What approval of carbon credit rules means for Africa
Carbon trade is the buying and selling of credits that permit a company or other entity to emit a certain amount of carbon dioxide or other greenhouse gases
What you need to know:
- Article 6, established during COP21 in 2015, facilitates international cooperation in achieving climate goals through carbon markets.
In the first week of COP29, negotiators reached a significant consensus on standards for creating carbon credits under Article 6.4 of the Paris Agreement. This is pivotal for global climate action, particularly for African countries, as it establishes a structured international carbon market to reduce greenhouse gas emissions.
Article 6, established during COP21 in 2015, facilitates international cooperation in achieving climate goals through carbon markets. It consists of two main mechanisms: Article 6.2, which allows countries to engage in bilateral or multilateral agreements to trade Internationally Transferred Mitigation Outcomes, and Article 6.4, which creates a centralised framework regulated by a UN body.
Article 6.4 aims to ensure that Emission Reductions Units are generated through verified and validated projects for transparency and integrity in carbon trading.
The recent consensus at COP29 has set critical standards for operationalising Article 6.4's key features, including:
Standardised methodologies: The Supervisory Body approved methodologies for developing and assessing projects under this new crediting mechanism to ensure projects meet rigorous standards before generating credits.
Carbon removal projects: New standards specifically address projects aimed at removing greenhouse gases from the atmosphere, expanding eligible activities within the carbon market.
Oversight and integrity: To prevent issues that have plagued previous carbon markets, strict protocols have been established to maintain the integrity of traded credits.
With Article 6.4 operationalised, African nations will have a stronger bargaining position in climate negotiations. The framework facilitates access to international carbon markets, enabling them to leverage their rich natural resources and biodiversity for economic gain. This shift allows them to advocate more effectively for their interests, emphasising the need for equitable financial flows and technology transfers from developed nations.
A regulated carbon market is expected to unlock substantial climate finance for Africa, which requires approximately $2.8 trillion between 2020 and 2030 to implement its Nationally Determined Contributions (NDCs). While climate finance flows to the continent have grown to $44 billion in 2021/2022, this represents only a tiny percentage of the estimated annual funding required.
In the carbon market, African countries can attract investments into sustainable projects for emissions reductions and local development goals. This financial influx can help address pressing issues such as poverty alleviation, infrastructure development and climate resilience.
Article 6.4 aligns with Africa's broader development objectives by promoting sustainable practices across agriculture, energy and health sectors. Carbon credits through sustainable land management or renewable energy projects can enhance economic opportunities while addressing climate change. This positions African nations as proactive contributors to global climate solutions rather than mere aid recipients.
Implementing Article 6.4 encourages collaboration among African nations in climate action. By sharing best practices and resources for project development under the carbon market framework, countries can collectively enhance their negotiating power on the international stage. This is crucial in advocating for fair treatment and recognising Africa's unique challenges and contributions to global climate discussions.
However, the establishment of Article 6.4 faces significant challenges on a global scale. There is a lack of consensus on methodologies for carbon removal and project eligibility for generating credits. Ongoing disagreements create uncertainty that hampers project developers' engagement in the market.
Developing a robust administrative infrastructure to operationalise Article 6.4 effectively complicates market functionality. This includes establishing a Supervisory Body responsible for overseeing the issuance and validation.
Financial barriers
Financial barriers also pose significant hurdles, particularly for developing nations where stricter regulations and associated costs may deter full engagement with Article 6.4 mechanisms. Many developing countries face financial constraints, limiting their ability to meet project approval requirements and credit issuance criteria.
Concerns about market stability arise from whether host countries can revoke authorisations for carbon credits after they have been transferred, creating apprehension among buyers who need assurance that their investments will be supported by changing national policies.
Additionally, quality control risks emerge by allowing emission avoidance projects, like conservation efforts, to qualify for credits, potentially leading to an oversupply of low-quality credits that undermine market integrity.
A significant challenge is ensuring that carbon credits are not double-counted towards different countries' NDCs. Clear rules governing their transfer and use are necessary to avoid discrepancies that could compromise market integrity.
Lastly, the success of Article 6.4 hinges on political will and international cooperation. Effective implementation requires a collective commitment from countries to collaboratively address these challenges, a complex endeavour historically marked by difficulties in achieving collaboration.
Closer to home, Article 6.4 faces additional hurdles due to past scandals involving fraudulent offsets that have raised credibility concerns about carbon credit integrity among stakeholders skeptical of carbon markets' effectiveness. Developing countries may struggle with the administrative and technical demands of participating in this complex global market.
Civil society organisations and environmental groups criticise carbon trading as a 'licence to pollute,' arguing it allows wealthier nations to evade responsibilities while placing undue burdens on poorer countries. Many African nations may also lack the institutional capacity to engage fully in carbon markets.
The costs associated with project development and compliance with regulatory requirements under Article 6.4 pose challenges for developing nations with limited financial resources but also present opportunities for growth through sustainable practices aligned with global climate goals.
