THE CARBON CREDIT MARKET IS NOT A LASTING SOLUTION TO CLIMATE CRISIS

Never has so much attention been paid to the carbon credit market as at this COP28. Between Friday 8 and Saturday 9 December, the halls that hosted the negotiations on Article 6 of the Paris Agreement were full, and in many cases one even had to wait outside because the available seats had run out.

The reason is clear: at a COP whose Presidency is busy shifting the focus away from mitigation and the fossil fuel phase-out discussion, the carbon credit market may be an easy way out for the Emirates Presidency. According to the International Energy Agency (IEA), and in line with science-based targets, to achieve climate neutrality, carbon credits can only be used to neutralise residual emissions. 

Residual emissions are those emissions remaining (or ‘unabated’) after a country’s or non-state actor’s total emissions have been reduced by at least 90 per cent and it is no longer possible to cut them further while pursuing all scientific and/or technological actions/solutions. According to science, carbon credits can thus only be used to neutralise a maximum of 10 per cent of a country or non-state actor’s remaining emissions, while 90 per cent of emissions must be reduced.

However, Article 6 of the Paris Agreement and the negotiations on it do not specify what percentage of emissions can be neutralised with carbon credits, opening the door to unambitious interpretations and the possibility of continuing to burn fossil fuels, merely neutralising their emissions. 

For this reason, on Friday 8 Bolivia and the negotiating group Like Minded Developing Countries (LMDC), which includes, for example, India and Indonesia, declared their opposition to carbon credits and loudly stated that the carbon credit market is not a lasting solution to the climate crisis. Bolivia therefore proposed a moratorium on market mechanisms under Article 6 (Article 6.2 and Article 6.4), calling for a halt to market functions under Article 6.2 and Article 6.4. Bolivia’s moratorium is currently contained in Annex II of the draft on Article 6.4 circulated on Saturday morning 9 December. This also states the reason for the moratorium: ‘the emissions market is scientifically and conceptually inconsistent with the basis of climate change science’.

These statements triggered reactions from the developed countries, which demanded that the work on Article 6.2 and Article 6.4 be continued and accused Bolivia of holding the text hostage and thwarting the work done so far.

Furthermore, Bolivia argued that it is only Article 6.8 that represents the true spirit of international cooperation. 

Recall that Article 6 has three negotiating strands: 

• Article 6.2 regulating the market for carbon credits between countries. 
• Article 6.4 regulating the carbon credit market between one or more countries and non-state actors.
• Article 6.8 regulating non-market approaches to carbon credits.

Furthermore, we recall that according to the Paris Agreement, the objective of Article 6 is to pursue voluntary cooperation with the aim of increasing the ambition of mitigation and adaptation plans and promoting sustainable development and environmental integrity.

A further distinction must be made. Carbon credits are generated in two ways: from CO2 removal projects (removals) or from reduction projects. 

Carbon dioxide removal projects are, for example, reforestation projects or protection of existing forests, which absorb it, or even capture and storage projects. 

Reduction projects, on the other hand, include projects related to renewable energy or energy efficiency, and are based on comparative estimates between two scenarios, for example between a business-as-usual situation (non-renewable energy plant) and a renewable energy plant. The estimated ‘reduced’ emissions generated by the renewable plant (in comparison with a hypothetical non-renewable plant) can generate carbon credits. However, according to science, only credits generated from removal activities can be used to neutralise residual emissions. Credits generated from reduction activities cannot be used to achieve science-based targets. 

But let us come to the negotiating texts.

Regarding Article 6.2:

• No reference is made to the science: use of credits exclusively for the neutralisation of 10% of residual emissions and exclusively through CO2 removal projects.
• Article 1 discusses whether the cooperative approach regulated under Article 6.2 is an agreement, a framework or a set of standards and procedures. It seems that the aim is to elevate the status of this article to an agreement. Given the assumptions shared at the beginning of this article, this would not be good news.
• The need to establish common terminologies on what is meant by reduction activities and removal activities is in brackets, i.e. there is no agreement. But without this definition, the rigour of the credit system would be compromised.
• There is no agreement on requiring information on the risk of CO2 being released once removed from the atmosphere (reversal risk). Recall that without scientific proof that the removed CO2 remains permanently in carbon sinks, the carbon credit market would be extremely detrimental to achieving the goal of the Paris Agreement. 
• There is no mention of the protection of human rights and the rights of Indigenous Peoples and local communities that might be negatively impacted by carbon credit projects: we have discussed this here.

Regarding Article 6.4: 

It is requested to develop a work programme that outlines clear distinctions between measures that include CO2 removal activities and those that include greenhouse gas reduction projects. This is positive because it would increase transparency and clarity.

The mention of human rights is positive.

(On Article 6.4 we have just published a detailed analysis from Dubai on the progress of the negotiating texts: you will find it on our website).

And there ends the good news. Let’s move on to the bad:

• There is a debate on whether or not to include ’emissions avoidance’. First of all, we need a clear definition of what is meant by ’emissions avoidance’. Their reporting is based on a system, based on assumptions, different from the one traditionally used to report emissions, which is based on data. In the absence of clear methodologies on how to report avoided emissions, the risk of double-counting or greenwashing would be high.
• There are some unclear points. There is talk of clarifying the risk of CO2 release and whether it is avoidable or unavoidable, but there is no clear definition of these terms. 
• The role of buffer wells is asked to be explained, but there is no definition of what they are. Some parties on Saturday requested that the word buffer be removed because it is unrelated to the terms used in relation to Article 6.
• In the text, there is a reference to reconsidering the tonne-year reporting system that some states are trying to bring back. This is a reporting system that attempts to measure the benefits of short-term carbon storage. According to the system, storing 300tCO2 for 1 year would be considered – according to a useful example cited in CAN’s ECO Bulletin – equivalent to storing 1tCO2e for 300 years. This reporting system had been shelved by the Article 6.4 Supervisory Board because it was not based on scientific evidence.
• The plan is to launch the database on the Article 6.4 mechanism by 2025 although many points still remain open.

We are waiting to see what texts will be delivered and how discussions will continue in the coming days.

Article by Margherita Barbieri, Italian Climate Network Volunteer