UN carbon market negotiations in Bonn must pave way to effective COP27 in Sharm el-Sheikh

Negotiators must prioritise human rights, transparency and environmental integrity as they hammer out the framework for carbon markets under Article 6 of the Paris Agreement.

The intersession of the UN climate change conference, where Carbon Market Watch will be present throughout, kicked off in Bonn, today, Monday 6 June, and will last through Thursday 16 June. Negotiators meet for the first time since Glasgow’s COP 26 in order to make progress on a range of issues, including further rules on the Article 6.2 and Article 6.4 market mechanisms of the Paris Agreement. Carbon Market Watch has prepared high-level recommendations on core Article 6 topics, as well as deeper dives into carbon market infrastructure, grievances and removals.

Despite the agreement hammered out at COP26 on the overall rules of the Article 6.2 and 6.4 carbon markets, much still needs to be discussed and agreed. The COP 26 agreement sets the overall framework but the concrete operationalisation of these guidelines is still needed. The devil is in the details.

Among the most important issues are the rules on baselines and additionality, transparency, the establishment of a grievance mechanism, and a better definition of the nature and role of carbon dioxide removals within the market mechanisms.

Real removals

It will be crucial that negotiators properly define carbon removals, and that this category excludes activities that seek to temporarily store carbon in ways that are highly susceptible to reversals. Temporary storage, here, means anything less than a few centuries. This is the case for nature-based activities, for example, which store carbon in natural ecosystems such as forests. These are at high risk of releasing the stored carbon when, for example, trees burn, die of diseases, or are logged. 

While activities that aim to store carbon in nature and improve biodiversity are necessary and good for the planet, they must not be used to generate carbon offsets. Nevertheless, there could be a space for these under Article 6, if strict safeguards are in place to ensure that no credits from such activities are sold or bought for offsetting purposes, i.e. temporary carbon removal projects cannot be used to meet emission reductions targets (whether mandatory or voluntary), such as nationally defined contributions (NDCs).

Nuts and bolts

Some of the most crucial elements of the new carbon market frameworks will require huge effort, and will need to be discussed by a body that has not yet been established: the 6.4 supervisory body (SB). This includes the adoption of new methodologies, and the establishment of a grievance mechanism. Getting the 6.4 supervisory body off the ground will be an important first step in making progress on carbon market rules.

Overall, as countries continue to negotiate the nuts and bolts of UN carbon markets, they should not lose sight of the bigger picture. These systems can play a role in channeling climate finance to where it is most needed, but they also carry very real risks of undermining ambition. Used as a tool to meet NDC targets, they can act as a disincentive to adopt and implement ambitious emission reductions policies.

The first priority must remain for countries to focus on ambition, climate finance support, and domestic emissions reductions. Carbon credits should not be used to meet NDC targets. At most, they should be used as a way of channeling climate finance through a system that benefits from robust MRV provisions.  Countries should not be too quick to forget the sobering lessons from the Kyoto Protocol’s failed Clean Development Mechanism, and should continue to approach carbon markets with a lot of caution.