The recent Bonn Climate Change Conference made little headway in resolving outstanding issues related to Article 6 of the Paris Agreement, leaving many unresolved issues looming as we approach the COP29 conference in November 2024
The Bonn Climate Change Conference did not reach a consensus on resolving open issues related to the functioning of an international carbon credit market under the Paris Agreement's Article 6.
According to a report in White & Case, key points of disagreement included the extent to which emission avoidance can generate carbon credits and the centralisation of components of the carbon credit systems.
Article 6.2 allows for direct country-to-country trading of emission reduction credits, known as Internationally Transferred Mitigation Outcomes (TMOs), to help countries achieve their climate targets, also known as Nationally Determined Contributions (NDCs).
Article 6.4 establishes a centralised international carbon market for trading emission credits among countries under the supervision of a designated body. It ensures that emission credits are validated, verified, and issued according to the framework. These credits, known as "A6.4ERs," can be used to meet NDCs.
In contrast, Article 6.8 promotes non-market approaches ("NMA") for countries to jointly address climate challenges through initiatives, such as mitigation, adaptation, and technology transfer, thereby avoiding reliance solely on market mechanisms.
The main takeaways from the Bonn meetings are touched upon below as we head towards the 29th session of the Conference of the Parties ("COP") to the United Nations Framework Convention on Climate Change, also referred to as COP29.
The SBSTA concluded discussions on standard nomenclatures for reporting annual information and tasked the Secretariat with maintaining a list for the centralised reporting platform. It also discussed modalities for reviewing confidential information and mandated the Secretariat to establish procedures and a code of conduct for handling such information. Substantive progress was mainly postponed.
The SBSTA: (i) noted ongoing work on whether ITMOs could include emission avoidance and agreed to revisit this in 2028; (ii) requested a workshop before SBSTA 61 in November 2024 to discuss authorisation, electronic formats, sequencing, first transfers, and registry issues; and (iii) agreed to continue working on the draft text for further guidance on cooperative approaches under Article 6.2, with the goal of recommending a decision at CMA 6 in November 2024.
The draft conclusions on Article 6.4 of the Paris Agreement4 indicate some progress, but the operationalisation of a centralised carbon market has not been resolved.
The schedule released ahead of the Bonn meetings included two negotiation sessions on Article 6.8 of the Paris Agreement. However, concrete initiatives under Article 6.8 to boost the Paris goals were not particularly highlighted in the conclusions presented.
The SBSTA called for an in-session workshop and roundtable discussions at the sixth meeting of the Glasgow Committee on NMAs in November 2024. They also requested the inclusion of links to relevant support bodies on the NMA Platform and the integration of NMA-related activities into the broader capacity-building programme for Article 6. Submissions on the progress of the first phase of the work programme and recommendations for the second phase were requested by August 31, 2024.
COP29 lead negotiator Yalchin Rafiyev emphasised the importance of Article 6 at the meeting in Bonn. However, achieving consensus on market-based approaches for achieving NDCs proved to be elusive due to disagreements on centralised versus decentralised systems. Nevertheless, the Parties' discussion of the NMA Platform gained momentum, promising to advance non-market solutions in the near future.