Science & Technology

What does the passage of Article 6 mean for the carbon market?

Obtaining an agreement on the rules for international trading of carbon credits is a series of negotiations known as Article 6, which was settled at COP26 last month. However, on the last weekend of the conference, 200 countries finally agreed on guidelines to create an international market for carbon credits, including country-to-country exchanges of these means.

In the case of the company that buys the offset and two major verification organizations, Verra and The Gold Standard, Article 6 is the long-awaited carbon credit creation, accounting and verification that was previously developed primarily by the private sector ad hoc. Government guidance. Basic.

According to Chirag Gajjar, Head of Local Climate Behavior within the World Resources Institute’s Climate Program, the rules agreed in Glasgow will make the offset program more stringent.

“This is the rulebook we’ve been waiting for,” added Southpole CEO Renat Heuberger, who is discussing a carbon reduction project. “It creates the clarity that we really need to increase the investment of the large private sector in projects that actually reduce large emissions.”

Article 6 is based on the Clean Development Mechanism (CDM) of the 1992 Kyoto Protocol. CDM has established rules for carbon markets and offset projects. Addition and leakage..Unfortunately, there have been allegations of abuse of these carbon trading practices. Under scrutiny In fact, the increase in emissions raises many questions about the reliability of the voluntary offset market.

“We want to get rid of this mechanism, modernize it, and re-install it. As science evolves, we get better data, better satellite imagery, and better quantification tools. It will be better. “”

Article 6 also describes how countries engaged in the international transfer of carbon credits can avoid the corresponding process called coordination, double calculation.And that Allow Converting the existing Certified Emission Reduction (CER), a type of carbon credit issued by the CDM, into the internationally transferred mitigation outcomes (ITMO), a new carbon reduction unit created by the Paris Agreement, the State. To trade beyond.

According to Gajjar, the passage of Article 6 means that the carbon market rulebook required by the Paris Agreement has finally been completed. But countries still have to provide guidance to put that framework into practice, he said. To do this, the supervisory authority plans to meet twice in 2022.

“Until now, offsets have been a zero-sum game, and buying and selling offsets hasn’t led to actual emission reductions,” Gajar wrote in an email to GreenBiz. “Article 6 will affect how the private sector looks to reach its goals. It will open the door for the private sector to contribute to reducing global emissions.”

Companies that buy offsets, projects that create offsets, and organizations that handle validation do not agree that voluntary offsets are not producing concrete carbon savings. But everyone agrees that getting clearer guidance, especially when counting offsets transferred from country to country, helps build confidence in the carbon market.

According to experts, the biggest benefit of passing Article 6 is to address ways to avoid double calculations of emission reductions when credits are traded between countries. This is an issue that prevented the framework from passing in the previous two COPs.

Under the new SchematicA country that generates and hosts carbon reduction credits can decide whether to sell it or use it for its Nationally Determined Contribution (NDC) goals. When sold, the seller’s country adds the emission unit and the buyer’s country deducts the emission unit, basically keeping the balance.

This form of double counting rule avoids what could end up in a sense of carbon colonialism.

“”[This rule] Avoid anything that could lead to a sense of carbon colonialism, “Hubger said.I don’t want to rob Senegal [for example] Opportunities for decarbonization “

There is disagreement over how Article 6 will affect the voluntary carbon market. Consulting firm South Pole said that Article 6 is not working towards mandatory NDC targets like the state and therefore does not “export” credit, so it is less of an internal business for companies that buy offsets. We support the theory that it has no effect.

WRI’s Gajjar believes it needs to be further clarified to address the situation of covering unapproved and unadjusted credits to NDC. “In a sense, Article 6 has already begun discussions on the shape and form of voluntary markets, which can affect how it evolves over time,” Gajjar said. Wrote by email. “Adjusted credits are used for offset purposes, and unadjusted credits may be used for other purposes.”

However, most experts are convinced that the Article 6 agreement will help boost investment in carbon credit projects and demand for credit. Increased demand and funding should in turn increase the value of carbon credits, they say, helping more ambitious climate mitigation projects finally get on track.

According to South Pole, many unruly and cheap removal projects are already underway. Now that prices are expected to rise, more expensive things may be possible. This unlocks the new funding and allows it to finally get going.

“Article 6 is ideal for voluntary markets as it generally supports international cooperation and carbon credit, a major financial product,” Huberger wrote in an email. “Therefore, we hope that Article 6 will help further increase the credibility of the market.”

What does the passage of Article 6 mean for the carbon market? What does the passage of Article 6 mean for the carbon market?

Back to top button