A contentious proposal has emerged as the 29th Conference of Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCCC) enters its second week. The proposal relates to the global carbon market and is part of the draft text of Article 6.4 of the Paris Agreement.
The proposed text asks the Supervisory Body, which oversees the market, to “strive to ensure regulatory stability.” This means avoiding frequent substantive revisions to carbon market rules.
Also read: COP29 Approves Article 6.4, Paving the Way for Global Carbon Trading
US Proposal Sparks Debate
The proposal, introduced by the United States, aims to limit frequent changes to carbon market rules under Article 6.4. This article allows countries to trade carbon credits, each representing one tonne of reduced or avoided CO2e emissions.
Activities that reduce emissions, such as using efficient cook stoves, or remove greenhouse gases, like planting trees, earn these credits.
Concerns Over Regulatory Stability
Many parties at COP29 have raised concerns about the proposal to restrict revisions to the rules governing the carbon market under Article 6.4. Experts argue that such restrictions could undermine the effectiveness of the system.
Injy Johnstone, a research associate at the University of Oxford, warned that this could hinder the system from being informed by the best available science. Isa Mulder, an expert on global carbon markets, echoed these concerns. She noted that some parties have proposed adjustments to allow periodic improvements based on new scientific advancements.
Without regular revisions, the carbon market could become stagnant and less responsive to emerging challenges in climate action.
Also read: COP29 Summit in Baku Urges G20 Leaders to Take Bold Action on Climate Crisis
Uncertainty Surrounding Carbon Market Rules
The proposal follows COP29’s announcement that countries reached a consensus on the rules for Article 6.4. Mukhtar Babayev, COP29 president, assured that the rules could still improve as negotiations continue. However, the US proposal raises questions about the carbon market’s future direction.
Mulder speculated that the proposal may change in future drafts. She noted that the supervisory body may need to revise the rules if new scientific reports, like those from the IPCC, contradict them.
Disagreement Over Afforestation and Reforestation Projects
Another significant issue at COP29 is the transition of afforestation and reforestation projects from the Clean Development Mechanism (CDM) to Article 6.4.
India, China, Brazil, and members of the Arab and African groups oppose the additionality check for these projects.
The additionality requirement ensures emissions reductions would not occur without the financial incentives from carbon credit trading.
Private Discussions and Market Mechanisms
Behind closed doors, informal sessions and bilateral meetings are likely to continue, as parties work to iron out these differences. There is no transparency about the discussions, making it difficult for observers to understand the progress being made. Despite these disagreements, many parties are eager to conclude negotiations on Article 6.
The European Union emphasized the importance of finalizing the carbon market rules. Market mechanisms could provide essential financing for the new climate finance goals being discussed at COP29.