FACTBOX: State of Article 6 negotiations after Bonn talks

24 Jun 2022

Quantum Commodity Intelligence - The Bonn climate talks concluded last Friday after two weeks of negotiations, with progress said to be minimal on key points.

Quantum provides a summary below on the state of Article 6 negotiations ahead of the COP27 conference to be held next November.

Article 6.2

The article establishes a market in which countries or groups of countries can trade emissions reductions to achieve their nationally determined contributions (NDCs).

These country-to-country transfers are called internationally transferred mitigation outcomes (ITMOs).

Most countries agree that ITMO trades should be made public, but some continue to disagree.

At Bonn, the group of like-minded developing countries (LMDCs) suggested that all information submitted to the UN could be considered confidential.

REDD+ and avoidance

The Coalition for Rainforest Nations (CFRN) has argued that avoided deforestation activities should be exempt from review and reporting requirements.

This could make REDD+ activities automatically eligible for credits, something that other countries have not agreed with.

The Glasgow deal clarified that avoidance activities in the fossil fuel sector or to protect forests that are not under immediate threats will not be eligible for carbon credits, but during the Bonn talks the Philippines and India argued for their inclusion.

Article 6.4

The article regulates carbon projects in countries and is often labelled the successor of the Clean Development Mechanism (CDM).

Little progress has been made on 6.4 to date since the supervisory body that will decide most rules has not yet been able to meet.

However, an agreement on its composition was reached in Bonn, meaning it should be able to meet soon.

Among other issues, the body will have to decide on the inclusion or exclusion of REDD credits, and whether to allow voluntary carbon registries such as Verra or Gold Standard to participate in the mechanism and supply credits.

"A key question for companies aiming to leverage carbon credits is what type of credit (i.e. avoidance, reduction or removal) they will be able to purchase under Article 6.4," said Abatable.

"Given the lack of alignment on what “avoidance” means, there has been no outright inclusion or exclusion of REDD and some market participants have suggested REDD credits should be considered outside of 6.4, also in light of the fact that CDM did not cater for the inclusion of REDD."

The Glasgow deal includes a provision that 2% of all carbon credits under Article 6.4 are automatically 'cancelled', but in Bonn negotiators from the LMDCs tried to insert a rule that this does not apply to credits that are not officially authorised by countries (and benefit from corresponding adjustments).

"This is little more than an attempt to water down one of the few clear safeguards in Article 6 for environmental integrity," said Carbon Market Watch.