Article 6.4: Is operation underway?

Final details for Article 6.4 have been agreed ahead of COP29, but uncertainty remains over whether the mechanism is no operational. Varnika Chawla shares her thoughts and insights with Genevieve Redgrave of Environmental Finance as part of the COP29 special edition.

Article 6.4 of the Paris Agreement refers to the creation of a UNsupervised, global, voluntary carbon market, which has been under development since 2021 when the Article 6 ‘rulebook’ was decided at COP26 in Glasgow. Last week, at a meeting in Azerbaijan, the Supervisory Body tasked with developing the market agreed a standard for methodologies. Varnika Chawla, legal manager at Climate Asset Management, said the final text aligns with global climate goals, “ensuring that projects are ambitious over time, and that conservative carbon accounting practices are in place”.

She told Environmental Finance this is “essential for building trust in the global carbon trading system”.

The Supervisory Body also agreed  requirements for carbon removal credits – for activities that remove carbon dioxide from the atmosphere and either destroys it or durably stores it in geological, terrestrial, ocean reservoirs or its products, according to the text.

This standard includes monitoring and reporting requirements for these activities, both before and after a credit has been generated.

But Chawla said questions remain as to whether current methodologies align with this definition of removals, with more details needed on how robustness will be ensured in managing the risk of ‘removal reversal’.

However, the development of a specific standard for removals is “critical” for negotiations, and the wider achievement of net-zero targets.

But in a landmark move, the Supervisory Body decided to ‘adopt’ these texts, without final approval needed by the Parties of the Paris Agreement (CMA), in effect putting the article into operationalisation immediately.

There’s “not a clear answer” on if they’re allowed to do this, Simon Puleston Jones, managing director of Emral Carbon, told Environmental Finance.

The Supervisory Body was originally set up at COP26 in Glasgow to present recommendations to the parties, which would then adopt or reject the proposals. Last year at COP28 in the UAE recommendations presented to it were rejected – largely because of political gridlock.

Instead of presenting the methodologies and removal texts as recommendations, the Body has provided them as ‘SBM standards’. This means that only endorsement from the CMA is needed, rather than full approval.

Puleston Jones suggested that the Supervisory Body might have adopted the texts to “avoid the risk that they’re rejected at [COP29 in] Baku” next month.

Countries that oppose the adopted texts will only be able to stop their operationalisation by getting enough countries to “get a decision passed at COP29 which would change the current set-up” – something which could be difficult politically, Puleston Jones suggested.

“If it’s clear that certain jurisdictions object but can’t get enough countries [to] overrule it, then we’re in a limbo of these rules purporting to be live and operational, and yet we’re aware that [some countries won’t support it,” he argued.

Speaking on social media, Beatriz Granziera, senior climate policy advisor at The Nature Conservancy, similarly argued that “I’ve seen a lot of people interpreting these developments as if Article 6.4 [is] now fully operational. In my view that’s not (yet) the case.”

While they are “certainly big steps”, the supervisory body operates under the CMA, so it will have to wait to be seen at COP29 “how this new process lands with countries, and if they will endorse this approach”, she said. Others, however, are more optimistic. Ivan Cosentino, offset
projects director at ClearBlue Markets, labelled it as a “significant step towards a fully operational Article 6.4,” telling Environmental Finance that that the “unexpected release of these standards by the [supervisory body] will speed up the process at Baku”.

He argued that the clear guidance in the approved standards will “boost confidence in carbon credit projects and encourage alignment with national climate goals, driving further participation in both the public and private sectors”.

Early last week, the Supervisory Body also launched a Sustainable Development Tool, which will require all projects to assess that they deliver emissions reduction as well as support the UN’s Sustainable Development Goals (SDGs) and the ‘do no significant harm’.This assessment will require validation through stakeholder engagement and activity-specific indicators across the lifecycle of the project.

Climate Asset Management’s Chawla said the tool, as well as its focus on indigenous rights, “reflects an increasing focus on ensuring that carbon market projects adhere to environmental and social safeguards”. She argued this “sets the stage for deeper discussions on how carbon markets can contribute to the SDGs while avoiding negative impacts”.

Alongside the operationalisation of Article 6.4 being the “main agenda” at COP29, Chawla expects the discussion to look more broadly at scaling up participation from developing countries into the carbon markets, and how these could support “more ambitious” climate action.

She concluded: “The outcomes of COP29 could set the stage for a more transparent, equitable, and effective global carbon market that is critical to achieving the Paris Agreement’s long-term climate goals.”