Cop: EU warns on UN carbon market standards

The EU has warned against efforts by some parties to dilute standards for the future UN-mandated co-operative carbon market, as high-level political discussions on its framework begin today at the start of the second week of the Cop 28 UN climate conference in Dubai.

Countries are consulting on a draft text for the co-operative carbon market under Article 6.2 of the Paris climate agreement, which contains many "options" and text blocks in brackets, and which the UN climate body's secretariat stressed today "does not represent consensus among parties".

Negotiations touch on issues such as the agreed electronic format for Article 6.2 activities, the number, timing and sequencing of the mechanism's authorisations, including those of the internationally transferred mitigation outcomes (Itmos) generated under Article 6.2 and their authorising entities, how to deal with inconsistencies in Itmo data, the level of confidential information the party must provide, and how to deal with the revocation of an authorising entity.

A "background paper" for the EU's Working Party on International Environmental Issues, which leads EU climate negotiations, warns against the position taken by some countries that are eager to start trading carbon offsets and seemingly unwilling to wait for appropriately stringent rules to be implemented.

Under Article 6.2, countries sign bilateral agreements generating Itmos, which are mainly to put towards the buyer country's nationally determined contribution — emissions reduction pledges — but can also be put towards other mechanisms such as the International Civil Aviation Organisation's Carbon Offsetting and Reduction Scheme for International Aviation (Corsia).

The EU's background paper reflects a continuing long-lasting disagreement between a focus on operationalising Article 6.2 and Article 6.4 — under which emissions reductions credits will be issued and traded on a platform operated by the UN — as quickly as possible, and a focus on ensuring utmost integrity, not least in the context of widespread concern over the integrity and validity of carbon offsets in the voluntary carbon market (VCM).

The paper voices its concern over the US promoting VCM standards "as a means to implement Corsia" and "to deliver finance from voluntary players through its Energy Transition Accelerator". And it criticises Switzerland — a global frontrunner in Article 6.2 activities — for using standards from Article 6.4's predecessor, the clean development mechanism (CDM), for its planned offsetting activities in Ghana and Vanuatu.

Switzerland, which has so far signed 13 bilateral agreements under Article 6.2, says it applies the highest standards of the CDM and/or the VCM's Gold Standard while it waits for the mechanism to be fully implemented.

The EU background paper commends Japan as the only country "actively" developing its own standard for bilateral crediting.

"The EU is spot on with its criticism of the US putting the interests of its voluntary carbon market industry above the integrity of international carbon markets," consultancy Perspectives Climate Group senior founding partner Axel Michaelowa said.

Non-governmental organisation Carbon Market Watch policy expert Jonathan Crook said that the EU paper is "useful" because it points out the political implications of what otherwise might seem like merely technical negotiations.

Article 6.2 is in practice already operational, although no actual trades have yet taken place. The representative of Thailand was heard to warn in negotiations at Cop last week that it is imperative for Article 6.2 to be operationalised by 15 April 2024, given that some countries are in the process of doing their first transfers. Thailand and Switzerland have signed an agreement under Article 6.2.

By Chloe Jardine