By Mathew Carr
July 10, 2023 — The UN supervisory body for the new Article 6.4 carbon market is looking at more market-structure options over the next few days and months to spur faster economic change toward cleantech across the world.
One key is to ensure the “baselines” by which carbon credits are issued become more ambitious over time. Ie baseline contraction factors (bcf)
NOTE: credits are usually issued only for economic activities that are more climate saving than business as usual and preferably ones that push emissions to fall to levels needed by 2030 (about half of today’s levels). Super challenging.
Three ideas, with pros and cons, from the 64-page draft “concept note,” published below:
One: Encouraging specific activities (so-called positive list) through simplified regulatory requirements and fast-track processes could reduce barriers for certain technologies and regions. However, it could skew market incentives, and establishing criteria to determine such a list of activities may be challenging;
Two: Limiting the number of credits (e.g. through conservative baselines, shorter crediting periods, discounting) may increase the cost of generating credits, which in turn could encourage buyer countries to enhance their efforts to reduce emissions domestically. However, some countries have stated that their current/future ambition is contingent on access to international offsets;
Three: Capping the total levels of credits generated by the Article 6.4 mechanism would limit the extent to which buying countries could limit/delay the introduction of measures to reduce domestic emission levels. However, it would skew market incentives that Article 6.4 sets up, would have many policy-related and operational challenges, e.g. ex ante rules on what the total cap is in a given sector, how it relates to crediting in specific Article 6.4 activities, stopping approval of proposed activities after a certain date/after a certain threshold of activities and/or expected emission reductions have been approved internationally.
See this snip
Another key concept: Activities that don’t cut emissions by 45% by 2030 to be deemed “carbon intensive”?
(I’m hoping to add to this story, include additional context and comments)
Here is the full fascinating concept note being looked at by the UN supervisory body for the new Article 6.4 carbon market, over the next few days and weeks.