I entered COP26 with the intention of tracking Article 6 negotiations. This proved to be more difficult than anticipated as Week 2 saw restrictions in the number of observers permitted to attend the negotiation sessions, with none allowed inside the Article 6 rooms. Nonetheless, I was able to monitor the developments by tracking the changes in the new versions of the text that were released each day. Here are a few points of interest for me in the latest 6.4 text.

One of the big questions regarding Article 6 in anticipation of COP26 was what would happen with the CDM transition. 6.4 will create a new mechanism for trading project-level carbon reductions and removals. However, that then begs the question of what will happen with the dozens of methodologies, thousands of projects, and billions of credits generated under the CDM from its inception in 2005 until 2020. 6.4 dictates that credits from projects registered after 2013 are eligible to be applied towards the first round of NDCs. While that does possibly permit about 320 million credits, that is still a small portion of the total 4 billion credits that have been issued under the CDM.

In terms of CDM projects, it does appear that projects that meet a set of requirements will be able to apply and transition to the new mechanism. However, it is unclear from the current 6.4 text what those requirements will be. While it will likely take time for decisions to be made on these criteria, the possibility to transfer likely gives a lot of hope to the many project developers with CDM projects who hope to continue earning the revenue from offsets.

The transfer of methodologies is another key decision that may dictate the success of the new mechanism. My understanding is that one reason that a new mechanism is being created rather than just updating the CDM is due to some lack of trust in the CDM. Some of this mistrust may be rooted in a lack of faith in the methodologies. The success of the carbon markets is largely dependent on the confidence in the methodologies, as that is what dictates the number of credits a project is eligible to earn and to sell. 6.4 dictates that the Supervisory Board will review all of the CDM methodologies and other pertinent methodologies – which I feel may include methodologies from the voluntary carbon market – in order to determine which are eligible for application towards the new mechanism.

The Article 6.4 rule book does include several other big decisions. These include a 5% share of proceeds being placed towards adaptation and a 2% cancellation for overall mitigation of global emissions on all trades. This is significant as these cancellations are not required under Article 6.2 trades. In addition 6.4 also clarifies that corresponding adjustments are required on all trades approved by a host party. I am continuing to investigate the implications of if this rule will also apply to the voluntary carbon market.

In all, great progress was made in defining the rules to create the 6.4 mechanism. While the decisions made were not the first choice of everyone and may have not been the perfect decisions, the fact that the mechanism is moving forward is a huge win from Glasgow.