Instead of listening to its own technical experts and scientific evidence, the body overseeing the UN carbon crediting mechanism has chosen to side with market players after intense lobbying efforts.
All eyes were on the Article 6.4 Supervisory Body last week – the decision-making group for the new UN carbon crediting programme (PACM) – which met in Bonn to finalise its rules on permanence. A crucial topic for any carbon market standard, permanence refers to whether the tonnes of CO2 that are reduced or removed from the atmosphere by a carbon crediting project are permanently and securely stored. This is critical because carbon credits are still used to offset ongoing emissions that will heat the atmosphere for hundreds to thousands of years.
The Methodological Expert Panel (MEP), the technical body that informs Supervisory Body decisions, unanimously recommended draft rules on permanence that were in line with the Supervisory Body’s previously adopted Removals Standard, as well as the mandate from countries that have signed the Paris Agreement (CMA).
Like the Removals Standard, the MEP’s draft requires the monitoring of a project after the last crediting period until that project can reliably demonstrate there’s negligible risk that CO2 stored somewhere (such as in trees or underground) will be re-released into the atmosphere (“reversals” in carbon market jargon) or that all potential future reversals are “remediated”, meaning they are made up for with additional carbon credits.
Yet the Supervisory Body adopted a highly modified version of the MEP’s draft rules, which now sabotages guarantees on permanence. First, it contains only a limited monitoring period, after which the carbon market project developer can stop monitoring for reversals, with a duration to be defined by individual carbon crediting methodologies approved by the Supervisory Body. Second, there is also no definition of negligible risk.
This will inevitably create a race to the bottom, where the shortest approved duration will set a precedent for others to request the same, or less stringent requirements. If one methodology, for example, sets the duration at 50 years and gets approved, there will be little appetite to commit to a longer, more robust but more costly duration in other methodologies.
(In)visible hand of the market
The tricky thing with permanence is that there are many market players who are not so keen on this quality aspect of carbon credits, because they have financial interests in the types of carbon market activities that cannot guarantee a permanent reduction or a removal, or for which such guarantees would come at a price.
The decision to stray away from science comes after strong lobbying by these market players. The call for input on the non-permanence standard received an exceptionally high number of submissions, which mostly came from an extremely skewed representation of stakeholders. Carbon Market Watch found that 55 out of 72 of the submissions, or 76%, were made by stakeholders that have a direct or indirect financial interest in carbon credits, most of which called for the Supervisory Body to water down the draft rules. Moreover, many of these inputs were carbon copies rather than original submissions. There are 10 entries from government representatives, and only five, a meagre 7% of submissions, came from independent stakeholders with no financial interest in carbon markets, who unanimously came out in favour of strong rules on permanence.
Many Supervisory Body members justified their suggestions to weaken the MEP’s draft with claims of ‘listening to stakeholders’, which translated to listening to vested market interests. This ignores the fact that many submissions from the same type of stakeholder cannot be seen as an indication of broad support or critique, and that many other, unheard stakeholders, such as civil society, governments, academia and future generations, would likely be in favour of a robust, science-based standard. It’s important to note that some Supervisory Body members raised serious concerns about environmental integrity and equity, with one member rightly pointing out that weak rules would leave Global South countries to foot the bill for reversals once all the private actors are off the hook.
Straying from the science
Why does this matter, some may wonder. This is due to the significant risk of reversal such projects involve which would lead to higher future emissions when the carbon they hold is rereleased into the atmosphere.
The most prominent example of this are nature-based projects. This includes projects to enhance and restore the storage of carbon in natural sinks, such as trees, wetlands and soil. While such projects can have a positive impact on the climate and biodiversity, their impact is unlikely to be permanent, as it can be reversed by natural and human-induced effects, such as forest fires, pests and droughts – effects that stand to become more and more common due to the exacerbating effects of climate change – or future changes in land use. Claiming that they can cancel out the millennia-scale impact of fossil fuel emissions is unwise and unscientific.
There are several ways the temporary nature of their sequestration is addressed. Under the Clean Development Mechanism, the precursor of Article 6.4, activities with a reversal risk could only issue “temporary” carbon credits that had to be repurchased on a continual basis. On the voluntary carbon market, it is common practice that the project developer needs to monitor for any reversals and make up for them for some period after the credit is issued. However, the duration of these periods often reflects arbitrary decisions aimed at economic feasibility rather than climate science – several decades instead of centuries to millennia.
Project developers involved in these temporary activities stand to lose a lot if it becomes more difficult or expensive for them to participate in the UN’s carbon market mechanism. On top of this, nature-based projects typically sell credits for far less than more permanent project types, so increasing the price of the former would mean that less scrupulous buyers would also lose out on an inexpensive fix to reach their climate goals on paper.
Losing sight of the benchmark
The Supervisory Body was on the cusp of making a landmark decision that could have elevated climate science above vested economic interests, but it failed to do so. This outcome is especially disappointing because, so far, the Supervisory Body’s decisions on methodological standards, such as the standard on baselines and the standard on leakage adopted earlier this year, were quite environmentally sound. Our recent assessment of the Article 6 rules had found 6.4 to have the potential to become a decent benchmark for carbon markets. However, this outcome required a lot of heavy lifting. It depended on decisions by the Supervisory Body to clear out certain ambiguities in the permanence rules and to close shortfalls in rules related to equity and human rights.
Recent decisions by the Supervisory Body have unfortunately gone in the opposite direction than what the science and environmental justice required, not only regarding permanence, but also on provisions to protect indigenous peoples and local communities negatively affected by projects.
On the latter, the Supervisory Body adopted revisions to operationalise a loophole in its safeguards framework (called the Sustainable Development tool) that would incomprehensibly allow environmental and social safeguards to be overridden when negative impacts exceed what is allowed under those safeguards. The adopted revisions establish weak criteria for when such “deviations” can apply, opening the door to human rights abuses and environmental damage.
There is scientific consensus that the benefits of a carbon credit should at least be on a similar timescale as the emissions it is compensating for. It is disappointing and unjustifiable that this became a topic of contentious debate in a body that claims to be informed by science. The outcome of this meeting seemingly resulted from the Supervisory Body caving to market interests that politicised the discussions to the point where science no longer informed the debate. This undermines the potential of this mechanism to serve as a much-needed high-integrity benchmark for carbon markets.
