ANALYSIS: Will COP29 negotiators override decisions on Article 6.4 CDR and methodology standards?

24 Oct 2024

Quantum Commodity Intelligence – A UN panel's decision to approve standards for carbon dioxide removals (CDRs) projects and methodology requirements under the Paris Agreement's Article 6.4 potentially provides a pathway towards a much-needed widening of the demand pool for credits, but major obstacles remain, not least the potential for pushback at COP29 next month.

The Article 6.4 Supervisory Body (SBM), a UN-appointed panel approved standards for both earlier this month at its meeting also in Baku, a move hailed a masterstroke by many in the CDR space with the hope that the sector can funnel billions of dollars of climate finance through the UN carbon mechanism.

But, if the standards get through the two-week talks in November unscathed, it will provide strong initial grounding for developers and buyers of credits that might prefer the UN stamp on their credits so these can be used to count towards targets under the Paris Agreement.

"There are many elements that will need to be further clarified, or additional processes still to be developed. There is time to get that done now that the basic framework is in place, pending CMA's reaction," said Eve Tamme, a Netherlands-based consultant in emailed comments to Quantum.

Various observers of the removals standard have pointed out it is a general document, and that it is impossible to outline all the necessary details for a whole crediting mechanism in just 10 pages. With the standard a work in progress, the two biggest glaring omissions are details on methodologies for CDR in Article 6.4, and a registry.

But methodologies can now start to be developed, either by market participants or the SBM itself, which will need to be submitted for approval, Tamme pointed out.

"All in all, we are suddenly in a much better place with operationalising Article 6.4. Of course, it will still take quite some time to get the first credits issued, so nothing changes in the short term," she said.

Disagreements

The approval of the standards comes against the backdrop of long-running disagreements between various SBM members – many of whom also negotiate on behalf of their governments at UN climate talks.

Disagreements have centred on how to mandate the risk of reversals from projects, the role of 'buffer pools', and how to define permanence, among several other issues.

However, the question remains whether the standards will still be in place after the main UN climate talks this year in Baku next month.

"The bulk of interventions from governments congratulated the Supervisory Body to the great work they had undertaken, which essentially meant that these countries were willing to endorse the standards," said Axel Michaelowa, a consultant on carbon markets with Switzerland-based consultancy Perspectives and a veteran of UN climate talks.

Michaelowa, who was speaking at a webinar hosted by ratings agency BeZero earlier this month, was referring to his observation of an 'intersessional' meeting of negotiators who gathered in the Azerbaijani capital last week, which was convened in an attempt to find common ground on various issues related ahead of COP29 in the same city, just four weeks from now.

"The one big outlier was Russia, surprisingly, because Russia in the past has not really engaged in Article 6 negotiation to a strong extent, and Russia clearly said [at the intersessional] 'we don't like it' [the decision to adopt Article 6.4 standards] and 'we oppose it'," he said.

"You can isolate one country like Russia. But I'm wondering how the like-minded developing countries will behave, because in the past they were also not very much favourable to the Supervisory Body deciding on this," Michaelowa explained.

"Maybe countries in the Gulf region will help convince the governments there to not try to reopen [discussions on CDRs and methodology requirements], because I think if it is fully reopened we'll get again into a significant risk of these rules being rejected," the consultant said.

"If you open one element, then of course you open all the other elements and then the old adage is there, nothing's agreed until everything is agreed. So I am cautiously optimistic that this may fly, but yeah, of course the dynamics in the COP, we can't yet tell," he added.