COP28 negotiations collapse on carbon credit sales agreement

Two weeks of relentless negotiating at COP28 have failed to produce an agreement on carbon credit sales, relieving non-profits that had opposed the proposals on the table while stoking fears the regulatory void could escalate greenwashing.

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.

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".

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.

But some negotiators said the regulations on the table at COP were too vague.

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.