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COP28's ripple effect: What lies ahead for the voluntary carbon market?


The COP28 climate summit, held in Dubai this December, concluded with familiar disappointment. The phase-out or phase-down of fossil fuels fell short of climate expectations. Climate negotiations extended into overtime while working on a new draft deal bridging between those demanding the phase-out of fossil fuels and a coalition comprising oil exporters and developing countries in the opposition.

CEEZER was present at COP28, and – despite the difficulties – witnessed bright discussions and serious commitments. These interactions could pave a way for a high-integrity voluntary carbon market (and its diverse actors), living up to its potential to enhance global climate efforts in 2024 and onwards.

CEEZER’s Chief Impact officer Dr. Carla Woydt shares some reflections on this pivotal moment in climate diplomacy. 

Voluntary carbon credits: A critical lever for achieving net zero

With a cut in consumption and production of fossil fuels being the strongest lever to reduce emissions, simultaneous removal of accumulated carbon emissions in the form of voluntary carbon credits becomes an increasingly important tool to keep global climate goals within reach.

The voluntary carbon market looks back at a difficult year, with major quality concerns, greenwashing accusations, and missing guidance for buyers urgently needed to catalyze and scale projects neutralizing atmospheric emissions.

Removal or no removal

Is this really still a question? Some still say that the reliance on removal technologies delays corporate efforts to decarbonise. A study shows that the opposite is true: Companies purchasing carbon credits are investing three times more on emissions reduction efforts within their own supply chains and are nearly twice as likely to decarbonise year-over-year compared with those who do not purchase credits (Ecosystem Marketplace, also read this article from Carbon Market Watch for a critical review). Johan Rockstrom made it clear: "We have to phase out fossil fuels AND scale negative emissions."

For the first time, a commitment to scale carbon removal is also part of the COP28 global agreement among the world’s nations on collective action to address climate change. The final text of the COP28 Global Stocktake includes a call to “accelerate zero- and low-emission technologies”. Carbon removal as a key element in the broader climate strategy to achieve net zero emissions by 2050 has been central to carbon market discussions at COP.

The Carbon Removals at COP platform, a coalition of organisations focused on scaling up carbon removals, curated a selection of events and briefings, all related to carbon removal technologies. The themes embraced usual perspectives such as quality, scale-up, and policy but also adopted the buyer perspective in asking who actually can and will pay for carbon removal. In the inaugural panel of the COP28 climate finance hour series hosted by the COP28 presidency and IETA, Robert Höglund, advisor in carbon dioxide removal (CDR) and climate policy, presented Carbon Gap’s updated 2023 report “Bridging The Corporate Ambition Gap”. Together with CEEZER, the report formed the basis for a discussion on corporate strategies to buy carbon removal credits. The conclusion: While there is a gap between the ability and willingness to pay, there are multiple ways to engage in carbon removal purchases. A portfolio approach (as advocated by CEEZER) does not only allow to optimize for budget but also de-risks carbon credit portfolios.

Whether engineered or nature-based removal solutions: corporate investment is needed from early development covering upfront cost and later-stage project maintenance to ensure the availability at scale with net-zero target years approaching.

Is no deal on Article 6 better than a bad deal?

Before COP28, it was already anticipated that negotiations concerning Article 6.4 would be challenging. As the summit progressed, these difficulties intensified, ultimately leading to a disheartening outcome where no agreement was reached on the key aspects of Article 6.2 and Article 6.4 of the Paris Agreement.

In a rollercoaster ride including tension around ambiguous language and re-introducing disproven accounting techniques (tonne-year accounting), country negotiators have failed to adopt key language on carbon crediting methodologies and international trade on the final scheduled day of COP28. This is a serious setback for global net zero, weakening carbon markets as a climate solution under the Paris Agreement.

Though operational, Article 6.2 would have benefitted from further guidance on market-based cooperative approaches (e.g. what does this actually mean?) and clearer rules on the authorization of Internationally Transferred Mitigation Outcomes. Countries can and should implement international carbon market mechanisms under Article 6.2 (with some agreements already signed and more underway).

The operationalization of the Article 6.4 mechanism is unfortunately delayed – presumably until next year. Andrea Bonzanni, International Policy Director at IETA, expressed disappointment, noting that this delay missed a crucial chance to fast-track the establishment of a crediting mechanism with strong standards for environmental integrity, safeguards, and human rights. He further commented that this postponement does not represent a win for environmental integrity. Instead, as he pointed out, “it is a victory for the anti-market agenda”.

The way forward remains unclear, and it's evident that it won't diminish the buyer-side uncertainty, which is obstructing necessary large-scale investments. This sentiment is echoed by Carbon Market Watch, which stated: “With all the unresolved problematic issues, the fact that they reached no deal was better than agreeing to a bad one that would torpedo the Paris Agreement”.

What is the voluntary carbon market narrative for 2024?

Let’s face it: The voluntary carbon market does not have the best PR agency coordinating language and tailored core messages for different stakeholders. The messaging should be based on a solid foundation, i.e. delivering high-integrity carbon credits, highlighting quality differences, and explaining risks associated with carbon credits. All this needs to be clarified in a language different stakeholders can use as guidance.

One big push to align requirements and eventually also core messaging was announced on December 4th: Leading frameworks like the IC-VCM, VCMI, SBTi, and GHG Protocol plan to establish a joint integrity guidance framework on decarbonization and the use of carbon credits for residual emissions. 

Furthermore, six leading carbon crediting programs (amongst them Verra, Gold Standard, ACR, and CAR) have announced a collaboration to increase the impact of activities under their standards. The collaboration aims to enhance rigor, transparency, and consistency across the market.

The organisations will put in place a framework to accelerate the impact of the voluntary carbon market:

  • Learn from each others’ best practices to increase support for abatement projects
  • Support the independent assurance of programs by the IC-VCM
  • Seek to align standards to common principles for the quantification and accounting of removals and reductions
  • Work to extend the durability of carbon sinks, including by insuring against reversals
  • Create indicators to promote community benefits of projects on the ground, to underline sustainable development achievements and to safeguard against negative harm
  • Improve the transparency around the use of carbon credits
  • Work to improve and enhance the flow of finance to developing countries to help them achieve and go beyond their nationally determined contributions.

The six signatory standards are all accredited under the CORSIA, and all are seeking assessment under the ICVCM’s Core Carbon Principles (CCPs).

This is a crucial first step to move towards consistent requirements and unambiguous buyer guidance. Data-driven analyses will help to identify high-integrity carbon projects and science-backed quality assessment will continue to illustrate quality differences across and within project types. Those findings will craft clear messages for different stakeholder groups to inform their decision.

Moving to action: Charting a strategic path in the VCM

This overview represents just a fraction of the numerous activities that unfolded in parallel during COP, yet it underscores developments critical to the voluntary carbon market. Marking the end of a challenging year, COP28 served as a pivotal occasion to revive confidence in the voluntary carbon market shaken by human rights concerns and integrity issues. The imperative for all actors in the voluntary carbon market is now to move to action, use available data and scientific evidence to identify high-quality carbon credits, and align those with specific carbon strategies that go hand in hand with high-ambition reduction activities.

Seeking strategic understanding of the voluntary carbon market? Connect with Dr. Carla Woydt, CEEZER’s Chief Impact Officer, for tailored insights here.

Read our more in-depth blog posts on the significance of Article 6.4 negotiations.