What to expect from COP28
This year, the UAE will host the 28th Conference of the Parties (COP28) from November 30 to December 12, its annual meeting of the signatories to the United Nations Convention on Climate Change (UNFCCC). Every year, COP symbolizes a crucial arena where governments and stakeholders worldwide converge to negotiate and shape international climate policies. While all COPs provide a large stage for significant international agreements on climate action and announcements from the private and public sectors, this year we’ve got our eyes on how key details for Article 6 will play out. First, let’s dig into what happened last year.
What happened last year at COP27?
COP27, which took place in Egypt in November 2022, was seen as a disappointment to many climate activists. COP27 fell short in its attempt to establish the Global Goal on Adaptation, neglecting to set indicators, targets, and timelines crucial for mobilizing collective global action. However, some important progress was made. The majority of the main agreements during COP27 related to coping with the effects of climate change. One significant agreement was reached on a loss and damage fund.
For the carbon markets, last year’s negotiations around operationalizing Article 6, the chapter of the Paris Agreement that deals with voluntary international cooperation and carbon trading, were in sharp focus. Although we saw no major breakthroughs, some progress was made and the first Article 6.2 transfer was authorized from Ghana to Switzerland. Article 6.4 saw only incremental progress, highlighting that the effects of Article 6 on VCMs are still unclear.
Finally, COP27 saw a consistent theme of net zero commitment announcements from some of the largest organizations, making it clear that they would continue to come under pressure to develop high-integrity climate strategies.
So, what are we looking for at COP28?
1. The world’s first Global Stocktake
The Global Stocktake is a periodic review, established under the Paris Agreement, evaluating where the world stands when it comes to meeting the goals of the Paris Agreement. It is a mechanism that will enable countries and stakeholders to see where we are collectively making progress and where we are falling short. The first-ever global stocktake is set to take place at COP28 and will likely set the tone for the next round of Nationally Determined Contributions (NDCs) i.e. each country’s emissions targets, in 2025.
The stocktake will likely help policymakers and stakeholders strengthen their climate commitments in this next round of NDCs, paving the way for accelerated action. Brazil, for example, recently submitted an NDC adjustment with increased ambition. Brazil’s emissions reduction target was lowered under President Bolsonaro, but the Ministry of Environment and Climate Change under the Lula administration raised the targets again. This adjustment is a positive step in the right direction and it could set the tone for others to follow suit.
Finally, we’ll be keeping an eye on any reference to Article 6 in any adjustments to NDCs. Article 6 enables voluntary cooperation among Parties and can support Parties in achieving NDC targets. Whether or not governments reference Article 6 in their new NDCs following the stocktake will likely have a knock-on effect for the VCMs and will either raise or lower the attention Article 6 receives.
2. Article 6 blockers and negotiations
A number of issues related to Article 6 need to be resolved before the mechanisms can be fully implemented. One fundamental issue that is likely to provoke fierce debate is the issue of corresponding adjustment (CA) revocation. Corresponding adjustments have been developed as an accounting exercise to overcome the challenge of ‘double counting’ emissions, which can arise when carbon is traded. How and when CAs should be applied, and whether they can be revoked, is still a contested issue.
For Article 6.4, key issues such as permitted methodologies and removals have until now remained unresolved, however the latest meeting of the 6.4 Supervisory Body finally saw recommendations on a) requirements for the development and assessment of methodologies and b)requirements for activities involving removals. These recommendations will now be forwarded to COP where they will hopefully be adopted by consensus.
This is the first sign we’ve seen of potential progress to be made for Article 6 during this year’s COP. But based on everything else we’ve seen pre-COP, it seems unlikely that Article 6 will be a big political priority. This means we are unlikely to see huge amounts of progress in the negotiations, especially on issues where Parties have struggled to reach consensus previously. This could stall the impact of these cooperative mechanisms and delay Article 6.4 credit issuance until 2025 or 2026.
3. A spotlight on VCMs
The opening letter from COP President Dr. Sultan Ahmed Al Jaber references the VCM, including detailed expectations of four paradigm shifts, one of which being climate finance. The president called for the world to develop innovative and holistic solutions, including unlocking the voluntary carbon markets.
That could set the stage for some lively discussion and debate around potential guidance on net zero and the development of additional net zero frameworks. How carbon credits factor into any new guidance on achieving net zero is likely to have an impact on the VCMs. As well as this, we’re anticipating announcements around potential buying coalitions, where groups of corporations and/or countries agree on a common set of objectives and commit to buying credits of that type. Such announcements will be a good indication of future demand trends in the market and a welcome vote of confidence in VCMs.
4. Transition towards a more jurisdictional approach
This COP, we’re expected to see the continuation of the transition towards a jurisdictional approach to crediting. As opposed to the project-based approach, jurisdictional programs use national or sub-national baselines for crediting. They are typically larger in scale, and program benefits are shared by a broader range of stakeholders including public, private, and civil society actors. Until now, discussions of the jurisdictional approach in the VCMs have largely focused on REDD+, and this COP could produce the first large trades from the LEAF coalition.
It’s not just REDD+ though, John Kerry is set to reveal details about his jurisdictional energy crediting program, the ETA (Energy Transition Accelerator). The ETA aims to catalyze private capital supporting the transition to clean power. This could encourage countries to enhance their near-term activities contributing to advancing the decarbonization of the energy sector.
After a year with more uncertainty in the VCMs than before, it’s a promising sign for the market to see discussions about jurisdictional approaches, net zero frameworks, and the inclusion of VCMs in talks on climate finance. The main drawback we anticipate at this year’s COP is a lack of focus on Article 6.
Sylvera at COP
We’ll be on the ground following the action, lending our voice to panels around the events, and meeting up with customers and industry leaders. Check out our COP resource hub here for more info you need to prepare for the event and follow along with our team.
Throughout COP, we’re here to help you stay ahead of the curve and understand which developments are significant and the impact they will have. Stay tuned for updates.
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