However, those expecting that such a decision would lead to a flurry of investments into Article 6 transactions may see their hopes frustrated by governments’ and corporates’ lack of appetite for such transactions.
Many have high hopes that finalizing the implementation arrangements for the ‘carbon market’ Article 6 will open the financial floodgates for unrestricted carbon finance to flow into mitigation projects and programs, which is urgently needed, particularly in developing countries.
Private sector driven carbon markets cannot replace public policy, but they can help to realize mitigation potentials in sectors, industries or regions where the reach of public policy is weak — due to a lack of political agreement, limited public finances, or difficulties reaching remote areas.
Activities such as reduced deforestation, restoration of forest ecosystems, carbon-rich agriculture, promotion of healthy diets yield high environmental, development and health benefits and can be implemented without further delays.
Sure, they are not without problems. They come with the risk of inflated emission reduction claims for the sake of profits; they draw finance only to a portion of available mitigation opportunities; and without safeguards tend to cement existing power structures.
However, the agreement on the rules for carbon trading in Glasgow may also turn out to be another step towards a mirage of an internationally regulated and liquid carbon market — a mirage that won’t die, regardless how often it has gone up in scintillating air.
With few exceptions, developed countries have made it clear in their nationally determined contributions , and while acceptable back then, public opinion has since withdrawn permission for developed countries to use offsets to meet their climate targets.
Subjecting their efforts to the rules of Article 6.4 Paris Agreement—the article that foresees non-government engagement—does not seem an attractive proposition to corporate buyers.
Whatever the results of Glasgow will be, regulation of carbon trading under Article 6.4 of the Paris Agreement will depend to a significant extent on host country regulation, oversight, and institutions, such as registries, and public offices ensuring proper accounting and issuing approvals.
While investments in decarbonizing their own operations and supply chains must take priority, companies have shown strong interest in investing in voluntary carbon markets—including in developing countries—as part of broader climate engagement strategies.
By contrast, voluntary carbon markets have the benefit of being flexible and independent of government regulation, bureaucracy, and they are less exposed to government challenges such as corruption.
Clarity on Article 6 can provide clarity on carbon accounting and empower countries to clarify where and when they support carbon market transactions, including those related to the voluntary carbon market.
She serves as an advisor to numerous governments and non-profit organizations, private companies, and foundations on legal aspects of climate policy, international negotiations, policy development and implementation.