Last month we published an article on this website describing the carbon markets in Article 6 and what was at stake at COP 28. The implementation phase of the carbon markets in Article 6.2 and Article 6.4 failed to reach consensus and were sent back to the Supervisory Body (SB). However, the implementation details of the controversial Article 6.8 work programme was agreed and passed through the COP Presidency.
By Sunday, December 10th, just two days before the scheduled end of the COP 28, the Article 6 negotiations were stalled in nontransparent closed meetings. These meetings, called informal informals or ‘inf infs’, are not uncommon, but they lasted the entire day, there were no new texts until the night and no information for observers. An informal informal (inf inf) is when party negotiators meet among themselves and observers (from NGOs, researchers, other stakeholders) are not allowed into the room. It is said that this may also be where deals are struck between parties on items from other texts like the Global Stocktake, or other non-climate related deals. The texts from the previous week were unacceptable and unclear on how an impasse of this scale might be reached with only two days to go.
The day before, Bolivia made a strong intervention on the floor stating that while they have stayed out of Article 6.2 and 6.4 carbon market negotiations, the pressure from the World Bank and other IFIs to financialize the non-market approach is a cause for concern, and as a result called for all of Article 6.2 and 6.4 texts to be put in brackets. This unprecedented demand meant that the texts could potentially be scrapped. Calls for ‘Rule 16’ were heard in the hallways.1 Nonconsensus at this point was what we wanted to see as things were heating up
Article 6.2 Cooperative Approaches
Early in the negotiations at COP 28, the negotiators still had not agreed how to define ‘Cooperative Approaches,’ the title and definition of Article 6.2. The first part of the long 40 plus pages of text aimed to define Cooperative Approach with some countries arguing that it is not a carbon market. Beyond the call for unified definitions of terms from the legal experts in the room paid to negotiate on behalf of the parties, the main disagreements were on transparency and national or international database accounts.
On transparency, the US argued for each country to be able to trade without sharing information by arguing the internal trading operations are a security issue. The European Union and AILAC argued for more transparency especially around ‘first transfer’ of Internationally Transferred Mitigation Outcomes (ITMO) (see previous article for details). The final unadopted draft text included language that would allow for complete lack of transparency making tracking carbon trading deals nearly impossible. Another argument from the US while pushing for confidential carbon trading is that Article 6.2 is not carbon trading at all but a Cooperative Approach, taking the negotiating room in a dizzying circle back to the need to define what a Cooperative Approach is in the first place.
In a full display of global geopolitical injustice, defining the function of the international database of Article 6.2 and a national database was hard to witness. As the African Group of Negotiators (AGN) negotiating block argued over and over again, many countries in Africa do not have national greenhouse gas registries and therefore cannot link their registries into the A6.2 international registry (see previous article on historical background). The AGN argued that they instead want to be able to set up national accounts in the A6.2 international registry that would be used as their national registry to buy, sell and trade ITMOs and make bilateral trades. Or at least, they argued, capacity building to set up national registries.
There was an effort to discuss if the registry database will only be a type of registration database to report greenhouse gas emissions to meet country Nationally Determined Contributions (NDCs) or if it will act as an internal trading platform. Many of the developing countries want it to be a shared platform registry for countries to track and trade emissions as ITMOs because many developing countries do not have emissions trading systems (ETSs).
Will the registry database only register emissions, include national existing databases, and/or act as a global stock exchange for greenhouse gas emissions? How the database will function is anyone’s guess at this point. The EU and Norway argued that because they set up and built the first multinational emissions trading systems (ETS) in the European Union that they have more confidence and vision regarding the function of the database. The arrogance in these colonial arguments ignored the blinding global inequality in the room and the failure of these markets. Article 6.2 is still an idea being envisioned in different ways for absolutely different purposes by many different countries – a truly astonishing moment of witnessing how capitalist markets are created to maintain certain human interests.
At this point, A6.2 seems to be a complex international banking system with private accounts, units (like money) with changing values, trades of these units, and nontransparent reports. More than once parties commented on how Article 6 would provide climate finance, essentially admitting that carbon trading is a way to make money and generate finance, rather than being a system to ratchet down emissions. The dependency on this climate finance via carbon trading is a dependency on fossil fuel pollution. Finally, the link between Article 6.2 and 6.4 (the offsets database) is not a mere discussion anymore as it was in Bonn in June earlier this year. It is concretely expected.
Article 6.4
For Article 6.4 – the database that will take over for the Clean Development Mechanism (CDM) – negotiations got stuck on carbon dioxide removals (CDR), the appeal and grievance process, and some implementation rules. For IEN and many of our allies, we have been submitting to the A6.4 Supervisory Body’s open calls over the last year including submissions on CDR and engagement with Indigenous Peoples and other local communities.
There are still plans to launch the article 6.4 mechanism database by 2025 but questions remain around what will be traded and many key procedural questions. The EU, Ukraine and others argued for a concrete appeal and grievance process before any such trading platform would be operational. The details of this process are highly political (please see previous article). The future of the appeal and grievance procedure presents a threat to the A6.4 system as a whole because if human rights violations begin to be taken into account under legal frameworks institutional payouts would be astronomical. Questions remain: who pays for this? If the project gets shut down and the credits cease to be sold, who pays, the Indigenous Peoples, the community, the state, or the regional agencies? Negotiators are well-aware given the history of offsets violating the inherent rights of Indigenous Peoples and human rights of local communities that there is a huge risk because so many carbon offset projects in the world have had some level of coercion, violation and misrepresentation. While this is only one aspect of the implementation phase of Article 6.4, it exemplifies the broader problems in the system – a poorly designed system incapable of timely identification and rectification of miscarriages of justice.
Another interesting point called out was more transparency from party negotiators who were also on the Supervisory Body (SB) because they are the same people. Questions of conflict of interests were hinted at but only a small ask to identify oneself if on the SB.
Article 6.8 Non-Market Approaches
After several long late-night meetings with countries restating their positions followed by another long day waiting for information, by Wednesday evening of overtime, the brackets were off Article 6.2 and 6.4 texts and the Article 6.8 text was passed quickly in a short meeting.
On Monday, Dec 4th, a workshop with presentations from the World Bank, the Green Climate Fund and other institutions was held on Article 6.8, the supposed non-market approach of Article 6. It was an illuminating meeting with the institutions clearly explaining how they would include A6.8 units in carbon markets. Bolivia pushed back stating that the spirit of Article 6.8 was for Article 6.8 to remain outside the carbon markets. In the end, this was the clarity Bolivian negotiators needed that pushed Bolivia to make a strong move to bracket the texts of Article 6.2 and Article 6.4 by the weekend. In the end, the brackets came off, and although the rights of Indigenous Peoples, language referring to Mother Earth are in the text, and nature-based solutions were removed, the foundational problems of Article 6.8 remain.
The problem being the argument that the Article 6.8 non-market approaches (NMAs) will not be used in carbon markets. There are two key issues here. One, even if NMAs are not traded in carbon markets, they are still problematic because they represent compensation for damage done to Mother Earth such as in payments for environmental services (PES), and/or potential land-grabbing agreements (see previous article). Second, it is very difficult to see how these agreements will be tracked and kept out of carbon markets when the database platform, now due to be ready in June 2024, will not contain a tracking system, and will be based on financial backers with no transparency or accountability. Many key fundamental questions have yet to be raised in the Article 6.8 space.
Just as the Article 6.2 and 6.4 look like big international banking systems, the Article 6.8 platform appears to be a nontransparent finance platform for private industry investors to gang up with governments to pitch and trade deals behind the scenes, or as referred to in a previous article, an auction house for nature. In the negotiating room, it was difficult to keep track of how many times the platform was referred to as climate finance. However, whether it is a market-based system or not, serious concerns continue because the private sector is involved, some projects are already underway, and in some countries, environmental services function as offsets.
The Clean Development Mechanism continues
Finally, meetings were held to discuss what to do about the CDM of the Kyoto Protocol. While the AGN, ABU (Argentine, Brazil and Uruguay) and others argued to keep it running until Article 6.4 was up and ready, the EU and others pushed to close it down sooner. The sticking point was around money left in the CDM Trust Fund, around $60 million that the AGN passionately argued should be transferred to the Adaptation Fund, while the EU and others pushed for it to be transferred to the Article 6.4 account. In the end, AILAC suggested a percentage of the money be sent to both accounts. The AGN lost that battle. In the end, the CDM will remain operational, and serious questions on transparency of how CDM funds have been used, financial reports, previously allocated funds and so on were brought up in the meetings that raised a lot of questions on how CDM operations could require so much funding.
While the CDM will remain operational and Article 6.8 will push ahead in its implementation phase, there are a few takeaways from COP 28.
The UNFCCC does not only occur at the end of the year. The decisions, designs, concepts, agreements are ongoing. However, many Indigenous Peoples do not have resources or access to engage in these decisions. Yet, it is important to pay attention especially in the next two years of implementation of Article 6. We cannot wait until COP 30 in Brazil to resist carbon markets in Article 6.
As these last COPs have been in locations that prohibited outside organizing, we are being forced to strengthen our inside game and there is real value in our collective inside shared resistance at actions, rallies, press conferences and in the negotiating rooms.
Although resisting carbon markets in Article 6.2 and 6.4 is incredibly important, eyes are needed on Article 6.8 as the web-based platform will launch in June, 2024. Connections between Article 6.8 and PES, debt-swaps for nature, 30x30 and other biological removals are also crucial areas to resist as they violate our Indigenous cosmovision and spiritual relationship with the sacredness of Mother Earth and Father Sky.
- 1Rule 16 is when parties fail to reach consensus and must pass the work on to the next year.
