The Pivotal Role of VCM in Addressing Article 6 Challenges and Universal Standards
At the conclusion of COP28, many disagreements surrounding Article 6 remain unresolved. However, the continuous evolution of the VCM, including the significant registry collaborations announced at COP28, provides a roadmap to resolve Article 6 differences in the future.
Article 6 allows countries to exchange mitigation outcomes bilaterally, report their trade, and apply the emissions toward their nationally determined contributions (NDC). Consensus on Article 6 is key to unlocking the large amounts of finance needed to fund decarbonization in developing countries. Despite extensive discussion, several key differences regarding the integrity of carbon credit transactions prevented COP28 from reaching an agreement. For example, there is notable discord on various technical aspects related to Article 6.2, such as ensuring transaction integrity at the national level. Additionally, disagreements persist about Article 6.4 for standard setting. These include baseline assessment, the permanence of removal credits, leakage assessment, and concerns related to human rights.
Many of the issues plaguing Article 6 have been extensively discussed in the VCM, including the registries and the integrity council, which have the potential to positively influence eventual Article 6 consensus. Over time, the VCM has diligently improved its practices for high-integrity carbon credit, which could offer solutions to similar challenges associated with Article 6. These include the latest advancements in adopting and refining the establishment of baselines for nature-based projects (e.g. ACR’s IFM v2.0, jurisdictional and dynamic baseline approaches of VERRA, etc.), reduced crediting periods, enhanced monitoring guidelines, updated project risk calculation tools, and incorporating national deforestation data for leakage estimation.
The VCM continues to play a crucial role in refining the methodologies that ensure the integrity of carbon credits. A noteworthy example is the collaboration among independent carbon crediting programs–including the American Carbon Registry, Architecture for REDD+ Transaction, Climate Action Reserve, Global Carbon Council, Gold Standard, and VERRA–during COP28. This collaboration aims to magnify the impact of carbon markets in addressing climate change and to support countries in the implementation of Article 6, including the fulfillment of their NDCs. This collaboration is crucial for VCM as registries agreed to learn from each other’s best practices for climate change mitigation and improve the standard for high-integrity credits. These efforts include aligning standards for quantification and accounting, promoting community benefits and safeguards against adverse impact, enabling financial flow to developing countries, extending the durability of carbon sink, and enhancing transparency on credit use.
Ideally, carbon programs for the government and project-based credits for the VCM should be governed by universal standards, ensuring high-integrity credits. The increasing demand from corporations and stakeholders for high-integrity emission reduction projects has led developers, standard-setting bodies, and integrity rating firms to offer more enhanced services. The challenge lies in achieving consensus among hundreds of governments, a process that may take longer than expected to fully refine the content of Article 6. Slow progress on Article 6 does not mean that there is slow progress in the VCM. On the contrary, the VCM is making big strides to more effectively incentivize climate solutions and support corporate climate target setting outside Article 6.