Just after COP28 president Sultan Al Jaber announced on Wednesday the historic deal to transition away from fossil fuels, he revealed the talks had failed to agree on a regulatory framework for carbon credits, sending policy advisors back to the drawing board for next year's COP29 in Azerbaijan.
Carbon credits allow corporations -- or countries under certain conditions -- to offset greenhouse gas emissions through projects that claim to absorb or store CO2.
One credit equals the reduction or removal of one tonne of CO2 from the atmosphere. Projects are often based in developing countries aimed at, for example, fighting deforestation.
The credits are mired in controversy, with scientific research repeatedly showing that emission reductions are often hugely overestimated.
Negotiations in Dubai were expected to better regulate them by ironing out details allowing states to enter the carbon-offset market under Article Six of the landmark Paris Agreement in 2015.
- Failure to cooperate -
Article 6.2 authorised voluntary "cooperation" between countries -- meaning a country making progress in reducing its greenhouse gas emissions could trade its "surplus" reductions with a bad actor.
Implementing this "cooperation" has remained a point of contention ever since, with critics calling for maximum transparency to avoid fossil fuel producers offsetting rather than reducing their emissions.
The COP28 text had veered off track from the language in Article Six and "was likely not fixable," said the non-profit Climate Land Ambition and Rights Alliance (CLARA) which includes ActionAid, Caritas, Oxfam and Greenpeace.
They called the summit's failure a "relief" after the proposed text eliminated "the most minimal aspects of transparency and any chance of environmental integrity".
But Jonathan Cook, an expert at the watchdog group Carbon Market Watch, cautioned that the outcome "should not be celebrated".
"Countries and companies are increasingly engaging in bilateral trades in the absence of a complete framework," he said, which risks making future negotiations even more difficult.
In a statement Wednesday, the International Emissions Trading Association (IETA) which brings together large multinational corporations including BP and Shell on the issue, expressed "regret at the lack of consensus" but confirmed that the mechanism could be "implemented without further guidance" from the COP.
A number of countries -- with Switzerland, South Korea, Japan and Singapore in the lead -- have already signed agreements to finance projects in Africa and South America.
Saudi Arabia -- the largest exporter of crude oil -- and Iraq both recently announced "Article Six-aligned" carbon crediting schemes.
While Emirati-based Blue Carbon, spearheaded by a member of the Dubai ruling family, had asked for "clarity" on the nature of the article during COP28, it did not prevent the company from signing new agreements during the conference.
- Failure to regulate -
Article 6.4 allows states, entities -- or even individuals -- to purchase carbon credits linked to projects vouched for by a United Nations supervisory body.
The mechanism was intended to restore credibility to carbon credits already in circulation when their value collapsed as a result of overestimated, or even non-existent, emissions reductions.
The negotiations intended to assess and regulate the most criticised carbon credits: those linked to projects aimed at planting trees or avoiding deforestation.
Several developing countries are aiming to finance their sustainable transitions through their tropical forests.
But some negotiators said the regulations on the table at COP were too vague.
This "should serve as a dire warning to buyers of cheap greenwashing offset certificates from carbon traders who have ignited a rush for land titles in many parts of the world," said Jannes Stoppel, a policy advisor at Greenpeace, according to a statement.
- Small victory -
Only one text related to Article Six was agreed to at COP28: a roadmap for the implementation of "non-market-based" cooperation, focused on financing projects in developing countries and transferring technology linked to reducing greenhouse gas emissions.
A flurry of carbon removal projects were announced at COP28, but it remains to be seen which ones will be integrated into the UN's supervisory platform, expected sometime next year.
The small victory strengthens the fact that the non-market approach is "the real alternative to the market mechanism and carbon markets," said Souparna Lahiri from the Global Forest Coalition, according to a statement.
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