If the world’s most vulnerable communities are heard during last-ditch efforts to finalize Article 6, this final critical piece of the Paris climate agreement could deliver significant emission reduction opportunities and urgently needed funding for climate adaptation, whilst protecting human rights. Powerful voices in the developed world may yet drown them out, however.

Though its nine dense paragraphs barely fill a page, Article 6 may well hold the fate of billions of people, as well as billions (possibly trillions) of dollars, within its few lines. The deeply contentious section of the Paris deal aims to lay down rules for how countries can use international carbon markets, and carbon trading, to reduce their emissions.

For its supporters, Article 6 is a path to significantly raise the climate ambitions of governments and private companies and accelerate sustainable development.

For detractors, Article 6’s faith in the power of the marketplace to drive emissions reductions risks making the climate ambitions of the Paris agreement not worth the paper they are written on.

Two years after climate negotiators tried and failed at COP 25 in Madrid to secure a final draft of the notoriously Byzantine document, many of the same people are back in Glasgow trying again.

The Importance of Getting it Right

Much is at stake in nailing down Article 6. In the long run, weak carbon market rules could erode progress to reduce emissions under the Paris Agreement, said Tom Evans, a researcher at the European climate think tank E3G. This would also “further legitimize low-quality offsetting and corporate greenwashing in the private sector,” he told China Dialogue.

Those looking to rein in climate cheaters will be working to deliver an Overall Mitigation in Global Emissions (OMGE), rather than the literal exchange of hot air permitted under the 1997 Kyoto Protocol in place of genuine emissions reductions. They will also be looking to prevent countries from double-counting their emission cuts by including them in their Nationally Determined Contributions (NDCs) under the Paris agreement while also selling them as carbon credits on the international market. There is also continuing contention over some countries’ sly plans to carry over unused carbon credits” generated under the Kyoto Protocol.

But the urgent drive to finalize Article 6 at COP 26 isn’t just about an overheating planet. 

“Demand is booming” for offsets, writes Bloomberg, citing research from BloombergNEF. “More credits changed hands in the first eight months of this year than in all of 2020,”as corporations and governments spent billions of dollars to meet their net-zero targets.

Even those currently benefiting from that trade are anxious to bring some order to the proceedings. “Companies are watching carefully—and lobbying, too,” Bloomberg writes. “They want clarity on the rules as they map out how to implement their net-zero strategies.”

Some critics fear that adoption of Article 6 will trigger a wave of “net-zero” plans from fossil companies that will serve as get-out-of-jail-free cards to keep emitting, rather than following the science and treating offsets as a last resort, to be deployed only if actual emission reductions fall short of target.

The Original Purpose of Article 6

Likewise looking for clarity on Article 6 are countries and communities on the front lines of the climate crisis like Madagascar, the Philippines, Guatemala, and Indigenous peoples in the Arctic and the Amazon. They’re holding out for an Article 6 that demonstrates moral courage.

“People and nature around the world have been negatively impacted by previous market mechanisms and seen their lands destroyed or taken without consent,” writes ECO, the daily COP newsletter produced by Climate Action Network-International, in a sharp reminder to Article 6 negotiators. “The true measure of Article 6 won’t be found on a balance sheet, but in the lives and livelihoods of impacted people.”

ECO stresses the urgent need for guaranteed, rights-based safeguards in Article 6, safeguards that were significantly eroded during COP 25 negotiations. As The Mix reported at the time, a core provision requiring parties to “‘respect, promote, and consider their respective obligations on human rights’” was removed and replaced with “a much weaker placeholder text.”

As COP 26 began, Greenpeace International Executive Director Jennifer Morgan told China Dialogue that interest groups framing Article 6 as being about carbon markets and nothing else have actually forgotten its original purpose. Pointing out that “there is no reference in the entire Paris agreement to offsets or markets,” she said Article 6’s original purpose was far broader: to foster international cooperation “through a range of measures to equitably support mitigation and adaptation through the delivery of finance, technology transfer, knowledge sharing, and capacity-building.”

That history is echoed in a report released in May by the Least Developed Countries Group (LDC). In the foreword, LDC Chair Sonam P. Wangdi, secretary of the National Environment Commission for Bhutan, wrote that he was sharing the document with other COP nations “in the hope and expectation that the policy decisions we take in Glasgow at COP 26 will be informed not by political expediency, but by what each policy decision to be taken means for levels of greenhouse gas abatement and for the generation of adaptation resources.”

That “and” speaks volumes, quietly but firmly insisting that adaptation funding not be sidelined—as it all too often has been, because it cannot generate the returns on investment that mitigation funding promises.

Delivering Mitigation for Vulnerable Nations

This is not to say that the countries most vulnerable in the climate emergency do not care deeply about climate mitigation. “We absolutely cannot afford to allow markets to undermine mitigation ambition,” said MJ Mace, negotiator for the Alliance of Small Island States (AOSIS), in the lead-up to COP 25 two years ago.

This week in Glasgow, that absolute refusal to allow mitigation to be undermined will drive the LDC Group’s push for a mechanism that effectively guarantees “an overall mitigation in global emissions (OMGE): namely, the mandatory automatic cancellation of a predetermined fraction of the credits generated by all Article 6 carbon-trading mechanisms.

So “if, say, 100 credits were transferred, representing 100 tonnes of CO2e (tonnes of carbon dioxide or equivalent, abbreviated as tCO2e), then the receiving country might only be allowed to count 80 of those credits towards its targets,” explains Carbon Brief in its must-read primer on Article 6. “In doing so, 20tCO2e would not be counted by anyone and, overall, mitigation would be achieved.” 

In its present form, Article 6 requires OMGE only for the proposed global marketplace for trading offsets from specific green projects, covered in Section 6.4. OMGE is currently not required in the system of bilateral exchanges of carbon credits between countries under Section 6.2, designed to help them meet their NDC targets.

While the mandatory automatic cancellation of carbon credits to ensure OMGE is a mechanism strongly supported by LDCs, and by civil society analysts like Carbon Market Watch and NewClimate Institute, the proposal “is far from universally popular,” as Carbon Brief puts it.

“The main argument against the idea is summarized by Dirk Forrister from IETA (the International Emissions Trading Association), who says such a strategy would make the process more expensive by adding ‘a form of taxation to trades that would discourage use of trading’,” the Carbon Brief primer explains.

Analysis released earlier this week showed IETA with 103 delegates at COP 26, delivering a major boost to a 503-person fossil fuel presence that would have given the industry the biggest delegation onsite if it were a country.

Balking at Adaptation Funding

Which takes us back to the matter of Article 6’s stance on adaptation funding.

“This is the sticking point now,” writes Bloomberg, explaining that “developing countries want a percentage of the proceeds from trading all types of carbon credits” channelled into funding climate adaptation.

AOSIS is calling for a non-negotiable 5% cut of the revenues under Section 6.4, describing that demand as “very low” and something that should neither “be in brackets nor be seen as something to trade.”

(Under the Kyoto Protocol’s Clean Development Mechanism, 2% of the certified emission reductions, or CERs, from 6.4 trading were to be set aside to cover administrative costs, with the remainder targeted for a climate adaptation fund.)

Flagging charged discussions now ongoing about securing some additional percentage from 6.2 revenues, Reuters cites bitter comment from Mohamed Nasr, climate finance negotiator for the African Group of Negotiators. Naser told the news agency that proposals to secure just 1 to 2% of this carbon credit stream for climate adaptation funding are proving “a no-go for the same countries who are preaching adaptation finance.”

Bloomberg writes that the EU, long opposed to funding climate adaptation through 6.2 carbon credits, has now been joined by the United States in refusing to allow “such a levy to apply to the exchange of carbon credits between countries.” 

China Dialogue adds that Canada and Australia have “typically oppose[d] increasing the revenues from carbon trading that would support adaptation.”

Back in 2019, Carbon Brief traced such opposition among wealthy nations to the fact that “many of them are enthusiastic about using Article 6.2 to link up the domestic emissions trading systems they already have in place, similar to how the EU and Switzerland or California and Quebec already have linked trading schemes.” Their fear is “that taking a share of proceeds from international transfers, within these linked markets, would ‘distort’ trading by placing a cost on those transfers.”

For the world’s most climate vulnerable communities, an Article 6 that is serious about funding adaptation increases the odds of survival in the face of escalating threats from the climate crisis. For the wealthy and secure stakeholders in the Article 6 discussion, carbon market-driven mitigation presents an opportunity to make a great deal of money. Adaptation, not so much.