High hopes for progress on Article 6 and carbon markets at COP28

Countries and companies around the world are eagerly awaiting clarifications related to the implementation of Article 6 at COP28 in Dubai. Implementation of this mechanism will also influence voluntary and compliance carbon markets, generating widespread interest from participants. 

Article 6 of the Paris Agreement provides a framework for international cooperation through carbon markets via two mechanisms – Article 6.2 and Article 6.4. These represent two methods of cooperation – one through bilateral or multilateral agreements (6.2), and one through an international market overseen by the UNFCCC (6.4).  

Recent progress – recommendations made by the Article 6 Supervisory Body on carbon credit projects and greenhouse gas removal methodologies related to Article 6.4 – has boosted hopes that the mechanism will become operational in 2024, but this is dependent on agreement of these recommendations from relevant parties during negotiations over the coming days. The negotiations are likely to hold many differing views, and there is no guarantee that priorities from all parties will be mutually agreed.  

Alongside the negotiations, there will be a number of side events over the course of the COP28 schedule to facilitate dialogue on the topic. On Sunday 3 December, the Article 6.4 Supervisory Body’s event, ‘What's next for Article 6.4?’ – will present progress on implementation so far and outline next steps. On the same day, there are several events linked to carbon markets and Article 6 operationalisation, before a key conference on 4 December focuses on ‘Restoring confidence in voluntary carbon markets’. 

The title of this showpiece event encapsulates the challenge for the COP28 Presidency, who are aiming to restore credibility after scrutiny has led to concerns that Voluntary Carbon Markets (VCM) credits do not represent reliable carbon emission reductions. The event is likely to recognise high integrity initiatives and credits working to improve confidence in carbon credit supply, such as the Integrity Council for Voluntary Carbon Markets (IC-VCM)’s Core Carbon Principles, Voluntary Carbon Markets Integrity Initiative (VCMI), and other sectoral specific initiatives. These are playing an important role in supporting high-quality carbon credits by implementing standards for credits to adhere to. 

Many market spectators are already anticipating the effects of Article 6 implementation by recognising the need to demonstrate clear accounting and high integrity in voluntary carbon markets. For example, Gold Standard recently introduced the first Article 6 compliant credits, following authorisation of the credits by the Rwandan government, recognising that these emission reductions will no longer count towards their NDC commitments. Verra has also now followed suit, labelling credits authorised by the Government of Rwanda.

All major VCM standards acknowledge that there will be a continued role for the VCM separate from Article 6, through projects that support achievement of government’s NDCs. At the same time, Article 6 and VCMs are expected to interact with each other, through the application of CAs for some credits intended for voluntary use, and as accepted methodologies used in VCMs could potentially be taken up by Article 6 projects.

It will be interesting to see the developments that result from discussions at COP28 over the coming weeks and what implications this holds for governments and business moving forward. The ideal outcome would be to see a clear commitment following the conference, to getting the Article 6.4 mechanism operational, and commitments to VCMs as alternative but reliable carbon markets for corporations to engage with. 

Ricardo has a wealth of experience advising clients on how carbon markets can be accessed and used to support climate action through international cooperation. For advice or more information on how we can support your organisation, get in touch.

Ricardo's experts are participating in talks and events at this years' conference to contribute to ongoing discussions on solving the global climate crisis. Find out more about Ricardo's activities at COP28