The Supervisory Body published the Methodology Guidance and the Removal Guidance to be presented for discussion in COP28.

After two years of discussion, the Supervisory Body (SB) responsible for determining the guidelines for Article 6.4 of the Paris Agreement published two sets of recommendations, which will be presented for consideration and adoption by the Parties to the Paris Agreement (CMA) at the 28^th annual Conference of Parties (COP28).

The first recommendation came on November 16, 2023, when the SB published guidelines on the requirements for the development and assessment of Article 6.4 mechanism methodologies (the Methodology Guidance).[i] The second recommendation followed the next day, when the SB published guidelines on activities involving removals under the Article 6.4 mechanism (the Removal Guidance).[ii]

Background on Article 6.4 of the Paris Agreement

Article 6 of the Paris Agreement recognizes that Parties can voluntarily cooperate in implementing their nationally determined contributions (NDC). Article 6.4 pertains to the establishment of international compliance carbon markets governed by the rules of the Paris Agreement. Such markets would enable Parties to trade carbon credits and utilize foreign carbon credits to satisfy their nationally determined contributions.

After COP26, the CMA adopted rules, modalities, and procedures for the Article 6.4 mechanism, which credits emission-reducing activities. COP27 Parties envisioned Article 6.4 to establish a framework for a multilateral carbon credit market that would be overseen by a SB and function according to agreed guidelines.[iii] Until earlier in November 2023, the SB had yet to agree on the operation of the carbon registry and methodology for crediting, which would allow Article 6.4 to become the de facto successor to the Kyoto Protocol’s Clean Development Mechanism (KP CDM).

Now, the SB is prepared to submit their recommended guidelines to national negotiators for discussion at COP28, which will be held in Dubai from November 30 to December 12, 2023.

The Methodology Guidance

The Methodology Guidance emphasizes that the Article 6.4 mechanism methodologies provide the basis for assessing creditable emission reductions or removals. The Methodology Guidance has four key requirements.

First, the Methodology Guidance requires methodologies to support 12 principles enshrined in the rules, modalities, and procedures for the Article 6.4 mechanism,[iv] which concern:

1. encouraging ambition over time;
2. being real, transparent, conservative, and credible;
3. establishing that the selected baseline is below business-as-usual;
4. contributing to the equitable sharing of mitigation benefits between participating Parties;
5. aligning with the NDC of each participating Party and long-term goals of the Paris Agreement;
6. approaches to set the baseline;
7. addressing elements of paragraphs 33 and 36 of the rules, modalities, and procedures;
8. encouraging broad participation;
9. including data sources, accounting for uncertainty, and monitoring requirements;
10. recognizing suppressed demand;
11. taking into account policies and measures and relevant circumstances; and
12. a standardized baseline.

Second, the Methodology Guidance requires methodologies to demonstrate the projects’ additionality, by illustrating that project activities would not have occurred in the absence of the incentives from the mechanism, taking into account all relevant national policies and legislation, and exceeding any mitigation that is required by law or regulation.

Third, the Methodology Guidance requires methodologies to avoid leakage, partly by obliging activity participants to list all potential sources of leakage and conduct a life cycle analysis of products.

Last, the Methodology Guidance requires methodologies to address non-permanence and reversals of emission reductions and removals during the projects’ lifetimes. For example, methodologies need to address a wildfire that reverses the carbon removals of trees under a carbon offset project.

The Removal Guidance

Whereas the Methodology Guidance focuses on assessing removals, the Removal Guidance notably defines “removals” as the “outcomes of processes to remove greenhouse gases from the atmosphere through anthropogenic activities and destroy or durably store them.” The Removal Guidance recommends nine high-level requirements for activities involving removals and their participants under the Article 6.4 mechanism, which concern:

1. monitoring;
2. post-crediting period monitoring, reporting, and remediation of reversals;
3. reporting;
4. accounting for removals;
5. methodologies applicable to the crediting period;
6. addressing reversals through reversal risk assessment and post-reversal actions;
7. avoidance of leakage;
8. avoidance of other negative environmental and social impacts; and
9. host Party roles.

The Removal Guidance focuses on the need for adequate monitoring during and after the activities’ crediting periods and to remediate potential reversals. With this recommendation, the SB aims to set up a reversal risk buffer pool to insure against the general risk of, and to remediate, unavoidable reversals under the Article 6.4 mechanism. The SB also commits to developing further guidance and procedures on reversal risk assessment, the reversal risk buffer pool use, defining “avoidable” or “unavoidable” events, and how the SB intends to monitor removal reports.

Latest Responses to the SB Developments

Removals stakeholders and observers broadly welcomed the guidelines, given that the removals workload is not part of the KP CDM and undergoes multiple stakeholder engagement processes. However, the texts are deemed very general in nature and include numerous mandates for further guidance. For example, Section 3.6 of the Removal Guidance, on addressing of reversals, outlines many of the SB’s future tasks with no definite due date. As previously noted, this includes the SB’s responsibility of defining whether a reversal is avoidable or unavoidable, governance around the use of the reversal risk buffer pool, and procedures on addressing buffer insufficiency. Other outstanding questions include how direct credit replacements will work and how to address the possibility for developers to no longer post-credit period monitoring.

Stakeholders in both compliance and voluntary carbon markets are demanding greater clarity from the Article 6.4 mechanism rules, given their importance for scaling pricing and participation. One stakeholder observed, “It would threaten the long-term viability of carbon markets at large if Article 6 does not work out and capacity building does not occur.”[v]

Nevertheless, the SB’s recommendations are expected to materially shape the operationalization of the Article 6.4 mechanism. While the texts are not comprehensive, they provide a framework for further discussion through their various sections (e.g., highlighting methodology principles and addressing additionality, leakage, and reversals). Further, if the recommendations were not ready before COP28, then the first carbon credits would not be issued until at least mid-2025 under Article 6.4, causing greater delays.

Olga Gassan-zade, Chair of the SB, believes that the guidelines provide the Article 6.4 mechanism with a “solid foundation to aim for full operationalization” in 2024. Underlining the need for clarity in communicating the recommendations, she added, “We need to communicate to the world that i[t] has not been easy and a lot of work […] and be aware that Parties at the CMA will need to understand how [these] texts work […] and communicate concerns the Parties might have.”[vi]

In turn, many stakeholders hope that COP28 will prompt decision-makers to reopen the texts and to work out substantive details in order to operationalize the concepts set out in the SB’s recommendations.

The authors would like to thank Gina Kwon for her contribution to this blog post.

Endnotes

[i] https://unfccc.int/sites/default/files/resource/a64-sb009-a01.pdf.

[ii] https://unfccc.int/sites/default/files/resource/a64-sb009-a02.pdf.

[iii] See Latham’s ELR blog post, Updates From Week One of COP27: Article 6 Negotiations and US Announcements, November 16, 2022.

[iv] https://unfccc.int/documents/309980. 

[v] See Carbon Pulse, Article 6 body unanimously agrees crediting methodology guidance in last-ditch talks before COP28, November 16, 2023.

[vi] Ibid.