COP28 text silent on carbon markets
- Media Manager
- Dec 13, 2023
- 2 min read
Businessline
Written By: M Ramesh
Published: December 13th, 2023
Parties could not come to an agreement on Article 6.2 and Article 6.4 of the Paris Agreement
The text that was agreed upon by all the negotiators at the just-concluded COP28 climate talks is silent on carbon credits. This is because the parties could not come to an agreement on Article 6.2 (bilateral trading) and Article 6.4 (carbon markets) of the Paris Agreement.
A vibrant system for trading in carbon credits (or carbon offsets) is a key mechanism for financing climate action projects. An entity that does an activity that reduces emissions of greenhouse gases (or removals from the atmosphere) is given a ‘credit’ that can be bought by another entity that must reduce emissions — either by law or voluntarily. This way, money flows into climate action.
The World Bank has estimated that carbon credits could reduce the cost of countries’ climate action commitments ( Nationally Determined Contributions or NDCs) by about $250 billion by 2030.
Article 6.2 allows countries to trade in carbon credits with one another through bilateral or multilateral deals. These traded credits are called Internationally Transferred Mitigation Obligations (ITMOs). Article 6.2 has been operationalised, but there are a few sticky issues. One is whether non-government entities, including the private sector, can buy offsets from a country or not.
For example, can the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), or, say, Google, buy carbon credits from, say, the Indian government, to offset its own obligations? Such a deal comes under the head Other International Mitigation Purposes (OIMP). ITMOs can be transferred for NDC compliance or for OIMP.
Also, a country authorising another entity to issue carbon credits is a bit of a grey area, notes Kishor Rajhansa, Chief Operating Officer at the Doha-based Global Carbon Council. Can a country unilaterally authorise an entity or should both or all the parties agree to the authorisation? There are some technical issues such as authorisation of credits and interoperability of registries.
