COP29’s “Get out of jail free” card: Article 6 carbon trading mechanisms

“Countries have little incentive not to game the system.”

At COP29 in Baku, governments agreed on rules about how countries can create and trade carbon credits under Article 6 carbon markets, nine years after they were included in the Paris Agreement. The agreement is a disaster for the climate.

Carbon Brief has a good overview of the technicalities of the deal. Here’s the Article 6.2 text, and here’s the Article 6.4 text.

Greenpeace’s Amanda Larsson describes the deal as a “get out of jail free card”.

She told RNZ that,

“Ultimately, we really need to see significant cuts in climate pollution. And there’s no such thing as high-integrity voluntary carbon markets, and a history of a lot of junk credits being sold”

In a statement, Carbon Market Watch’s Isa Mulder says, “The flaws of Article 6 have, unfortunately, not been fixed.” This suggests that carbon markets can somehow be “fixed”. But the reality is that carbon markets are fundamentally flawed.

Carbon markets are about profit and have nothing to do with addressing the climate crisis. They are a distraction from the urgent need to leave fossil fuels in the ground.

The problems with the Article 6.2 deal that was agreed in Baku include the fact that there are no repercussions if countries do not conform to the rules. There is no deadline to take action to address “inconsistencies”. Instead of halting trading, non-compliance will be flagged within the system. The Article 6.2 text only “requests” countries not to count flagged carbon credits towards their Nationally Determined Contributions.

“Countries have little incentive not to game the system,” Carbon Market Watch notes.

COP29 rejected the requirement for Clean Development Mechanism projects to be re-assessed to determine whether the credits are additional before they are absorbed into the Article 6.4 carbon trading mechanism. Large numbers of junk CDM credits are likely to flood the new carbon market.

Even Environmental Defense Fund, which is looking forward to cashing in UN carbon trading, is critical of CDM credits:

CDM units have been discredited over time and through various assessments. EDF urges countries not to use these credits towards any commitments. 

The rules on carbon removals and permanence are missing from the Baku Article 6 deal. This will be handed back to the Article 6.4 Supervisory Body, which notoriously helped pushed through the agreement on Article 6 in Baku.

It is fitting that a former oil executive, Mukhtar Babayev, who spent 24 years working for the Azerbaijan state-owned oil company SOCAR, was COP29 President. This is just one more chapter in a long history of Big Polluters and carbon markets.

Harjeet Singh of the Fossil Fuel Treaty Initiative told Al Jazeera that,

“The fact is on the very first day, they passed some of the standards which are so weak that they're going to allow double counting, they're going to allow false solutions or what we call dangerous distractions. And not just that they’re going to start counting the carbon market trading also as part of climate finance. That's like a a double, triple double jeopardy, that we are looking at. . . .

“We have huge concerns about the way carbon markets are being created and the way they are celebrating passing the rules. We know that that's not going to help. History tells us that carbon markets have not been successful. If that had been the case, how come our emissions continue to rise? And how come we have not not generated enough resources to support countries in moving away from fossil fuels?

“Carbon markets are not a solution, in fact they are a false solution and we must reject them. What we need is stronger regulation. What we need is direct financial support to smaller businesses who are ready to make a transition but do not have access to technology and finance.

“Carbon markets are nothing but pollution permits that we are promoting where large corporations instead of making a shift towards clean energy are going to buy these cheap pollution permits and will continue to pollute and exacerbate the climate crisis.”

Kate Dooley of the University of Melbourne points out that the rules agreed on in Baku “contain several serious flaws that years of debate have failed to fix.”

Dooley highlights the problem of permanence. She gives the example of a coal-burning company in Australia buying carbon credits from a tree-planting company in Indonesia. Obviously, the carbon has to be stored in the trees for as long as the emissions from burning coal remain in the atmosphere.

Yet the rules agreed in Baku fail to specify how long carbon should be stored in carbon projects like tree-planting.

Dooley writes that,

Temporary carbon removal into land and forests should not be used to offset fossil fuel emissions, which stay in the atmosphere for millennia. Yet governments are already over-relying on such methods to achieve their Paris commitments. The weak new rules only exacerbate this problem.

The Climate Land Ambition and Rights Alliance describes the new carbon markets as “dangerous”. Regarding Article 6.2 rules, CLARA writes that,

Text governing internationally traded mitigation outcomes (ITMOs) under Article 6.2 also worsened throughout the conference. The rules lack transparency, risk double counting and will fail to prevent human rights abuses.

Kelly Stone, CLARA Coordinator and Senior Policy Analyst with ActionAid USA, says,

“This COP was supposed to deliver on climate finance, but developed countries insisted on ducking their climate finance obligations in favor of greenwashing. Carbon markets enabling offsetting - which are essentially permits to continue polluting - are not climate action. Nothing in the rules developed here will prevent carbon markets from repeating their history of harming communities and failing to deliver meaningful climate action.”

Global Forest Coalition’s Souparna Lahiri says,

“Global Forest Coalition joins civil society to reject carbon markets and restate that carbon market finance is not climate finance. In order to keep up the pressure on rich countries to fulfill their climate finance obligation and ensure immediate and rapid emission, GFC calls upon Parties and civil society to call for a Moratorium on carbon markets.”

And in a Friends of the Earth International press release, Agus Dwi Hastutik of WALHI (Friends of the Earth Indonesia) says,

“Shockingly, COP29 is set to agree to carbon markets that are even worse than the voluntary carbon markets. Carbon markets are not climate finance, but a permit to pollute. They ensure Big Polluters can escape their obligations on emissions and finance in one fell swoop. We know these markets have failed. They are riddled with fraud and they do not reduce emissions or provide finance. Communities everywhere and in fact the planet itself are on the line.”