Cop: Article 6 carbon trading decision stuck

The UN Cop 28 climate conference in Dubai has ended without a deal on outstanding elements of Article 6 of the Paris Agreement relating to international carbon trading.

The overarching Article 6 rulebook was agreed at Cop 26 in Glasgow in 2021, six years after first being set out in the Paris deal, but outstanding elements remain to be decided on the carbon trading mechanisms under Article 6.2 and 6.4.

Article 6.2 allows bilateral government agreements to generate so-called internationally transferred mitigation outcomes (Itmos), which can be counted towards a country's nationally determined contribution to the Paris agreement.

A number of countries have already formed bilateral agreements under Article 6.2 ahead of its finalisation, with Switzerland and Sweden among frontrunners on the buyer-side and Ghana, Thailand and Peru on the project host-side.

But its incomplete framework limits the transparency of its transactions and could make negotiations next year more difficult, UN-accredited observer of the Cop process Carbon Market Watch (CMW) warned today.

The non-governmental organisation pointed to the lack of limits on what countries can class as "confidential" in their Article 6.2 transactions, and an absence of "real consequences" for not adhering to some of the mechanism's rules, as some of the contentious issues in the final draft negotiating text put to parties at Cop 28 yesterday evening.

Parties similarly failed to reach agreement on outstanding Article 6.4 elements relating to credit authorisation, the eligibility of emissions avoidance or conservation enhancement projects to generate credits in the market, and the mechanism's link to Article 6.2. Article 6.4 provides for a centralised carbon credit platform run by a supervisory body under the auspices of the UN.

The mechanism's supervisory body was also hoping to approve guidance it had put forward last month on Article 6.4 methodologies and the potential inclusion of carbon removals in the market.

But the issues "proved too contentious", CMW said. "While some countries were worried about insufficient safeguards and the many holes left in the removals text, others seemed to want to bring down the ambition of the methodological guidance."

Article 6.4 credits cannot be issued and traded until the central mechanism has been operationalised.

"Negotiators made the best out of a bad situation" by rejecting the draft decision, CMW said today, noting that "the lack of a breakthrough leaves the nascent UN carbon markets in a continued state of uncertainty and shakiness, but avoids the adoption of inadequate rules that would have chained down climate ambition, enabled questionable trading and facilitated greenwashing".

But the International Emissions Trading Association (Ieta) criticised what it termed the "politicisation" of Article 6.4. "The delay of the Article 6.4 mechanism is not a victory for environmental integrity, it is a victory for the anti-market agenda," Ieta's international policy director Andrea Bonzanni said. Discussions on the implementation of Articles 6.2 and 6.4 will continue into next year's Cop 29 in Azerbaijan.

By Victoria Hatherick