COP28 was a summit of two halves, with the first week dominated by actions and announcements outside the formal process, and the second by the negotiations themselves. It delivered in some respects and missed in others.
Getting a consensus on a phase out of fossil fuels was never going to be easy. Neither was a way forward on Article 6 carbon markets. The final texts reflect these challenges, and the misses here are disappointing.
However, where we have landed – the “UAE Consensus” – does speak to the urgent need to cut emissions and unlock significantly more finance to support sustainable development, adaptation and mitigation in emerging and developing countries. This is critical progress.
The call to transition from fossil fuels is a step in the right direction but doesn’t go far enough:
- The Global Stocktake text has not put us back on track, but it does signal the beginning of the end for fossil fuels. Commitments to the scale-up of renewable energy and energy efficiency have been well received, but this must be accompanied by a rapid phaseout of coal, oil and gas based on a clear plan for a just transition.
Increased finance is essential to make the transition from fossil fuels a reality:
- Details are scant in the Global Stocktake on how emerging and developing countries will fund this transition. In the early days of COP28 we saw a blueprint emerging for the way forward on global climate finance, but there is more to do. It was positive to see some breakthroughs in financing activity – for instance the $30bn climate-focused investment fund launched by the UAE in the opening days of COP. There must now be more focus on how blended finance, private sector investment and public sector financing initiatives can come together to channel investment from the Global North to the Global South. This will be the key task at COP29.
- On loss and damage for developing countries, the agreement reached on the Loss & Damage Fund in the opening days was positive, with the first pledges totalling $700 million. However, this is still far below what is needed – with some estimates placing this at $400 billion per year. We must now see concrete commitments to get the Fund to a meaningful scale.
Carbon markets can play an important role in cutting emissions and supporting the transition away from fossil fuels; the failure to reach agreement on Article 6 means this important source of funding faces further delays.
- If the carbon market’s architecture is to come together within two years as the UN and many governments have called for, policymakers must now push forward and build on the work already done. This includes filling gaps in definitions and agreement on transparency, environmental and social safeguards, authorizations, methodology approvals and ensuring appropriate rules for carbon removals.
- The absence of an agreement on Article 6 for another year reinforces the need for a high-integrity VCM more than ever. This can provide a foundation and framework for integrity in carbon markets as they continue to develop, providing clarity and giving confidence that will unlock finance and incentivise deeper corporate climate action.
There is now wide support for high-integrity VCMs can complement Article 6 markets as a key part of the wider package of global climate finance mechanisms:
- VCMs, along with compliance markets, emerging Article 6 markets, and effective carbon pricing by governments, can all deliver finance towards climate mitigation and sustainable development efforts.
- Many global political, business and civil society leaders voiced support for VCMs during COP28, specifically noting that only high-integrity VCMs can make sure that carbon finance is delivered in a way that is targeted, equitable, and that the credits sold represent real, verifiable emission reductions or removals.
- These respective and complementary roles of different carbon mechanisms were highlighted at a Presidential roundtable on 4th December, moderated by Tariye Gbadegesin, Co-Chair, VCMI. Speakers stressed the important role of high-integrity VCMs in channeling climate finance from advanced economies to projects in emerging markets and developing economies to support ambitious decarbonization in line with 1.5 degrees. Many voiced support for the work of VCMI and ICVCM in developing the rules for high-integrity.
Government endorsement for high-integrity VCMs is growing, and being seeded in nascent VCM regulatory approaches:
- The CFTC, IOSCO, the UK Government and a group of major EU countries (Netherlands, Germany, France, Spain, Finland, Belgium and Austria) announced initiatives during COP28 that pave the way for increased government action and regulation in VCMs. All these initiatives highlighted the necessity for VCM activity to be high-integrity – and many directly pointed to the work of VCMI for companies to follow. If these initiatives are to succeed in their ambition, they must align with the work VCMI and ICVCM have already produced that defines integrity.
Companies now have an end-to-end integrity framework to follow to scale up climate action. Many are confidently engaging with high-integrity VCMs:
- VCMI came together with SBTi, GHG Protocol and ICVCM to display how they are collaborating to deliver clear, cohesive standards for corporate climate action. This was widely welcomed by companies with many consistently demonstrating their support for the work of VCMI and ICVCM in providing rules for high-integrity VCMs.
- Many companies during COP28 signalled their intention to participate in initiatives that are underpinned by high-integrity. We heard from many climate leading businesses – including Salesforce, Natura, Netflix and BCG – on how they are using high-integrity VCMs to go above and beyond their science-aligned emissions cuts. Many leading companies also expressed their interest in participating in the Energy Transition Accelerator (ETA); we were delighted to see reference to VCMI’s guidance and look forward to seeing this fully embedded in the ETA’s rules.
There is still more to do to embed integrity in all VCM activity:
- All VCM activity must be high integrity. Every credit originated and purchased must be high quality. Use of carbon credits must be in addition to – not instead of – decarbonization. There cannot be a slip back to the ways of the past where low-integrity approaches damaged the VCM’s reputation and ability to deliver financing to emerging and developing economies.
- Throughout COP28, there was resounding support for high-integrity VCMs and an expectation that there can be nothing less than high-integrity in VCM activity. We cannot delay further, we must do everything we can to ensure that finance flows are increased to facilitate a rapid, equitable phaseout of fossil fuels.
Mark Kenber, Executive Director, VCMI, commented:
“While there were many encouraging developments on carbon markets at COP28, the overall negotiations fell short of the mark. Achieving Paris Goals requires all flows of capital to be mobilized. The lack of agreement on Article 6 makes this much harder. For the market to fully develop in the next two years as the UN and governments have called for, policymakers can draw on the foundational work of the VCMI and IC-VCM to accelerate the transparency and integrity agenda, developing high-integrity VCM and Article 6 markets that deliver the finance that makes ambitious global action possible.”
Image source: UNCTAD at COP28 – 2 December 2023