Each year, countries convene in Bonn, Germany to hash out the technical elements of the Paris Agreement. Pollination participated in the intersessional meetings with a particular focus on Article 6 of the Paris Agreement. The decisions made in these meetings set the focus for the annual UN Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP), which will be held in Dubai in November and December 2023.
Here are Pollination’s key takeaways on the outcomes of the Article 6 discussions in Bonn:
1. The rules around the timing of authorisation and scope of changes to authorisation are a big deal. This is a key topic to watch at COP28.
As predicted in our post-COP27 readout, one of the hottest topics for Article 6 negotiations in 2023 relates to the process for authorising Article 6 carbon credits, known as ‘internationally transferred mitigation outcomes’ or ‘ITMOs.’ This process is important for Article 6 carbon markets because authorisation is a necessary step for ITMOs to be transferred internationally. Authorisation is a step required by Article 6 that only governments can take, but it can also affect private projects seeking authorisation, so clarity around the process is important for all market participants.
The Bonn meetings discussed changes to government authorisation of ITMOs. Changes to authorisation may be small and administrative (e.g., a altering the name of an entity) or significant (e.g., revising the scope of the authorisation). While some changes in the scope of authorisation, such as to the authorised use (e.g., nationally determined contribution achievement vs. other international mitigation purposes), can provide market flexibility, the ability for a government to revoke or withdraw authorisation poses concerns for market predictability and stability.
In general, there was broad agreement among Parties in Bonn that clarity is needed on authorisation processes to ensure market confidence and transparency. However, disagreement arose when settling on whether a government can revoke a previous authorisation and, if so, when. The spectrum of views expressed in Bonn ranged from:
- No option for revocation of authorisation (regardless of timing),
- Revocation possible but not after first transfer of the ITMO, and
- Revocation possible and the scope and timing for changes in authorisation are entirely up to the participating government as a national prerogative.
As an outcome from Bonn, countries called for a technical paper to be developed by the UNFCCC Secretariat on “[t]he process of authorisation…, notably the scope of changes to authorisation of internationally transferred mitigation outcomes towards use(s), and the process for managing them…,” which will then be discussed in a UN-organised workshop. As a result, continued attention is needed on this topic in the lead up to and during COP28 in Dubai.
2. The Article 6.4 Supervisory Body has a tough mandate, and all eyes are on the ‘removals’ discussion.
Article 6.4 of the Paris Agreement provides for a new sustainable development mechanism, which is in the process of being set up. The Article 6.4 Supervisory Body (SB), which governs the mechanism, spent considerable time in 2023 debating methodological guidance related to emission removal activities under the Article 6.4 mechanism (e.g., nature-based activities, such as afforestation/reforestation, which enhance forest carbon stock, as well as engineered sequestration and geological storage solutions). This work warrants attention, as the methodologies developed and adopted by the Article 6.4 SB will directly impact the viability of and demand for removal activities under the Article 6.4 mechanism. This may also indirectly influence the treatment of removal activities under Article 6.2 and in the voluntary carbon market.
Over recent months, the SB focused significant attention on the hyper-technical issue of addressing the risk of ‘reversals.’ Early outputs from the SB on this topic proposed permanence approaches that deviate from market best practice (e.g., by utilising the tonne-year accounting method); however, during its early June deliberations, the SB decided to drop this method from near term consideration and will explore more conventional and tested approaches instead (e.g., measures that address reversals on a tonne-for-tonne basis). The SB is expected to hold 2-3 more meetings before Dubai, and the topic of removals will be a key discussion point.
The Article 6.4 Supervisory Body is proactively working to increase the transparency of its deliberations and decisions through the introduction of a newsletter. We view this as a welcome development that will help expand the circle of ‘insiders’ able to follow this process. Those interested in receiving this newsletter can sign up here.
3. While further international guidance on Article 6 is important and beneficial, we need to make equal progress outside of the negotiations—Article 6 pilots and the development of national Article 6 frameworks should be seen as an equal priority.
Finalisation of outstanding elements of Article 6 guidance is important for clarifying questions around authorisation and operationalising reporting requirements; however, countries already have sufficient foundational Article 6.2 guidance to initiate national level implementation. The biggest, practical lessons about how to operationalise Article 6 will not come from windowless conference rooms in Bonn or Dubai. They will come from real world piloting experiences and the development of national frameworks. And, while we cannot ignore or give up on the negotiations, it is important to share attention on and resources to piloting efforts and the development of national frameworks.
In our opinion, the outlook for COP28 on Article 6 is rosier than past years, as there is strong likelihood of reaching agreement on authorisation and other key topics. Much work remains to be done by the Article 6.4 Supervisory Body, of which the members are hyper aware. They are seeking inputs from countries and observers to aid them in their technical and political deliberations over the coming months. For governments, companies, NGOs and other stakeholders interested in this space, now is the time to weigh in.