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About Commodity Insights
06 Dec 2023 | 16:40 UTC
Highlights
Removals definition for Article 6.4 not strong on integrity: opposing parties
If not adopted, draft to go back for revision and resubmitted next COP
Last ditch efforts by CMA could see deal being adopted: sources
The consensus to adopt carbon crediting and trade under Article 6 of the Paris Agreement at COP28 was still uncertain and shaky as disagreements over key definitions and text remained, several sources told S&P Global Commodity Insights on the ground in Dubai.
Much of the disagreements were around the methodologies to be adopted and definitions for removal credits under Article 6.4 market mechanism, a centralized and regulated global voluntary carbon market.
Article 6.4 allows a company in one country to reduce emissions domestically and have those reductions credited so that it can sell them to a different company in another country.
The Article 6.4 Supervisory Body (SB) -- entrusted with deciding the guidelines on the market -- submitted their final draft text to the UN Climate Change subsidiary body for scientific and technological advice (SBSTA) Dec. 6, which will now deliberate on the proposed text.
Sources said the main push to get the text approved in its current format was from the US among others but there was opposition from representatives of the EU, Canada, Norway and the Independent Alliance of Latin America and the Caribbean (AILAC) countries.
"For removals, the guidance is not strong on environmental integrity as per the opposing nations," a nongovernment observer source said.
Removal carbon credits have faced strong scrutiny for some of the current methodologies perceived to be not scientific enough and riddled with integrity concerns.
"As for 6.4 methodologies, the bone of contention seems to be on non-clarity and limited time to hash out the details," the source said.
In the context of Article 6.2, the disagreements were minor with only the issue of revoking of credits by host countries still not agreed upon by all parties, sources said.
The finalized Article 6 draft text released Dec. 6 morning has a variety of different options to choose from and has been forwarded to the Conference of the Parties (CMA), the supreme body of the Convention, which will deliberate with parties to see if consensus can be reached by the end of the conference. If there is no consensus reached, the draft will go back to the SB which will have to come back at the next COP meeting with changes.
"Anything can happen at the last moment," a second observer source at COP28 said. "I have seen far more contentious texts getting approved in the past 20 years and it all depends on the convincing power and last-minute deliberations."
The operationalization of Article 6.4 will provide a new structure for a global carbon market, opening up fresh demand for credits, with the UN deciding the rules on eligibility. It will also open up a new avenue for existing project developers to be part of this market who currently register their projects with the private global standards.
"It's hard to be a project developer right now. If this does not get adopted at this COP, then just more waiting possibly up to the end of 2025, which just pushes the market back," a nature-based project developer source said.