Developers of new UN carbon reduction projects under Article 6.4 of the Paris climate agreement face prolonged uncertainty as regulators opted to postpone decisions on related methodologies.
The Article 6.4 supervisory body said at its meeting earlier this month that it would postpone the planned decision on mechanism methodologies by September, instead adopting only the requirements for developing and assessing the methodologies by this time. The requirements would be approved at the UN Cop 28 climate summit in December.
Work on final methodology rules based on the approved requirements would then start in early-2024. If countries reach an agreement at Cop 28 then a "batch of priority methodologies" might be available before the end of 2024, senior founding partner of consultancy Perspectives Climate Group and UN climate negotiations observer Axel Michaelowa says.
Proponents planning to develop projects under Article 6.4 — essentially a successor to the UN's clean development mechanism (CDM), which ended in 2020 — will need to wait for the rules to be in place. And they can no longer register as "provisional" with the CDM board as of 30 June, the day on which the transition process for eligible CDM activities to Article 6.4 became operational. The UN climate change secretariat will be accepting transition requests until the end of this year.
"The inability for project developers to get on a ‘waiting list' for Article 6.4 projects will certainly cast a chilling effect on project preparation," Michaelowa tells Argus. "One can only hope that the Article 6.4 regulators will come back on their decision and at least enable a prior notification, like under the CDM".
Advances on methodologies have been made difficult by persistent disagreement between negotiators, not just within the supervisory body but also at delegate level, such as during the UN Bonn climate conference last month.
Baseline contraction factor
The proposed baseline contraction factor (BCF), against which the activity's results are measured and which is designed to encourage ambition to rise over time, continued to be a hotly-disputed issue at the supervisory body meeting.
Members from developed countries, mostly in favour of introducing a BCF, were broadly pitted against members from developing countries largely opposing it.
Members mostly from developing countries warned that introducing a BCF would be tantamount to interfering in a country's nationally determined contribution (NDC) to the Paris deal. A project proponent sometimes needs every single tonne to make the project work, a member from the group of like-minded developing countries (LMDC) said.
Too strict a BCF might end up discouraging investments under Article 6.4, a developing country member warned, particularly if investors have the choice of using Article 6.2 — a framework under which host and buyer countries form bilateral agreements to generate internationally traded mitigation outcomes (Itmos).
But an insufficiently ambitious Article 6.4 might be less competitive than Article 6.2, a developed country member countered, "because countries will be able to do what they want under 6.2, whereas here [under Article 6.4] they might be committed to crediting at levels they wouldn't like".
The same delegate warned of a risk of over-crediting. "If we have a very loose approach to this then we're committing host countries to crediting at levels which will make it impossible to raise their ambition. They will find themselves in a more difficult position in further NDC cycles."
Article 6.4 is the only mechanism that looks at host countries and host country interests, the member stressed. And host countries are also becoming more careful about managing what they are going to sell into the market, the member said.
The supervisory body will launch a call for input between 3-16 August on the draft recommendations for mechanism methodologies. Its next meeting will take place between 10-15 September in Singapore.
"The UNFCCC Secretariat will get a lot of support by countries and development agencies to ensure rapid revisions of CDM methodologies to make them ‘Article 6.4-proof'," Michaelowa says.
