COP29: Negotiators edge closer to outcome on Article 6: sources

Talks to agree key details on an Article 6 carbon market are nearing completion, with several parties showing willingness to make compromises, several sources said Nov. 21.

But issues dealing with upfront transparency around the authorization and transfer of Article 6.2 credits, along with defining the key responsibilities of the Article 6 registry, remain the main bones of contention.

The UN Climate Change Conference, which started on Nov. 11, is poised to end on Nov. 22, with world leaders under pressure to agree final texts for both Article 6.2 and Article 6.4 of the Paris Agreement.

Some parties said they are very optimistic that a deal will be agreed imminently in Baku, although others expect the talks to drag on.

"Many parties expressed unhappiness with the next text," said one negotiator closely involved in the Article 6.2 talks. "Some said we can work with it but need to make tweaks and others were more unhappy with several aspects. Things are still up in the air. I think it will take some work."

Article 6.2 sets out a system of national accounting for greenhouse gas emissions, with common principles that countries can adopt to allow cross-border exchanges of credits. Countries can adopt credits, or Internationally Transferred Mitigation Outcomes, under Article 6.2.

Many countries in Europe and Latin America have called for stronger wording in the sections of the mechanism detailing inconsistencies in the authorization of credits, saying that some of the language has been watered down in the latest version of the text.

"Overall, the Article 6.2 text is quite good, as is Article 6.4. But quite a few other parties want further refinements. We just want to tighten up a few paragraphs on transparency and the use of ITMOs," a second negotiator said.

Views on authorization, registry

Concerns over the impact of secondary trading in the voluntary carbon market are less of an issue, following some compromises regarding cooperative approaches around the transfer and authorization of credits.

"The current texts represent a more balanced compromise which supports increased transparency, integrity and predictability, without placing undue restrictions on market participants," said Bjorn Fonden, policy adviser at the International Emissions Trading Association, speaking Nov. 21. "We expect that there will still be some parties raising concerns about this new draft, and hope that they together can resolve any final disagreements to get this across the finish line tomorrow."

Consensus around the functions of an Article 6.2 registry is also emerging gradually, with many parties demanding that it has dual functions.

The latest text "clarifies that the connection of the Article 6.4 mechanism registry and participating party registries to the international registry shall enable the ability to pull and view data and information on holdings and the action history of authorized emission reduction under Article 6.4 paragraph 4, of the Paris Agreement (A6.4ERs) and enable the transfer of authorized [credits] to the international registry, consistent with the interoperability arrangements."

On Nov. 11, world leaders adopted key standards underpinning carbon removals and project methodologies under Article 6.4 that were agreed by the Supervisory Body, but the guidance around this UN-backed centralization of carbon markets still needs to be settled.

Article 6.4 creates a centralized carbon market with carbon credits issued, transferred and held under a UN-backed, centralized system.