Carbon markets continued to feature prominently and often worryingly at COP30. Carbon Market Watch witnessed a stark contrast between the optimism championed by the many initiatives promoting “high quality” carbon markets and the negotiation rooms where concerted efforts were made to water down Article 6 rules.
“We are moving from negotiation to implementation” was a phrase frequently stated in the Article 6 negotiation rooms of COP30 in Belém. And, indeed, the Article 6 rulebook was sealed at last year’s gathering in Baku. Nevertheless, there was little sign of closure as national negotiators aired their grievances on existing decisions, reviving a supposedly settled set of texts. But while some tried to improve the transparency, accountability, scientific soundness, and overall ambition of the rules, others fought to lock Article 6.2’s low quality bar firmly in place and pull down that of Article 6.4.
In the Article 6.4 negotiation room, a low-key agenda became anything but when certain countries threw damaging proposals on the table that largely mirrored the position of carbon market players and their financial interests. Witnessing this was tragic to say the least. Many of these same actors led a vocal campaign, only weeks before, that influenced the weakening of the Article 6.4 rules on non-permanence.
Doubling down on this success, on the eve of COP30, they called on countries to dilute permanence and other technical (baseline and leakage) rules in Article 6.4, and to introduce huge exceptions for nature-based carbon crediting projects. Troublingly, some countries listened in the COP30 negotiations and demanded weaker Article 6.4 rules.
These attempts were roundly criticised by civil society, both in the negotiation rooms and in the media, and that pushback was echoed by progressive negotiators and leading scientists. Thankfully, combined efforts meant a crisis was averted and concessions to market actors were not included in the final adopted decision.
“Governments averted disaster by fending off numerous financial interests that sought to weaken carbon market rules in Article 6.4. At the same time, they leave Belém with a lot of unfinished business if this carbon crediting mechanism is to fulfill an exemplary function for carbon markets globally,” said Isa Mulder, CMW global carbon market expert, from Belém.
The ghost of COPs past resurfaces
Though negotiators importantly heeded science on that occasion, they did not hold the line when it came to the transitioning of projects from the Clean Development Mechanism (CDM), the ill-fated carbon crediting mechanism of the Kyoto Protocol. A controversial compromise born at COP26 allowed carbon crediting projects from the CDM to switch over to the new Paris Agreement Crediting Mechanism (PACM) under Article 6.4 until the end of 2025.
However, countries agreed to extend the deadline by another six months, because four years somehow seemed too short. If all eligible projects were to transition over, the Article 6.4 market could be flooded with nearly a billion CDM-quality credits employing widely discredited methodologies. This deadline extension risks making a bad situation worse by allowing even more problematic CDM projects to join the Article 6 market and misleadingly receive the PACM-quality stamp.
At the same time, as the CDM itself remains operational to this day, despite it already being six years since it ceased approving any new projects, countries at last decided to shut it down for good – once all the loose ends, including the projects currently caught in the twilight zone between CDM and PACM, are tied up. And it’s good news that they finally did so: the substantial remainder of funds glimmering in the CDM treasure chest, while initially loaned to Article 6, are ultimately destined for the severely undercapitalised UN Adaptation Fund.
“While the old CDM framework is now put to rest, it’s dire that credits from the Kyoto mechanisms have been given yet another lifeline”, said Mulder. “The absurd message coming from governments seems to be ‘the CDM is dead, long live the CDM.’”
The silver lining: power to the people?
The saga of weakening the rules on non-permanence demonstrated that Article 6.4 lacked the antibodies to fight against industry lobbying. CMW estimated that three quarters of the respondents to the consultation on non-permanence had direct or indirect financial interests in carbon credits. The consultation process was clearly missing the point.
Fortunately, the now-adopted decision could help move the consultation in a more inclusive direction. In fact, it includes a mandate to the Article 6.4 Supervisory Body – the UN entity that implements the Article 6.4 market – to reinforce its consultation processes by inclusion of, and outreach to, indigenous peoples and local communities who are currently severely underrepresented. Increased efforts to hear the people on the carbon market frontlines is an overdue and necessary step.
Nothing to see here
For Article 6.2, the adopted text is a missed opportunity to enshrine much-needed improvements on transparency and accountability. While the implementation phase is only getting started, a common trait for all country-led carbon credit trading reports that have been reviewed so far is that even the low hanging fruit that represent the transparency requirements of the Article 6.2 framework are not being reached. The current system also suffers from a lack of accountability, leaving the responsibility for meaningful scrutiny in the hands of external observers and civil society.
Given that this COP kicked off with countries meeting to talk over a so-called ‘Ambition Dialogue’ and that this edition’s dialogue, contrary to the last one, also included a recognition of enduring quality and transparency problems arising from carbon trading deals, one might think there would be enough momentum to make some improvements to the inadequate framework.
Unfortunately, the promising proposals that were put on the table in the opening week, including a provision stating that countries should not transact internationally transferred mitigation outcomes (ITMOs) falling short of the transparency requirements, did not make it into the final text. Countries in favour of softening ambition opposed such proposals, and also tried to sneak in troublesome paragraphs that seemed to suggest that the UN should exercise tighter control over potentially critical reviewers. Such divisions resulted in a compromise text that might have negated the bad proposals, but also swept away the good ones.
The result is a neutral Article 6.2 decision. Although it contains some helpful language, such as a demand for countries to report on their deals in line with the low level of transparency demanded from the current requirements, it does little to strengthen the inadequate framework of Article 6.2 in any meaningful way.
“The adopted decisions may add marginal improvements to the overall Article 6.2 rulebook, but such increments do little to change the rather worrying course that Article 6 seems to be on,” said Federica Dossi, CMW global carbon market expert, who is also in Belém.
Adding oil to the fire
COP30 saw a record attendance of deep-pocketed fossil-fuel lobbyists – one in every 25 people at COP30. And this has a direct link to carbon markets, since industry associations heavily involved in Article 6 have people working for fossil fuel companies on their delegations.
With Article 6 fully operational, many market players have ramped up their promotional and advocacy activities in Belém – with some national pavilions seemingly even serving as literal carbon market trading places. The term ‘high integrity’ has become a buzzword for market actors and was frequently spotted in initiatives, announcements and deals. Yet when framed around high-level principles without actionable governance and accountability, the promotional effect of these words was not matched by a comparative level of substance.
If carbon markets serve as a substitute for emissions reductions and Article 6 acts as a dumping ground for junk and low-quality carbon credits, which will only be worsened by further attempts by vested interests to steer steer carbon market carbon market negotiations to their own ends to their own ends, the international community will continue to miss its climate targets and the climate crisis will continue to escalate.
“COP30 has demonstrated that the spectre of inadequate carbon crediting rules and blurred carbon market deals will continue to haunt climate targets for years to come,” said Dossi. “We call on countries not to buy carbon credits to reach their climate goals. EU policymakers, especially, must take note.”
