a stable and transparent global carbon market of high integrity.
Conclusion
The adoption of standards on Article 6.4 by COP29 signals a new chapter in a global carbon market established under the aegis of the Paris Agreement. Mechanisms such as Article 6.4 will be supported by the urgent call of the climate crisis, hence giving enough finance to carbon reduction projects and addressing a needed effort of countries toward their respective targets on emissions. However, for continued momentum, Article 6 needs more refinement-since Article 6.2 would indeed be necessary concerning the full advancement of trust and transparency built within the global carbon market.
What environmental activists and experts are implored to COP29 leaders to pressure for open and transparent governance, to have fair and equitable participation, and robust scientific rigor as they continue to build out these carbon trading frameworks. Of course, there is a lot left to be done, but the adoption of these standards puts a bottom line going forward for advancement of climate action through international cooperation, one piece of which must be done but leaves much undone in terms of achieving meaningful progress on climate goals.
World Meteorological Organization, COP29 proceedings, The Nature Conservancy