COP29: Industry players highlight synergy of Article 6 with voluntary, compliance carbon markets

The interplay of national and voluntary carbon markets with Article 6 of the Paris Agreement could help boost demand, and reinvigorate the beleaguered global carbon sector, key industry executives said on the sidelines of the UN Climate Change Conference.

On Nov. 11, the first day of COP29, a long-awaited decision was seen on Article 6.4 of the Paris Agreement, leaving many carbon market stakeholders to ponder over a centralized UN-backed carbon market that will impact existing carbon pricing mechanisms.

Speaking at an industry event on Nov. 12 during COP29, Federico Di Credico, Interim CEO at the Climate Action Data (CAD) Trust said there will be a need for similar standards on the supply side, which define a high-quality carbon credit, for these markets to converge,

"That kind of convergence on the supply side is relevant to create the scalability that actually enables actions," he said, explaining that such convergence can build synergies among investors on the demand side that currently face different regulatory requirements and different needs.

Article 6 of the Paris Agreement sets out the rules for global trade in greenhouse gas emissions reductions, providing countries and businesses with a key pathway to meet and accelerate their climate goals.

Supporting Article 6 is a key objective for the CAD Trust, and it has been working toward connecting all the world's largest voluntary registries to consolidate the critical mass of data.

Di Credico also highlighted the importance of centralized systems that can provide transparency across different emission trading mechanisms, including Article 6, national and international voluntary mechanisms.

Uniform standards, multiple purposes

Dirk Forrister, president and CEO of the International Emissions Trading Association (IETA), said carbon credits that are aligned with the Article 6.4 standards have the potential to be used for multiple purposes. He said they could be used in the Carbon Offsetting and Reduction Scheme for International Aviation [CORSIA] scheme, as well as to meet targets under national programs and voluntary commitments.

Mandy Rambharos, the CEO of Verra, the world's largest issuer of carbon credits, took a similar stance.

"I do think there's [an] opportunity for all of us in the ecosystem to look at what is the way to collaborate to make sure that we're getting the best out of the system and really not trying to reinvent the wheel," she said.

When asked whether Verra methodologies have the potential to be used under Article 6.4, she said "Absolutely. Why not?"

"I read their methodological guidance, too. They have the guidance for the standards. We do tick a lot of the boxes in that," she added.

Another convergence that Rambharos has observed is that buyers are increasingly asking for regulatory oversight.

"I think we also see more and more buyers in the market asking whether governments are accepting these carbon [offsets]," she said.

She added that, for a long time in the past, there was a fear of government interference in VCM, however, buyers have changed their mindsets and are keen to get government oversight.

Price premium

Currently, prices of Article 6 credits, namely from Article 6.2, are much higher than the prices seen on voluntary carbon markets, especially those credits with a corresponding adjustment.

Platts, part of S&P Global Commodity Insights, recently heard Article 6.2-certified Household Device credits indicatively valued at $25-$30/mtCO2e between an African country (host) and Switzerland (buyer) for forward vintage and delivery.

Meanwhile, Platts assessed Household Devices 2024 at $3.85/mtCO2e Nov. 12, a modest recovery from Sept. 26's $3.50/mtCO2e, the lowest since Platts began assessing the price in June 2021.

Article 6.2 deals with cooperative approaches and the transfer of Internationally Transferable Mitigation Outcomes between different actors, including countries and private sector companies, through bilateral agreements.

Corresponding adjustments between countries are seen as essential to avoid double counting under Article 6. These must be made when a country buys carbon credits from another country to meet its Nationally Determined Contributions.