5 takeaways on carbon markets from the Bonn Climate Change Conference

Torrey Sanseverino
Senior Research Manager, Beyond Carbon

21 June 20233 min

Markets and Policy

As the Bonn Climate Change Conference drew to a close, frustrations surfaced on the slow progress ahead of this year’s COP28 climate conference. But there’s also room for hope. Outside of the negotiation rooms, governments, international bodies and companies are discussing how carbon markets are evolving. Here are five questions to keep an eye on in the lead up to November.

1. Will carbon ratings have a place in Article 6 markets?

In Bonn, Article 6 stakeholders discussed ratings as an important piece in the maturation of Article 6 carbon markets. Article 6 markets are relatively nascent and many buyers are not yet confident in the environmental integrity of Article 6 credits. Carbon ratings are viewed as a potential avenue to build that confidence. With more information on quality at hand, buyers would be able to make more informed decisions about their Article 6 carbon credit purchases.

2. How are countries looking to regulate voluntary carbon markets (VCM) and Article 6 markets?

A number of countries provided updates on carbon market regulation in response to the Paris Agreement. Some are in the process of creating frameworks which allow both VCM and Article 6 credits to be issued from their jurisdictions. While finalising these processes, several moratoriums on carbon credits have been put in place, such as the one implemented by Papua New Guinea in 2022.¹ Thus, once these frameworks are established the accompanying moratoriums may be lifted, which could increase VCM issuances.

3. Will REDD+ results units (RRUs) seek finance through Article 6?

Several talks centred on REDD+ and Article 6. Countries are seeking finance for the results of their REDD+ carbon projects. Some countries are looking to Article 6 rather than Article 5 of the Paris Agreement to do so. In Article 6 markets, the RRUs would act like carbon credits, allowing governments to seek buyers from other countries or private entities.

4. What role do the SDGs play in Article 6 carbon projects?

The Sustainable Development Goals (SDGs) were mentioned by country representatives in their Article 6 carbon projects updates. The benefits of Article 6 projects, beyond carbon avoidance and removal, are frequently highlighted. As in the VCM, it is seemingly popular for Article 6 projects to illustrate their beyond-carbon impacts through the SDGs. However, the SDG impacts of carbon projects are difficult to quantify and define. Transparency of the impacts behind SDG claims will be essential for the integration of high-integrity claims in Article 6 markets.

5. Are biodiversity markets gaining traction?

Although Bonn focused on climate talks, biodiversity was also discussed. This is unsurprising, as biodiversity impact goes hand in hand with climate impact. Biodiversity markets are in development and questions were raised about their future as an ecosystem assets market, particularly around the interplay between biodiversity markets and carbon markets. Concerns were shared regarding the potential for biodiversity and carbon projects to overlap.

References
¹ Land, C., Papua New Guinea declares a moratorium on voluntary REDD projects, 2022,https://redd-monitor.org/2022/03/19/papua-new-guinea-declares-a-moratorium-on-voluntary-redd-projects/