The apparent progress made on Article 6 carbon markets during week 1 of the COP29 climate conference conceal many problematic fundamental and technical issues that remain unresolved. Isa Mulder explains.

While the COP29 started off hastily with one contentious Article 6 agenda item being gavelled through in the opening plenary, UN carbon market negotiations remain as entrenched as ever.

After a week of intense negotiations, the two carbon market agendas under Article 6.2 (decentralised emissions trading by countries) and Article 6.4 (a UN-mandated central carbon market) of the Paris Agreement have been forwarded from the first week’s UN negotiating body, the Subsidiary Body for Scientific and Technological Advice (SBSTA), to the second week’s body that has the power to eventually adopt or reject text: CMA, which represents all the countries which ratified the Paris Agreement.

Tech talk

On Article 6.4, the negotiating countries seem fairly aligned on issues around authorisation, working out the technical details to ensure everyone’s wishes are heard. Transfers between the 6.4 mechanism registry and other registries seem equally technical in nature and do not give rise to any major differences, so long as the credits have been formally authorised by the country where the underlying projects are located. 

However, countries have not yet had a chance to work out their differences on defining further guidance to give to the body overseeing the future UN carbon market, the Article 6.4 Supervisory Body. This body can set up most rules under Article 6.4 but is accountable to Paris Agreement signatories who can establish mandates to it at COPs. 

The debate around further guidance may become a battleground in week 2 between countries who want more climate ambition and rights protections from this carbon market and those who would rather see these elements watered down. Carbon Market Watch outlined suggestions for further guidance in recommendations to the CMA.

Emission or omission

We are already seeing the same stark fault lines re-emerge between countries on Article 6.2. While Article 6.2 negotiations are especially technical in nature, they boil down to essential disagreements around the urgent need to strengthen transparency and accountability processes in the loose bottom-up Article 6.2 framework. 

There were options on the table to provide more upfront information in the name of transparency and to publicly flag “inconsistencies” which need to be resolved before any Article 6.2 credits would be used by buyers (inconsistencies indicate lack of conformity or even non-compliance with Article 6.2 rules). However, these have been significantly watered down in the text that is going into week 2. And even with this diluted text, there continue to be countries that are not willing to accept such modest improvements in Article 6.2. 

While a large number of countries ask for more ambition, the window of opportunity to get this done is narrowing. Moreover, there are still large disagreements on how carbon market registries should be handled. With all this still in play, week 2 is setting up to be a difficult one. It is essential that the involvement of ministers and high-level negotiators does not result in significant quality compromises for the sake of a deal.
Finally, with  difficult and crucial climate finance negotiations occurring in parallel at COP, it is essential to ensure a strict firewall between the new climate finance package and Article 6 (and the voluntary carbon market). It is key for NGOs and many countries that Article 6 and the VCM are not inappropriately mixed into the climate finance deal. As Secretary-General of UN Trade and Development (UNCTAD), Rebeca Grynspan, recently expressed: “Carbon markets are not a panacea… They are not a substitute for official development assistance or for climate finance flows.”