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From the angle of the UAE Consensus and the progress made on Loss and Injury, the COP course of could be very a lot alive and the UAE Presidency must be congratulated on all that they managed to attain. However if you’re a eager follower of progress on Article 6 of the Paris Settlement, a vibrant dwelling and creating course of was laborious to see.
On this publish, my colleague Malek Al-Chalabi discusses COP 28 from the angle of the Article 6 negotiations. Malek co-Chairs the Worldwide Working Group inside the Worldwide Emissions Buying and selling Affiliation and is the Senior Carbon Pricing Coverage Adviser inside Shell.
COP28, held within the UAE in December 2023, progressed many facets of the worldwide local weather negotiations. This contains the primary reference to transitioning away from fossil fuels, operationalising the Loss and Injury Fund, the Canadian led International Carbon Pricing Problem and the UAE Consensus which units the scene for COP30 when nations resubmit their Nationally Decided Contributions.
However whereas carbon pricing bulletins featured closely in and round COP28, negotiators did not agree on particular points associated to Article 6 of the Paris Settlement, which is among the basis parts of a broader worldwide carbon buying and selling mechanism and by implication a catalyst for wider adoption of carbon pricing. Events couldn’t comply with provisions referring to Article 6.2 or Article 6.4 – regardless of prolonged consultations within the lead as much as COP28 and lots of nights of lengthy deliberations all through the COP. What occurred and what does this imply for Article 6?
On Article 6.2, the EU, the Latin American and Caribbean Alliance (AILAC) and the Alliance of Small Island States (AOSIS) pushed for extra oversight on Celebration-to-Celebration agreements, whereas the Umbrella Group (together with the U.S., U.Okay, Australia, Canada and New Zealand) and the Like-Minded Growing International locations (LMDCs) group (together with China, India and Saudi Arabia) opposed as a result of they believed that the bilateral nature of Article 6.2 meant that it must be managed by Events partaking within the bilateral trades and never by one other authority. This distinction couldn’t be resolved within the negotiating room regardless of obvious readability within the Article 6.2 rulebook the place there’s a assertion to the impact that ‘steering won’t infringe on the nationally decided nature of nationally decided contributions’.
On Article 6.4, one other set of variations emerged throughout quite a lot of matters, together with removals, methodologies, and registries. Notably, the Supervisory Physique had labored on suggestions for removals and methodologies all year long and agreed drafts for each in November. Nonetheless, at COP28, the EU and the Coalition for Rainforest Nations expressed robust opposition to the removals suggestion, whereas keen to just accept the methodologies paper. Nonetheless, the LMDCs and others weren’t keen to progress one suggestion and never the opposite, which couldn’t be overcome, as many believed they wanted to be adopted collectively. Variations additionally emerged on how registries would work together with nations unable to seek out compromise.
Outdoors the negotiating room the EU referred to as for superior international cooperation on carbon pricing with the World Commerce Group, Worldwide Financial Fund, and the World Financial institution, however within the negotiating room the EU was seen as one of many predominant blockers of progress on Article 6. Completely different causes have been reported, from desirous to concentrate on high quality and integrity of markets to blocking progress on Article 6 to concentrate on increasing the EU ETS and its personal home removals certification system, as Article 6 is a instrument that the EU says it’s unlikely to make use of in direction of web zero.
For context, the primary carbon worth that entered the market was in 1990 (Finland, Poland) and since then carbon pricing has taken a rustic particular and region-specific strategy as it isn’t a world commodity. Subsequently, it mustn’t come as a shock that when negotiating to develop a world carbon market framework (6.4) or guidelines to interact in bilateral commerce (6.2) that totally different nation and regional views and preferences would emerge. What works in Brazil shall be very totally different to what works within the UAE which shall be very totally different to what works in Canada.
Article 6 offers a chance to develop a world, UN-led carbon market – however the politicization of markets was on full show and didn’t foster the spirit of what was wanted to progress the worldwide carbon market agenda, which was disappointing as different obstacles had been overcome as highlighted above.
There have been calls to finish the politicisation of carbon markets within the Article 6 negotiating room and focus as a substitute on creating the framework that could be very a lot wanted to attain 1.5°C. As has been proven within the Shell Power Safety Eventualities and nation Sketches such because the UAE and Singapore, Article 6 is among the key instruments that’s required to assist speed up decarbonisation efforts throughout jurisdictions. It is usually clear from the Sky 2050 situation that nations comparable to Brazil maintain large potential to ship net-zero emissions globally sooner than could be the case with out them because of the carbon removing capability they will create by way of land change practices. Nonetheless, unlocking this removing potential requires a considerable cross border mechanism comparable to Article 6.
Trying forward, the dearth of progress on Article 6.2 signifies that the choices that passed off in Glasgow and Sharm El Sheik nonetheless stand. As a consequence, events can proceed to make the most of Article 6.2, however particular person bilateral selections will prevail, fairly than a extra strong multi-lateral strategy. This week Switzerland and Thailand concluded their first transaction underneath Article 6.2. The expectation is that additional bilateral use of Article 6.2 will substitute for the absence of an operational Article 6.4. Some specialists predict 2-3 years till 6.4 is operational. On Article 6.4, important uncertainty now exists – together with the scope of the Supervisory Physique work plan for the longer term. The loss right here may very well be actually hundreds of undertaking targeted transfers and the numerous emission reductions that they’d deliver, just because there is no such thing as a frequent customary accessible for undertaking analysis and credit score issuance.
Bringing Article 6 to full operational standing is required now greater than ever – however subsequent yr will mark a decade for the reason that Paris Settlement’s inception and the world remains to be unlikely to have an operational 6.4 mechanism by then. Ten years to ship a working final result from a key provision of the Paris Settlement is unacceptable, significantly after we know that the restricted remaining carbon finances is now counted in single years and never in many years. As confidence within the COP course of with regards carbon markets continues to waver, market gamers might look elsewhere to shut the hole, comparable to making much more use of the voluntary carbon market. This may supply some hope and trigger for optimism, however it’s laborious to see a voluntary mechanism doing the heavy lifting required to get the world to net-zero emissions in 25 years. And as argued beforehand, with no functioning Article 6 net-zero emissions might not be achieved in any respect within the desired time frame.
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