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Empty Promises: Oil & Gas Decarbonization Charter masks massive fossil fuel expansion

November 13, 2024 by ZCA Team Leave a Comment

This factsheet was written by David Tong based on research by Kelly Trout with contributions from Al Johnson-Kurts. All are with Oil Change International. Additional contributions provided by Zero Carbon Analytics.

Key points:

At COP28 in December 2023, 50 oil and gas companies launched the ‘Oil & Gas Decarbonization Charter’, making a series of pledges to “contribute to supporting the aims of the Paris Agreement.”
In 2024, the Charter’s member companies approved 68 new oil and gas fields and field expansions containing 14 billion barrels of oil equivalent (BOE) of oil and gas, which – when extracted and burned – will cause nearly 5 billion metric tonnes of carbon dioxide (CO₂) pollution.
Ten companies are responsible for over 90 percent of the newly approved reserves, led by the Abu Dhabi National Oil Company (ADNOC), Saudi Aramco, Petrobras, TotalEnergies, and Shell.
These new projects represent a total commitment of almost USD 250 billion in new oil and gas expenditure, made up of USD 87 billion in capital investment and USD 159 billion in operating costs.
Charter member companies are projected to increase oil and gas production by 17 percent by 2030.
There is a clear scientific consensus that there can be no new oil and gas extraction beyond already developed fields if the Paris Agreement’s temperature goals are to be met.
To align with the International Energy Agency (IEA)’s 1.5ºC-aligned energy pathway, global oil and gas production must decline by close to 20 percent by 2030, and by 45 percent by 2035.

Overview

In December 2023, at the United Nations Climate Change Conference (COP28) in Dubai, all countries agreed for the first time to transition away from fossil fuels in energy systems.¹ Just days before, 50 oil and gas companies launched the “Oil & Gas Decarbonization Charter” (the Charter), attempting to frame themselves as part of the energy transition.²

The Charter is a voluntary pledge that focuses primarily on reducing greenhouse gas emissions from companies’ upstream operations.³ The Charter ignores the vast majority of member companies’ climate impact, which occurs from the burning of the oil and gas they produce, typically accounting for 80 to 95 percent of emissions from the oil and gas industry.⁴

As such, independent analysis found that the Charter falls “short of what is needed to reach the Paris Agreement goals,” and could enable levels of fossil fuel production incompatible with climate goals.⁵ The Charter is highly controversial, with over 300 civil society organizations signing an open letter describing it as “a dangerous distraction.”⁶ Fifty-four oil and gas producing companies have now signed on, including the Azerbaijani national oil and gas company, SOCAR.⁷

This factsheet provides a summary of the new oil and fossil gas extraction projects approved by the Charter’s member companies in 2024 (see Methodology).

For a livable future, no new fossil fuels

There is a clear scientific consensus that the objectives of the Paris Agreement leave no room for new oil, gas, or coal extraction beyond already developed fields and mines.⁸ Peer-reviewed research shows burning just the oil, gas, and coal in existing fields and mines could warm the world beyond 2 degrees Celsius (ºC), let alone 1.5ºC.⁹The majority of fossil fuels in active fields and mines must stay in the ground to stay within a 1.5°C carbon budget.¹⁰

As the IEA has found, “Companies aligned with [the IEA’s 1.5°C scenario] would not invest in new exploration or approve new projects.”¹¹ The first step to transition away from fossil fuels – an aim countries agreed at the 2023 UN Climate Change Conference – is to stop extracting more.

New oil and gas approved by Charter companies in 2024 could result in 5 billion tonnes of CO₂ pollution

Despite their claims, Charter member companies have continued to approve new oil and gas extraction throughout 2024. They participated in final investment decisions to:

approve 68 new oil and gas fields or field expansions between January and September 2024;
amounting to 14 billion barrels of oil equivalent (BOE) of new oil and gas reserves approved for extraction (see Table 1).

Burning all the oil and gas in these newly approved fields would release nearly 5 billion metric tonnes of carbon-dioxide (CO₂) pollution – roughly equal to the United States’ total carbon emissions for an entire year.¹²

Table 1: Committed carbon pollution from oil and gas fields approved by Charter companies in 2024

Source: Oil Change International analysis based on data from Rystad Energy (October 2024).¹³ Data covers approvals from January through September 2024.

Charter companies are disproportionately responsible for approving new oil and gas extraction, highlighting the hollowness of their voluntary pledge. Despite accounting for less than 40 percent of global oil and gas production, they account for 65 percent of all new oil and gas reserves approved in 2024.¹⁴

Ten companies are responsible for over 90 percent of new reserves approved by Charter members in 2024

This surge in oil and gas expansion is being driven by a subset of Charter member companies. Just ten Charter companies account for over 90 percent of the new reserves approved by its 54 members from January to September 2024, as shown in Figure 1.¹⁵

Figure 1: Charter companies driving the most oil and gas expansion in 2024

Charter companies are on track to invest hundreds of billions in new oil and gas

Charter companies have pledged to “Invest in the energy system of the future,” such as renewables.¹⁶ However, the new fields approved from January through September 2024 alone represent a commitment of almost USD 250 billion¹⁷ in new oil and gas expenditure:

Charter companies are projected to invest USD 87 billion of capital expenditure (‘capex’) into developing new oil and gas fields approved so far in 2024 over their lifetimes; and
The cumulative operating costs associated with these new fields could total USD 159 billion over the course of their lifetimes.

In total, Charter companies are forecast to invest USD 728 billion of capex in developing and exploring for new oil and gas fields from 2024 through 2035, including new projects approved in 2024 plus new fields they are projected to approve in coming years, if there is no change in their current course.

Charter companies are projected to increase production by 17 percent by 2030

The Charter’s 54 member companies are on track to drive climate disaster. Charter companies are forecast to cumulatively produce 17 percent more oil and gas by 2030 than in 2023, and their production is predicted to stay above 2023 levels until the late 2030s.

In contrast, the IEA shows global oil and gas production must decline rapidly under its 1.5ºC-aligned Net Zero Emissions pathway – by close to 20 percent by 2030, and by 45 percent by 2035.¹⁸

To align with the 1.5ºC energy pathway, Charter companies would need to:

cease approving all new fields and fracking wells;
stop all projects currently under construction; and
shut down some already-producing projects.¹⁹

This is shown in Figure 2.²⁰

Figure 2: Charter companies’ projected oil and gas production vs IEA 1.5ºC scenario

Conclusion

The first step to transition away from fossil fuels is to stop approving new production. Yet Oil & Gas Decarbonization Charter member companies’ voluntary pledges mask an oil and gas expansion spree that threatens to further drive the climate crisis and harm communities around the world.

Instead of focusing only on their operational and energy supply emissions (Scope 1 and 2 emissions), these companies must cut the emissions from the burning of the oil and gas they produce (Scope 3) in accordance with 1.5ºC-aligned pathways. This requires an immediate end to expansion and a rapid phaseout of all fossil fuel production, with some fields closed early, alongside just transition measures to protect workers and communities.

The majority of Charter signatories are nationally owned oil and gas companies. Under the Paris Agreement, the countries that own these companies must submit new nationally determined contributions (NDCs) in early 2025. To be 1.5ºC-aligned, all NDCs must immediately end new fossil fuel extraction and include a plan to phase out fossil fuels. Global North countries – including those with nationally-owned oil and gas companies and those where international oil and gas companies are based – must act first and fastest, in line with equity and common but differentiated responsibilities. The Charter does nothing to address this imperative.

Methodology

Data findings on Charter companies’ oil and gas expansion and projected production and investment are based on Oil Change International analysis of data from the Rystad Energy UCube (October 2024 version). Expansion attributed to Charter companies reflects their ownership stakes in newly approved projects. We include reserves and production volumes that companies owe to governments through royalties or production sharing contracts to represent the full climate impact of their activities.

1
United Nations Framework Convention on Climate Change (UNFCCC), Report of the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement on its fifth session, held in the United Arab Emirates from 30 November to 13 December 2023, Decision 1/CMA.5, Outcome of the first global stocktake, FCCC/PA/CMA/2023/16/Add.1, para 28(d).
2
COP28 UAE, Press Release: Oil & Gas Decarbonization Charter launched to accelerate climate action, Dubai, December 2, 2023.
3
Oil & Gas Decarbonization Charter, “OGDC Charter: Decarbonizing the global oil and gas sector at speed and scale”, & “Oil and Gas Decarbonization Charter”.
4
Zero Carbon Analytics, “COP28: Assessment of the Oil and Gas Decarbonization Charter,” December 4, 2023.
5
Zero Carbon Analytics, 2023.
6
Fiona Harvey, “Oil and gas firms must convert to renewables or face decline, says IEA chief,” The Guardian, December 2, 2023.
7
OGDC: The Oil & Gas Decarbonization Charter, “Signatories,” last accessed November 4, 2024.
8
IEA, “Net Zero Roadmap: A Global Pathway to Keep the 1.5 °C Goal in Reach, 2023 Update” September 2023, p. 76; United Nations Environment Programme, Emissions Gap Report 2023: Broken Record – Temperatures hit new highs, yet world fails to cut emissions (again), Nairobi, 2023,, pp. 34-35; Fergus Green, Olivier Bois von Kursk, Greg Muttitt, and Steve Pye, “No new fossil fuel projects: The norm we need” Science, May 30, 2024, 384:6699.
9
Kelly Trout et al, “Existing fossil fuel extraction would warm the world beyond 1.5°C” Environmental Research Letters 17:6, 2022; Kelly Trout, “Sky’s Limit Data Update: Shut Down 60% of Existing Fossil Fuel Extraction to Keep 1.5°C in Reach,” Oil Change International, August 2023.
10
Kelly Trout, “Sky’s Limit Data Update: Shut Down 60% of Existing Fossil Fuel Extraction to Keep 1.5°C in Reach” Oil Change International, August 2023.
11
IEA, “The Oil and Gas Industry in Net Zero Transitions” November 2023, p. 149.
12
U.S. Environmental Protection Agency, “Climate Change Indicators: U.S. Greenhouse Gas Emissions” accessed October 29, 2024.
13
We apply the following CO₂ emissions factors to estimated oil and gas reserves volumes: 0.421 tonne (t) CO₂/barrel (bbl) of oil and condensate, 0.235 tCO₂/bbl of natural gas liquids, and 54.7 tCO₂/million cubic feet of gas.
14
Rystad Energy indicates Charter companies accounted for 38 percent of global oil and gas production (43 percent of oil; 31 percent of gas) in 2023.
15
The COP29 host Azerbaijan’s nationally owned oil company SOCAR is not listed as it has not yet approved new extraction projects to date in 2024. But Rystad Energy tracks that the company has 11 new fields or field expansion projects in its pipeline for approval before 2030.
16
OGDC: The Oil & Gas Decarbonization Charter, “Commitments”. This reference to renewable energy sits alongside a number of things that have been heavily criticized as prolonging the fossil fuel economy and delaying the energy transition: “low-carbon fuels, carbon capture and sequestration (CCS), low-carbon hydrogen, etc.”
17
All USD figures in real 2024 $.
18
IEA, World Energy Outlook 2024, 2024, Annex A: Table A.1c.
19
In theory, companies could shut down an equivalent portion of already producing projects to compensate for bringing new fields online, but no company has made such a commitment.
20
We index OGDC companies’ 2023 production to the global decline rate for oil and gas supply to 2030 and 2035 under the IEA’s Net Zero Emissions scenario using: “Annex A: Table A.1c,” in World Energy Outlook 2024.

Expanding the contributor base: a solution for all climate finance woes?

October 31, 2024 by ZCA Team Leave a Comment

Key points:

Countries are set to prepare a new collective quantified goal for climate financing at the climate conference, or COP, in November 2024. This new goal offers an important opportunity to improve the way that climate finance is provided and increase the goal.
According to the OECD, developed countries finally met their objective of providing USD 100 billion in climate finance in 2022. However, this goal was not met on time, and the finance provided up until now has frequently been through instruments that are not necessarily adapted to developing countries’ needs.
Needs estimates show that developing countries will need at least USD 1 trillion per year to tackle climate change, illustrating the urgent need for increased financing.
To fill this gap, some countries and experts have suggested expanding the contributor base to include certain emerging countries.
While there is some justification for certain countries to join the ranks of contributors, most of these countries already contribute voluntarily in line with Article 9.2 of the Paris Agreement. These voluntary contributions are an important source of climate finance for developing countries.
Our estimates of a potential addition of more countries to the contributor base show that the current financing gap wouldn’t be significantly reduced even if countries voluntarily providing climate finance were to increase their contributions to the current level of developed countries.
Efforts to add new mandatory contributors require a broader discussion on the categorisation of countries under the UNFCCC and the Paris Agreement.

Current financing structures found lacking

Climate change mitigation, adaptation, and loss and damage are and will continue to be expensive, particularly for countries with fewer resources at their disposal. The principle of “Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC)” was enshrined under the 1992 United Nations Framework Convention on Climate Change (UNFCCC) to account for the different historical contributions to climate change and countries’ abilities to support climate action.¹ Developed countries, listed in Annex II of the Convention, were given responsibility for taking significant steps to mitigate climate change and to contribute to funding mitigation and adaptation efforts by developing countries (non-Annex countries).²

A first effort to this end was a goal of providing USD 100 billion per year of climate finance for developing countries by 2020 was set for in the nonbinding Copenhagen Accord in 2009.³ This target was only met for the first time in 2022, although the USD 115.9 billion mobilised did represent nearly a 30% increase compared to 2021.⁴

There is now an opportunity to reinvigorate global climate financing structures and accountability. According to the Paris Agreement, countries should agree to a new collective quantified goal (NCQG) for financial support for developing countries to mitigate and adapt to climate change before 2025.⁵ This is a key task for COP29 in Azerbaijan in November 2024. This new goal is meant to be needs-based, and while precise estimates vary, the evidence points to the need for at least USD 1 trillion per year.⁶ Because of the scale of the financing required, some experts⁷ and countries, including Switzerland, Canada and the US,⁸ have suggested expanding the list of countries mandated to contribute, also called the contributor base, to include emerging countries with high emissions and high incomes.

This briefing investigates estimates of funding needs and the current state of funding from developed and emerging countries to shed light on the potential impact of expanding the contributor base.

How much climate finance is needed?

Several estimates exist on developing countries’ needs for climate finance. The UNFCCC Standing Committee on Finance estimates a total of USD 5.8 trillion to USD 5.9 trillion will be needed to cover the costed needs of 153 developing country Parties, based on its assessment of nationally determined contributions (NDCs). This is likely to be an underestimation given that only a small proportion of needs were costed across the documents provided.⁹ Regionally, around USD 2.5 trillion of global need comes from African states, around USD 3.2 trillion from Asia-Pacific states and around USD 168 billion from Latin American and Caribbean states.

The Independent High-Level Expert Group on Climate Finance put forward the need for a mix of financing from private and public sources to reach USD 1 trillion per year by 2030 for emerging and developing countries¹⁰ based on financing needs to transform the energy system and pursue a just transition, cope with loss and damage, invest in adaptation and natural capital, and mitigate methane emissions.¹¹ UN Trade and Development (UNCTAD) takes a different approach, suggesting a contribution of around 1% of gross national income (GNI) for climate finance, adding to the 0.7% of GNI that developed countries are supposed to allocate towards official development assistance (ODA). This would raise total funding to approximately USD 1.55 trillion per year by 2030.¹²

Though the final figure these reports come to varies, in essence they tell us the same thing: at least USD 1 trillion per year will be needed to tackle the climate crisis, far above the USD 100 billion goal previously set.

While numbers this big may appear abstract, the funds they represent have real consequences on people’s lives. In the decade to 2022, heat-related deaths increased by 85% compared to the period from 1991 to 2000. By the end of the century, heat-related deaths will affect 683-1,537% more elderly people than currently.¹³ And these are but a small fraction of the many health and economic impacts of climate change, illustrating the imperative to do more, faster.

Tracking climate finance – and accounting disagreements – to date

Developed countries have responsibilities under international law due to their historical emissions and their wealth to contribute financially to developing countries for mitigation and adaptation actions.¹⁴ The amount of climate and development finance provided and mobilised by developed countries¹⁵ is regularly tracked by the Organisation of Economic Co-operation and Development (OECD). Its calculations show that the USD 100 billion goal was achieved two years late, in 2022, mainly due to increased public climate finance (Fig. 1).¹⁶

Fig. 1: OECD’s recording of climate finance from developed countries, 2013-2022 (USD billion)

Yet this conclusion has been challenged by other sources that contend that much of this financing is double counted with development aid budgets and includes loans, therefore concluding that the USD 100 billion climate finance goal has not been met. Research by Care International found that only 7% of climate finance from 2011 to 2020 was additional to official development assistance (ODA),¹⁷ while Oxfam calculated that climate finance was overstated by as much as USD 88 billion.¹⁸

Even when the OECD figures are taken at face value, they remain under 1% of the combined GNI of the contributing countries, reaching a maximum of 0.21% of their combined GNI in 2022, according to calculations by ZCA using World Bank GNI data and OECD climate spending data (see Table 1).

Table 1: Climate finance from current contributor base as a proportion of GNI, 2013-2022

ODI has calculated whether developed countries (defined here as Annex II countries) have provided their “fair share” of climate finance by looking at their GNI, cumulative territorial carbon dioxide emissions and population.¹⁹The think tank finds that in 2022 while some countries like Norway, France and Luxembourg are hitting above their weight, other countries like the US, Greece and Portugal are providing less climate finance than they should be. Overall, according to the analysis, 11 out of 23 countries do not provide their fair share towards helping developing countries mitigate and adapt to climate, with the US providing 32% of its fair share, ahead only of Greece (see Table 2).²⁰

Fig. 2: Developed countries progress towards meeting their fair share of climate financing in 2022 (%)

Another analysis by Bos, Gonzalez and Thwaites roughly followed this formula, with some variation to try to better account for population size and future development, but have nevertheless found that many developed countries are not providing enough climate finance.²¹

Assessments of the quality of finance also show a lack of ambition from contributors. It is estimated that nearly 95% of current climate finance is in the form of debt (61%) or equity (34%), and around 80% of loans are made at market rates, adding to the debt burden of countries already likely to be over-indebted.²² Among contributors, the instruments used to disburse financing varies, with Japan and France having been found to tend to give proportionally more loans in their financing mix.²³

As many developing countries are already highly indebted, this form of climate finance can serve to further weaken the macroeconomic stability of developing countries and divert spending from public services. Least-developed countries and small island developing states spent USD 48 billion repaying such loans to G20 countries between 2020 and 2022, and payment amounts have been increasing over time.²⁴

A shortage of financing directed towards adaptation threatens to exacerbate the issue for vulnerable countries that are unable to take measures to protect themselves from extreme weather events caused by climate change without financing and in the face of high debt servicing requirements. As continued fossil fuel use increases the likelihood of extreme weather events, there will be an increasing need for adaptation financing.²⁵ Adaptation received just 8% of global climate finance recorded by the Climate Policy Initiative in 2020, at USD 56 billion out of USD 665 billion, and against USD 589 billion given to mitigation initiatives.²⁶ Meanwhile, the UN Environment Programme estimates that there is a need for USD 215 billion per year for adaptation alone.²⁷

Search for solutions to fill the finance gap

In light of these funding gaps, some stakeholders have considered the logic of expanding the funder base to include emerging countries like China, Brazil and Saudi Arabia.²⁸ They assert that the high emissions or high GNI of these countries mean they have a role to play in closing the funding gap.

Researchers have used several methods to determine whether emerging countries should be contributing (more) to climate finance, as there is no agreed-upon threshold or metric to determine which countries should be contributors. Most suggested models aim to compare both income and contribution to climate change of potential contributors to existing contributors, using the median values of GNI and emissions for Annex II countries against those of other countries.

ODI researches propose that non-Annex II countries should become contributors under three thresholds related to per capita GNI or emissions in comparison to a minimum number of Annex II countries. Accordingly, ODI suggests that Brunei, Israel, Kuwait, Qatar, Singapore, South Korea and the United Arab Emirates are potentially good candidates to provide funds.²⁹

Another academic article published in 2024 looks at several metrics for historic emissions and capability to pay, as well as institutional affiliation (EU, OECD, G20) and countries’ payments to other multilateral funds. On the basis of these findings, the paper suggests that Czechia, Estonia, Monaco, Poland, Qatar, Saudi Arabia, Slovenia, South Korea, Turkey, and the UAE would be good candidates.³⁰

Meanwhile, the Center for Global Development creates multiple models to account for responsibility and capability to pay and finds that Mexico, Poland, Russia, Saudi Arabia, South Korea, Taiwan and the UAE should contribute.³¹

What could expanding the contributor base amount to?

To add to the analysis above, we have estimated the amount of financing from the combined group of countries frequently mentioned in the literature or in the press, to understand the financial impact if they contributed at the same rate as developed countries. To do so, we first calculated the average climate finance spending of developed countries³² as a percent of their GNI, using data from the OECD and the World Bank (see Table 1 above). This equalled 0.21% in 2022, the year with the most up-to-date data and when developed countries met their USD 100 billion target.

We then took this percentage and multiplied it by the GNI of each of the candidate countries. This analysis shows that countries that are not required to contribute to global climate finance have nevertheless raised on average almost 30% of developed countries’ spending, according to the latter’s average GNI contributions (see Table 2, column 5), with a total of USD 12.3 billion in 2022. This methodology likely underestimates the amount of finance given by emerging economies as it only considers multilateral development finance due to data availability limitations. Despite not having any requirements to contribute, these countries are already providing finance for climate action.

It also shows that if countries currently being considered as candidates for mandatory spending contributed at the same rate as developed countries actually provided in 2022, this could raise an additional USD 51.19 billion³³ or 5.12% of the USD 1 trillion minimum needed to meet developing countries’ needs.

Table 2: Estimated contribution of candidate countries’ spending

Like previous analyses, this evidence does not provide definitive answers to the political question of who should be paying more or less to meet global climate finance needs. But it does show that many countries are already stepping up without any binding rules and that mandating an increase of their participation to the current real level of developed countries will likely not make a meaningful dent in the current financing gap.

Therefore, the literature and the additional evidence provided here reinforce the need for more leadership from developed countries.³⁴ As the Centre for Global Development concludes, “the analysis confirms that developed countries should continue to take primary responsibility, with the USA in particular shouldering at least 40% of the burden in virtually every scenario.”³⁵ Other experts agree, noting “If we are to timely address the pressing global needs of emissions reductions; adaptation; and averting, minimising and reducing losses and damages, the contribution of developed countries should remain central to any type of agreement around the NCQG.”³⁶

Moving finance forward

The NCQG offers the opportunity for countries to come together and hammer out details that have until now been left aside. The three questions raised by ODI should be kept in mind during the upcoming NCQG negotiations: “First, how much should each individual developed country be contributing towards this target? Second, which states should be considered ‘developed countries’ for the purposes of climate finance provision and mobilisation? And third, what counts as climate finance and how can we compare countries’ different contributions and commitments?”.³⁷

While ODI and others have started to put together methodologies to define the level of contribution from developed countries based on historical emissions and ability to pay, the second question of clarifying the definition of the contributor base would require the UNFCCC’s annexes to be reworked and clarified. There have been two changes since the original categorisation in 1992: one in 2002 when Turkey was removed from Annex II, and the second when new EU Member States including Czechia and Malta asked to be put on the Annex I list.³⁸

Expanding the contributor base has been a point of discussion since at least 2009, with strong feelings on both sides and a certain level of “arbitrariness” in any outcome.³⁹ Research recommends several ways forward, including creating a net recipients category and a list of countries excluded from giving finance to ease discussions going forward.⁴⁰ The ODI recommends a similar approach, proposing the creation of a new category called “non-developed Parties” that would not be required to provide climate finance.⁴¹

Beyond ensuring that the high-level target meets developing countries’ needs, it is critical to answer the ODI’s questions above to create accountability for meeting the target and ensure that reported finance is actually going where it is most needed. This includes discussions around loss and damage, which have remained outside of the financing goal up until now, but is a particularly contentious subject for negotiators,⁴² and on adaptation, which has been neglected in climate financing to date.⁴³ Finally, the question of transparency and tracking of funds is critical to even be able to measure if what is pledged is delivered.⁴⁴

1
Climate Nexus, ‘Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC)’, 23 March 2017, https://climatenexus.org/climate-change-news/common-but-differentiated-responsibilities-and-respective-capabilities-cbdr-rc/.
2
United Nations, ‘United Nations Framework Convention on Climate Change’, FCC/INFORMAL/84/Rev.1(1992), page 21, https://unfccc.int/sites/default/files/convention_text_with_annexes_english_for_posting.pdf.
3
UNFCCC, ‘Copenhagen Accord’, FCCC/CP/2009/L.7 (2009), https://unfccc.int/resource/docs/2009/cop15/eng/l07.pdf.
4
OECD, ‘Climate Finance Provided and Mobilised by Developed Countries in 2013-2022’ (OECD, 29 May 2024), https://doi.org/10.1787/19150727-en.
5
UNFCCC, ‘Durban Platform for Enhanced Action (Decision 1/CP.17) Adoption of a Protocol, Another Legal Instrument, or an Agreed Outcome with Legal Force under the Convention Applicable to All Parties’, 15 December 2015, https://unfccc.int/resource/docs/2015/cop21/eng/l09r01.pdf.
6
Natalia Alayza, Gaia Larsen, and David Waskow, ‘What Could the New Climate Finance Goal Look Like? 7 Elements Under Negotiation’, 29 May 2024, https://www.wri.org/insights/ncqg-key-elements.
7
W. Pieter Pauw et al., ‘More Climate Finance from More Countries?’, Current Climate Change Reports 10, no. 4 (24 July 2024): 61–79, https://link.springer.com/article/10.1007/s40641-024-00197-5.
8
Matteo Civillini, ‘Swiss Propose Expanding Climate Finance Donors, Academics Urge New Thinking’, Climate Home News, 16 August 2024, https://www.climatechangenews.com/2024/08/16/as-swiss-propose-ways-to-expand-climate-finance-donors-academics-urge-new-thinking/.
9
UNFCCC Standing Committee on Finance, ‘Executive Summary by the Standing Committee on Finance of the First Report on the Determination of the Needs of Developing Country Parties Related to Implementing the Convention and the Paris Agreement’ (Bonn, Germany: UNFCCC, 2021), https://unfccc.int/sites/default/files/resource/54307_2%20-%20UNFCCC%20First%20NDR%20summary%20-%20V6.pdf.
10
Excluding China.
11
V Songwe, N Stern, and A Bhattacharya, ‘Finance for Climate Action: Scaling up Investment for Climate and Development’ (London: Grantham Research Institute on Climate Change and the Environment, London School of Economics, 2022), https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2022/11/IHLEG-Finance-for-Climate-Action-1.pdf.
12
United Nations, ‘Considerations for a New Collective Quantified Goal’ (Geneva: United Nations, 2023), https://unctad.org/system/files/official-document/gds2023d7_en.pdf.
13
Marina Romanello et al., ‘The 2023 Report of the Lancet Countdown on Health and Climate Change: The Imperative for a Health-Centred Response in a World Facing Irreversible Harms’, The Lancet 402, no. 10419 (16 December 2023): 2346–94, https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(23)01859-7/abstract.
14
However, there is little clarity about which countries are defined as developed under the UNFCCC, leading to difficulties in tracking progress. Indeed, while developed countries are noted as being required to provide climate finance (Article 9.1 of the Paris Agreement), there is no specific delineation of which countries should be considered developed. Because of this lack of clarity, there is a de facto practice of relying on the 1992 country lists, with Annex II being often referred to as the developed country list for finance purposes. Other countries are encouraged to contribute under Article 9.2 of the Paris Agreement but are not required to do so.S Colenbrander, L Pettinotti, and Y Cao, ‘A Fair Share of Climate Finance? An Appraisal of Past Performance, Future Pledges and Prospective Contributors’, ODI Working Paper (London: ODI, 2022), 17, https://media.odi.org/documents/A_fair_share_of_climate_finance.pdf .
15
In this case, defined by the OECD as Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Denmark, Estonia, European Union, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Monaco, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, United Kingdom and the United States.
16
As of the time of writing, the OECD had not released data breaking down specific country contributions, although other authors have put forward estimates. See for example: L Pettinotti, T Kamninga, and S Colenbrander, ‘A Fair Share of Climate Finance? The Collective Aspects of the New Collective Quantified Goal’, ODI Working Paper (London: ODI, 2024), https://media.odi.org/documents/ODI_2024_Fair_share_climate_finance_new.pdf.
17
Andrew Hattle, ‘Seeing Double’ (Care International, 2023), https://careclimatechange.org/wp-content/uploads/2023/09/Seeing-Double-2023_15.09.23_larger.pdf.
18
Oxfam, ‘Rich Countries Overstating “True Value” of Climate Finance by up to $88 Billion, Says Oxfam’ (Oxfam GB, 9 July 2024), https://www.oxfam.org.uk/media/press-releases/rich-countries-overstating-true-value-of-climate-finance-by-up-to-88-billion-says-oxfam/.
19
The calculation methods were established by Colenbrander, S, Y Cao, L Pettinotti, and A Quevedo. ‘A Fair Share of Climate Finance? Apportioning Responsibility for the $100 Billion Climate Finance Goal’. Working paper. London: ODI, 2021. https://media.odi.org/documents/ODI_WP_fairshare_final0709.pdf.The latest numbers referenced here come from L Pettinotti, T Kamninga, and S Colenbrander, ‘A Fair Share of Climate Finance? The Collective Aspects of the New Collective Quantified Goal.’
20
L Pettinotti, T Kamninga, and S Colenbrander, ‘A Fair Share of Climate Finance? The Collective Aspects of the New Collective Quantified Goal.’
21
Julie Bos, Lorena Gonzalez, and Joe Thwaites, ‘Are Countries Providing Enough to the $100 Billion Climate Finance Goal?’, 10 July 2021, https://www.wri.org/insights/developed-countries-contributions-climate-finance-goal.
22
Climate Policy Initiative, ‘Global Landscape of Climate Finance A Decade of Data: 2011-2020’ (Climate Policy Initiative, 2022), https://www.climatepolicyinitiative.org/wp-content/uploads/2022/10/Global-Landscape-of-Climate-Finance-A-Decade-of-Data.pdf . The OECD estimates a lower amount, with bilateral finance loans being 79% concessional loans, 41% of multilateral climate funds and 23% for multilateral development banks. The difference can be attributed to differences in definitions of concessionality.OECD. ‘Climate Finance Provided and Mobilised by Developed Countries in 2013-2022’. OECD, 29 May 2024. https://doi.org/10.1787/19150727-en.
23
Colenbrander, Pettinotti, and Cao, ‘A Fair Share of Climate Finance? An Appraisal of Past Performance, Future Pledges and Prospective Contributors’, 26–27.
24
IIED, ‘Climate-Vulnerable Indebted Countries Paying Billions to Rich Polluters’ (IIED, 2023), https://www.iied.org/climate-vulnerable-indebted-countries-paying-billions-rich-polluters.
25
Zero Carbon Analytics, ‘Unnatural Disasters: The Connection between Extreme Weather and Fossil Fuels’ (Zero Carbon Analytics, 2024), http://zaerocarbonlive.local/archives/energy/unnatural-disasters-the-connection-between-extreme-weather-and-fossil-fuels.
26
Climate Policy Initiative, ‘Global Landscape of Climate Finance A Decade of Data: 2011-2020’ (Climate Policy Initiative, 2022), https://www.climatepolicyinitiative.org/wp-content/uploads/2022/10/Global-Landscape-of-Climate-Finance-A-Decade-of-Data.pdf.
27
United Nations Environment Programme, ‘Adaptation Gap Report 2023: Underfinanced. Underprepared. Inadequate Investment and Planning on Climate Adaptation Leaves World Exposed’ (United Nations Environment Programme, November 2023), 35, https://wedocs.unep.org/handle/20.500.11822/43796;jsessionid=AC69CB2C709FC5BC0FB8124E18F1ED1.
28
Matteo Civillini, ‘Swiss Propose Expanding Climate Finance Donors, Academics Urge New Thinking’, Climate Home News, 16 August 2024, https://www.climatechangenews.com/2024/08/16/as-swiss-propose-ways-to-expand-climate-finance-donors-academics-urge-new-thinking/.
29
Colenbrander, Pettinotti, and Cao, ‘A Fair Share of Climate Finance? An Appraisal of Past Performance, Future Pledges and Prospective Contributors’.
30
Pauw, W. Pieter, Michael König-Sykorova, María José Valverde, and Luis H. Zamarioli. ‘More Climate Finance from More Countries?’ Current Climate Change Reports 10, no. 4 (24 July 2024): 61–79. https://doi.org/10.1007/s40641-024-00197-5.
31
Beynon, Jonathan. ‘Who Should Pay? Climate Finance Fair Shares’. CGD Policy Paper. Washington, DC: Center for Global Development, 2023. https://www.cgdev.org/sites/default/files/who-should-pay-climate-finance-fair-shares.pdf.
32
The same developed countries were included as those included in the OECD’s calculations, excluding Monaco for which GNI data is unavailable from the World Bank.
33
This is the sum of all the candidate countries, excluding Czechia, Estonia, Poland, and Slovenia as they are already included in the OECD’s calculations for total climate finance and thus any funding would not be considered additional.
34
S Colenbrander et al., ‘“The New Collective Quantified Goal and Its Sources of Funding: Operationalising a Collective Effort”’, Working Paper (London: ODI, 2023), https://media.odi.org/documents/ODI_The_new_collective_quantified_goal_and_sources_of_funding.pdf.
35
Beynon, ‘Who Should Pay? Climate Finance Fair Shares’, 13.
36
W. Pieter Pauw et al., ‘More Climate Finance from More Countries?’, Current Climate Change Reports 10, no. 4 (24 July 2024): 61–79, https://doi.org/10.1007/s40641-024-00197-5, 76.
37
Colenbrander, Pettinotti, and Cao, ‘A Fair Share of Climate Finance? An Appraisal of Past Performance, Future Pledges and Prospective Contributors’, 14.
38
W. Pieter Pauw et al., ‘More Climate Finance from More Countries?’
39
W. Pieter Pauw et al., 76.
40
W. Pieter Pauw et al.
41
Pettinotti, L, T Kamninga, and S Colenbrander. ‘A Fair Share of Climate Finance? The Collective Aspects of the New Collective Quantified Goal’. ODI Working Paper. London: ODI, 2024. https://media.odi.org/documents/ODI_2024_Fair_share_climate_finance_new.pdf.
42
Alayza, Larsen, and Waskow, ‘What Could the New Climate Finance Goal Look Like?’
43
Bos, Gonzalez, and Thwaites, ‘Are Countries Providing Enough to the $100 Billion Climate Finance Goal?’
44
Bos, Gonzalez, and Thwaites.

Reforming climate finance: Unlocking funds from multilateral development banks

October 21, 2024 by ZCA Team Leave a Comment

Key points:

Multilateral development bank (MDB) funding is one of the fastest-growing sources of climate finance, increasing by nearly 3.3 times between 2012 and 2023.
MDBs could unlock hundreds of billions of dollars more in financing if they implemented reforms such as taking on more risk, innovating and boosting transparency, according to a G20 report.
Increased MDB funding will likely play an important role in the New Collective Quantified Goal (NCQG) – which will determine the amount of finance developing countries receive for climate mitigation and adaptation.

MDBs could unlock hundreds of billions in climate finance

Multilateral development banks hold over USD 1.8 trillion in assets globally and play a critical role in climate finance by providing and mobilising funds for climate mitigation and adaptation. In a report published in April 2023, Zero Carbon Analytics highlighted how MDBs, unlike commercial banks, have unique financial strengths such as callable capital and preferred creditor status. However, their capital adequacy frameworks (CAFs), which help them assess whether they have enough capital to absorb potential losses, still don’t fully reflect these advantages. Risk aversion by MDBs, driven by a focus on maintaining AAA credit ratings, limits their willingness to expand lending, holding back billions in climate finance.

A G20 expert panel found that reforms by MDBs could unlock hundreds of billions of dollars of financing in the medium term, while posing negligible risk to their financial stability.¹ These reforms include taking on more risk, giving more credit to callable capital, innovating, improving credit rating agency assessments and boosting transparency. This funding could be a step towards the USD 8.6 trillion in funding required annually to implement climate action plans globally by 2030.

MDBs make moderate progress on reforms

The Center for Global Development (CGD) has monitored progress by seven MDBs on several reforms, including the G20 recommendations.² In April CGD released an update to the tracker which showed that the majority of MDBs have indicated their intention to pursue most of the reform agenda items. In its October update, CGD said it was “a mixed picture, with promising signs of progress in some areas, while other important reforms have not yet been initiated and relatively few reforms have been fully completed.” The think tank added that some MDBs, including the Asian Development Bank and the Inter-American Development Bank Group, had made more progress than others.

At present, the progress the seven MDBs have made in implementing CAF measures could unlock up to USD 357 billion in additional lending headroom in the coming decade.

However, there are several further actions they could take to unlock further lending. S&P predicted that MDBs could invest USD 500 billion–1 trillion more by revising their CAF policies, while posing no risk to their current credit ratings. While Fitch Ratings found that a dozen MDBs could collectively lend nearly USD 480 billion more before risking rating downgrades.

Table 1: Progress by seven MDBs on reforms

MDBs’ current contribution to climate finance

MDBs’ current contributions to climate finance falls short of the trillions of dollars required annually to address climate change. In 2022, USD 1.26 trillion was invested in climate finance globally- with MDBs providing 8%³ of this amount. MDBs’ contribution accounts for about 1% of the USD 8.6 trillion in climate finance needed annually by 2030. However, MDB’s contribution to climate finance is increasing each year. In 2023, MDBs provided about USD 125 billion for climate finance, up 26% from USD 99.45 billion in 2022. The majority of this funding goes to climate mitigation. In 2023, 67% of funding by MDBs went to climate mitigation, while 33% went to adaptation.

In 2023, 60% of climate finance by MDBs went to low-income and middle-income economies – totalling around USD 74.7 billion. About 63% of this finance was provided in the form of loans⁴ – in a context where 53% of low-income countries are in or at risk of debt distress.

Figure 1: MDB’s climate finance per region per type of income

Under-utilised finance tools by MDBs

In addition to the reforms in Table 1, MDBs could make greater use of several financial tools to scale up financing to developing countries. Equity finance currently makes up only about 1.8% of MDBs’ climate finance commitments in emerging markets and developing economies, according to the IMF. Equity finance currently accounts for 1.8% of MDBs’ commitments to climate finance in emerging markets and developing economies. However, equity investments by MDBs could draw in more private finance. Currently, every USD 1 invested by MDBs attracts USD 1.2 of private finance. By increasing equity investment, MDBs can signal to private investors that projects are viable and worth supporting. This can help reduce perceived risks and mobilise significantly more private capital.

Private sector actors often emphasise that guarantees – where MDBs commit to repaying a loan if the borrower is unable to – are useful for making investments viable as they reduce risk and lower debt costs. Guarantees also have the highest mobilisation ratios, attracting an average of USD 1.5 in private capital for every USD 1 invested by MDBs, outperforming loans and equities by six times. However, despite their effectiveness, guarantees currently only account for 4% of MDBs’ total climate finance commitments.

Similarly, project development typically accounts for 2-5% of a project’s total cost but can attract 20-50 times more early-stage investment. This leverage effect is critical in mitigating development risk, making early-stage funding more accessible and effective in advancing project viability. MDBs could leverage concessional financing to establish and expand project development facilities that offer technical assistance, advisory services, and customised models to foster earlier investment and help scale investment-ready projects in developing countries.

Role of MDBs in the NCQG

The NCQG on climate finance is currently being negotiated ahead of COP29 in Azerbaijan. The stakes are high — the outcome of the negotiations will determine the size, contributors to and the scope of the new goal to support developing countries’ climate action. Achieving climate action (a four-fold increase in adaptation, resilience and mitigation compared to 2019), in developing countries excluding China requires additional annual investments of USD 1.8 trillion by 2030, while meeting SDGs needs extra spending of USD 1.2 trillion per year. The G20 expert group recommends channelling USD 260 billion annually through MDBs to achieve the goal, 78% of which should come from non-concessional lending.

In light of this, the NCQG is likely to target an amount significantly larger than the USD 100 billion climate finance goal set in 2009, according to Boston University’s Global Development Policy Center. It would be difficult to meet the new goal “without major increases in MDB climate finance” the report said. MDB funding is the fastest-growing source of climate finance, increasing by nearly 3.3 times between 2013 and 2022. In addition, MDBs increased the amount of climate finance provided to low-and middle-income economies by over 26% in 2023 from 2022.

However, researchers have pointed out that while MDB climate finance is likely to play an important role in the new NCQG, it should complement, not replace, grant-based finance. The new NCQG should differentiate clearly between different types of public finance, so the growth in MDB finance does not displace other forms of climate finance.

1
For more information, see the Zero Carbon Analytics explainer: Climate change requires a new approach from international financial institutions.
2
CDG reviewed progress by the African Development Bank, the Asian Development Bank (ADB), the Asian Infrastructure Investment Bank, the European Bank for Reconstruction and Development, EIB Global, the Inter-American Development Bank Group (IDBG), and the World Bank Group (WBG).
3
Zero Carbon Analytics estimation based on USD 99.45 billion.
4
Zero Carbon Analytics analysis based on USD 47 billion (page 55) channelled through investment loans.

Principles for just and equitable oil and gas phase out

June 7, 2024 by ZCA Team Leave a Comment

This paper was produced in collaboration with Strategic Perspectives.It intends to contribute to the next steps of the global debate of how to transition away from fossil fuels as agreed at COP28 by proposing scenarios, recommendations and reflections on targets for phasing out the extraction of oil and gas.

Upcoming meetings of the G7 and G20 can discuss what a fossil fuel phase out in “a just, orderly and equitable manner” means, building momentum for countries to include fossil fuel phase out commitments in their updated climate targets, ahead of the climate summit in Brazil in 2025.

Key points:

Feasible 1.5°C scenarios require both oil and gas production to decline by 65% by 2050 compared to 2020 levels, but current projected production is set to be 260% and 210%, respectively, above what would be required to keep warming below this.
Orderly transition plans for the sector are long overdue, but are the natural next step after the COP28 consensus to transition away from fossil fuels in Dubai.
Countries and companies aiming to fully use their oil and gas resources chase diminishing returns and risk USD 1.4 trillion in stranded assets.
By delaying a managed decline of fossil fuel production, countries are increasing the costs of achieving a just and equitable transition.
Instead of competing for the perceived benefits of oil and gas extraction, countries can collaborate to agree on principles for a just and equitable fossil fuel phase out that reduces the economic and social impacts of any delays.
Multilateral forums such as the G7 and G20 are best placed to provide the vision and leadership on how to phase out oil and gas production. COP30 can become a significant milestone to show what a just and equitable transition looks like at a global level.
Most approaches to achieve a fossil fuel phase out share significant commonalities around the principles of justice and alignment with the Paris climate agreement and climate science.
With USD 2.4 trillion green transition investment required annually through 2030 in emerging and developing economies (other than China), climate finance is the key enabler of phase out planning.
All countries should halt the opening of new oil and gas fields while a coordinated global phase out of fossil fuels is negotiated.

The scientific urgency to act

The scientific evidence is unequivocal, the next years are crucial to keep the 1.5°C temperature goal enshrined in the Paris Agreement within reach. The UN’s Intergovernmental Panel on Climate Change (IPCC) has stated clearly that global greenhouse gas emissions need to peak before 2025 and be reduced by 43% by 2030.

Fossil fuels are the major contributors to global warming, a fact finally recognised by all countries at COP28, which agreed to “Transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, so as to achieve net zero by 2050 in keeping with the science”.¹

There is a clear urgency to set transition pathways to drastically reduce fossil fuels: Projected cumulative future CO₂ emissions from existing fossil fuel infrastructure would already exceed the remaining 1.5°C carbon budget, unless they are abated.²

Business as usual is thus not an option. To stay within a 1.5°C carbon budget, 40% of ‘developed’ reserves of coal, oil and gas would need to be left unextracted. Developed oil and gas fields alone account for more than four fifths of the 1.5°C budget.³

Oil and gas production should decline by 15% and 30%, respectively, by 2030 and 65% by 2050, compared to 2020 levels, according to analysis of feasible 1.5°C scenarios by the International Institute for Sustainable Development.⁴

Fig. 1: Oil and gas production from new and existing fields vs a 1.5°C aligned pathway

Existing fossil fuel extraction projects are already sufficient to meet demand in scenarios where warming is limited to 1.5°C.⁵ Any new oil and gas extraction projects would exceed this, putting the temperature goal of the Paris climate agreement at risk.

Unless meaningful policy measures and finance decisions are taken, governments could produce around 110% more fossil fuels in 2030 than would be consistent with limiting warming to 1.5°C.⁶ This makes it evident that current trajectories for oil and gas production are completely incompatible with the goals of the Paris Agreement. Instead, all countries can be encouraged to set out their plans to transition away from fossil fuels in their next round of updated Nationally Determined Contributions (NDCs), due in 2025.

Without action, oil and gas production is forecast to be 29% and 82% higher, respectively, than the median 1.5°C pathway in 2030. By 2050, the respective percentages will grow to 260% and 210%.

Fig. 2: Oil and gas production forecasts and scenarios

Defining just, orderly and equitable transition pathways is thus imperative. This discussion is happening at a time when extreme climate events are breaking records, making it evident to citizens and leaders that climate action is inevitable and urgent. These extreme climate events affect vulnerable communities the most and become a great obstacle in reducing inequalities.

The economics continue to be made to favour oil and gas production and consumption. Global fossil fuel subsidies amounted to USD 1.6 trillion in 2022, according to the OECD and IISD.⁷ It is high time to implement the agreement at COP28 to “Phasing out inefficient fossil fuel subsidies that do not address energy poverty or just transitions, as soon as possible”.⁸

A transition away from fossil fuels is still hindered by countries each trying to benefit from their resources the longest rather than working towards a collectively managed transition. But this approach is misguided as the economic benefits of fossil fuel production will be limited and diminishing as the energy transition accelerates. If all countries seek to maximise oil and gas production in the face of falling demand, the economic and social costs of the transition will increase.

Oil firms and investors also face significant risks from the energy transition, with the total value of stranded assets under a scenario where warming is limited to 2°C estimated at USD 1.4 trillion.⁹

Instead of competing for the perceived benefits of oil and gas extraction, countries can collaborate to agree on principles for a just and equitable fossil fuel phase out that reduces the economic and social impacts of any delays. Without coordination and effective policies, these climate impacts will end up being disproportionately borne by the poorest, most marginalised and least able to transition. Some initiatives such as the Beyond Oil and Gas Alliance and the Fossil Fuel Non-Proliferation Treaty have proposed approaches to this end.

Multilateral forums such as the G7 and G20 can discuss what a fossil fuel phase out in “a just, orderly and equitable manner” means, building momentum for countries to include fossil fuel phase out commitments in their updated climate targets, ahead of the climate summit in Brazil in 2025. Following the scientific evidence would require immediately halting the opening of new oil and gas fields as a first step.

Methodologies to define a just and equitable transition

A variety of approaches have been identified to achieve a fossil fuel phase out, many of which share significant commonalities around the principles of justice, fairness and alignment with the Paris climate agreement and climate science.¹⁰ The majority cite one of the foundational principles of the UNFCCC process – that of common but differentiated responsibilities and respective capabilities.

As an example, assessing countries by their ability to finance the transition – measured in GDP per capita and the extent to which government income comes from oil – shows that countries like the UK, US and Canada would face relatively low challenges to transition (according to these criteria) and have significant financial capacity for it. Whereas countries like Iraq, Congo and Equatorial Guinea face significant challenges and have little financial resources to mitigate the impacts of the transition (see Figure 3).

Fig. 3: Transition capacity of selected countries by GDP per capita and oil share of government revenue

A recent study, endorsed by over 200 organisations including Climate Action Network International and the International Trade Union Congress produced a comprehensive approach to assess which countries are least socially dependent on fossil fuel extraction. The study – the Civil Society Equity Review¹¹ – identifies three criteria:

the share of primary energy consumption that is met from domestically extracted fossil fuels,
the share of government revenues that comes from fossil fuel extraction, and
the share of the workforce employed in fossil fuel extraction.

Underpinning this analysis is the principle that the pace of the phase out should be driven by reducing the social costs and maximising the social benefits of transition, rather than purely by a country’s stage of development or historic responsibility.

The two tables below highlight options of what just, orderly and equitable transition pathways could look like. They can form the basis for a discussion in multilateral forums such as the G7 and G20 and UNFCCC on what criteria should be used to assess a just phase out of fossil fuel production.

Table 1: Equitable oil and gas phase out assessed on country’s non-oil and gas GDP per capita

Table 2: Equitable oil and gas phase out using the Civil Society Equity review framework (selected countries)

The role of financing in the transition

As well as defining what just and equitable approaches mean, agreement on the financial support to get there would be critical to a successful implementation. Multilateral conversations can therefore focus on developing principles and pathways that are just and equitable, matched by financial support for those countries that need it. This would reflect countries’ capacities and constraints, the necessity to provide finance, as well as predictability for workers and communities.

A range of proposals are on the table on climate finance, among them the necessity for Developed Countries (defined as Annex I countries under the UNFCCC) to provide support and the suggestion that countries with the greatest ability to pay (defined as those with per capita capacity above the global average) contribute. More recently, there have been calls for the fossil fuel industry to pay for climate finance, as proposed by the EU, and the idea of a fossil fuel levy by incoming COP29 presidency Azerbaijan.¹²

A broader reform of financial systems that includes the international financial institutions is also under way – and will be critical – but progress has been too slow given the resources needed. The economic and financial opportunities resulting from a transition to climate neutrality can only be unlocked in low-income countries with access to sufficient finance and if debt no longer stands in the way of sustainable development.

The scale of existing climate finance is estimated at USD 1.3 trillion annually, according to the Climate Policy Initiative.¹³ This is still less than the USD 1.5 trillion paid in direct fossil fuel subsidies among 82 of the largest economies in 2022 (OECD).¹⁴ It is also just over half of the USD 2.4 trillion green transition investment required annually through 2030 in emerging and developing countries (other than China), according to the UN’s high level expert group on climate finance.¹⁵

The G20 and G7 can play important roles in the process of creating financial mechanisms to allow low-income and vulnerable countries to decarbonise their energy systems and adapt to the impacts of an increasingly extreme climate. COP29 should result in a new collective quantified goal (NCQG) on climate finance that addresses mitigation, adaptation, and loss and damage.¹⁶

Timelines for planning the energy transition

Managing local needs and collective action requires a combined bottom-up and top-down approach to define a just, orderly and equitable transition away from fossil fuels. The run-up to COP30 is the time to make progress on setting out pathways to transition away from fossil fuels. The G7 and G20 summits in June and November 2024, respectively, offer key touchpoints to lay the foundations for global action on the transition away from fossil fuels. These summits offer the opportunity for major economies to signal their intent to phase out oil and gas production, and begin building international consensus around how to ensure that it is just and equitable.

Agreements at these summits could lay the groundwork for a bottom-up approach, where countries commit to end the expansion of oil and gas extraction, set fossil fuel phase out dates as well as demand reduction goals for 2035 in their next NDCs, to be submitted 9-12 months ahead of COP30.

The top-down approach can be guidance on what “just, orderly and equitable” means internationally, building on the progress made through countries’ individual commitments. It is vital that new, fossil-free economic models are established globally and alternative income sources found for fossil-dependent economies. This approach should also aim to address any shortcomings in bottom-up targets and ensure these are aligned with what is required to limit warming to 1.5°C and achieve a just transition.

The G7 and G20 have an opportunity to give an impetus to this debate, not least as the high-income countries among their members have a historic responsibility to lead on emissions reduction and provide financial support. Their leadership could pave the way for a broader debate and action in the UNFCCC context.

Leadership needed from the G7 and G20

Widespread support for immediate government action to address climate change exists in most countries, with 71% of people in G20 countries agreeing that action is necessary. Concerns about escalating weather extremes, care for future generations, and dissatisfaction with government inaction are significant elements of messages that drive support for climate action. Research indicates majority support for policies like ending fracking (61%) and phasing out fossil fuels (56%) across G20 countries.¹⁷

With sufficient global leadership, societal support can be built on the imperative of phasing out fossil fuels to avert current and future climate impacts to protect people and nature. Progressing the debate will be facilitated by global leadership on:

Affirming the scientific finding that any new oil and gas projects are incompatible with and threatening the 1.5°C warming goal.
Highlighting that both supply-side and demand-side policies need to contribute to a transition away from fossil fuel use, in line with science.
Recognising the IEA Net Zero Emissions scenario findings that a number of higher-cost projects would need to be retired before the end of their commercial life due to falling demand in the 2030s.¹⁸
Acknowledging that the UNFCCC must play a vital role in agreeing on terms for a just, orderly and equitable transition away from fossil fuels, in line with climate science, based on principles of common but differentiated responsibilities and respective capabilities; supporting just transitions for workforce; reducing extraction fastest where social costs of transition are least and ensuring respect for human rights and biodiversity.

Furthermore, in terms of practical steps, the G7 and G20 can play a crucial leadership role by committing to:

Ending the licensing of new coal, gas and oil projects,
Setting clear end dates for coal, gas and oil use per sector,
Committing to phasing out coal by 2030 (G7) or 2035 (developing countries) and setting out how much demand and supply will be reduced for coal, gas and oil by 2035 in their upcoming NDCs,
Supporting other countries on their just and orderly transition away from fossil fuels,
Phasing out fossil fuel subsidies as soon as possible, as agreed at COP28,
Showing leadership as the G7 on the overall finance reform to accelerate a just energy transition in low-income countries, especially through access to renewable energy,
Using the G20 to set out concrete steps on the financial reforms and financing mechanisms required to share the costs of the transition fairly, committing to scaling up finance as a matter of urgency with tangible outcomes, including through innovative sources of finance such as a tax on fossil fuel companies’ revenues.

1
UNFCCC “Decision CMA.5, Outcome of the First Global Stocktake.” UNFCCC, 2023.
2
IPPC, “Climate Change 2023: Synthesis Report: Summary for Policymakers.” IPCC, 2023.
3
Trout, K. et al. “Existing fossil fuel extraction would warm the world beyond 1.5°C.” Environmental Research Letters, 17, no. 6 (2022).
4
Bois von Kursk et al, “Navigating energy transitions: Mapping the road to 1.5°C.” IISD, 2022.
5
Green F.et al. “No new fossil fuel projects: The norm we need”, Science, May 2024.
6
SEI, Climate Analytics, E3G, IISD, and UNEP. “The Production Gap: Phasing down or phasing up? Top fossil fuel producers plan even more extraction despite climate promises.” UNEP, 2023.
7
OECD & IISD “Fossil Fuel Subsidy Tracker.” Accessed June 2024.
8
UNFCCC “Decision CMA.5, Outcome of the First Global Stocktake.” UNFCCC, 2023.
9
Semieniuk, G., Holden, P.B., Mercure, JF. et al. “Stranded fossil-fuel assets translate to major losses for investors in advanced economies.” Nat. Clim. Chang. 12, 532–538 (2022).
10
While broad agreement on the importance of an equitable phase out between countries, different methodologies have been proposed for assessing the responsibilities and capabilities of individual countries. Proposed criteria include each country’s development according to the Human Development Index, accrued benefit from past fossil fuels production, historical cumulative per-capita production, GDP per capita, and share of GDP per capita derived from non-oil and gas sectors. See Calverley, C. & Anderson K. “Phaseout Pathways for Fossil Fuel Production Within Paris-compliant Carbon Budgets”, University of Manchester, 2022; Civil Society Equity Review, “An Equitable Phase Out of Fossil Fuel Extraction”, Civil Society Equity Review, 2023; Muttitt, G. and Kartha, S. “Equity, climate justice and fossil fuel extraction: principles for a managed phase out”, Climate Policy, vol 20 (2020); Pye, S. et al “An equitable redistribution of unburnable carbon”, Nature Communications, volume 11 (2020).
11
Civil Society Equity Review, “An Equitable Phase Out of Fossil Fuel Extraction.” Civil Society Equity Review, 2023.
12
John Ainger, Jennifer A Dlouhy and Akshat Rathi, (2024, May 30) “COP29 Host Azerbaijan Working on Proposal to Levy Fossil Fuels.” Bloomberg News.
13
Buchner, B. et al, “Global Landscape of Climate Finance 2023.” Climate Policy Initiative, 2023.
14
OECD, “Cost of Support Measures for Fossil Fuels Almost Doubled in 2022 in Response to Soaring Energy Prices.” OECD, 2023.
15
Independent High-Level Expert Group on Climate Finance, “Finance for climate action: Scaling up investment for climate and development.” LSE, 2022.
16
UNFCCC, “From Billions to Trillions: Setting a New Goal on Climate Finance.” UNFCCC, 2024.
17
Potential Energy “Later is Too Late.” Potential Energy, 2023.
18
IEA “Net Zero Roadmap: A Global Pathway to Keep the 1.5°C Goal in Reach.” IEA, 2023.

Article 6 of the Paris Agreement at COP29: What is at stake?

May 17, 2024 by ZCA Team Leave a Comment

Key points:

Article 6 (A6) is a key component of the Paris Agreement. It aims to finalise the rules on how countries can use UN-governed carbon markets to reduce their emissions and reach their climate targets.
Negotiations have been drawn out over multiple years and the resulting lack of clarity means that A6 is already being misused. Competing objectives mean that instead of helping to slow climate change, A6 could in fact let countries get away with making inadequate emissions cuts.
Making progress on A6 has been highlighted as a priority by the COP29 Presidency. While the topline rules have been largely agreed upon, with some progress made during 2024, several key details are still under discussion.
Sticking points for COP29 negotiations are likely to include ensuring transparency in credit trading and review processes, implementing strong methodology requirements that prevent the inclusion of low-integrity carbon credits and developing robust guidelines to prevent human rights abuse and fraud.
There are reports that decisions on Article 6.4 will be pushed through early in Baku, but countries may still be able to request changes to the mandate of the Supervisory Body, which governs A6.4 implementation, to provide more specific guidelines in how the Body operates.
In light of the scrutiny over carbon markets, non-market approaches to financing nature may also attract more attention at COP29.
Decisions made are also likely to influence the voluntary carbon market, particularly those regarding double counting and carbon removals.

Update: Progress on A6 at COP29

Since this briefing was published, the operational standards on A6.4 were pushed through for adoption on the first day of COP29. Parties at COP29 will still need to agree on other issues before Article 6.4 is completely operationalised, including rules for the authorisation, transparency and reporting of carbon credits and deciding on how different carbon credit registries will function.

The decision to address the issue so early in the conference has been criticised, as it meant countries and observers did not have much time to consider and debate the issue. Isa Mulder of Carbon Market Watch said that “Kicking off COP29 with a backdoor deal on Article 6.4 sets a poor precedent for transparency and proper governance.”

Last updated 15 November 2024.

What is Article 6?

A6 is one of the least accessible and most complex articles in the whole Paris Accord. It allows countries to cooperate voluntarily with each other to achieve the emission reduction targets set out in their Nationally Determined Contributions (NDCs) via the transfer of carbon credits.

A6 sets out two market mechanisms and one non-market mechanism:

Article 6.2 (A6.2): Allows for the bilateral trading of carbon credits between countries to meet NDC targets. Credits traded under A6.2 are called Internationally Transferred Mitigation Outcomes (ITMOs) and can already be traded among countries. This is a decentralised approach, as countries decide on their own guidelines for trading credits.
Article 6.4 (A6.4): Creates a new global carbon market overseen by a UNFCCC entity, referred to as the Supervisory Body (SB).¹ This market could begin operating in 2025 and will replace the old Clean Development Mechanism (CDM) that enabled carbon trading under the Kyoto Protocol. These credits are called A6.4ERs and can be bought by countries, companies or individuals. Unlike ITMOs, A6.4ER credits must be authorised according to UNFCCC guidelines. As well as helping countries achieve their NDCs, A6.4 is designed to support sustainable development and mobilise the private sector to participate in climate change mitigation beyond emission reductions.

Article 6.8 (A6.8): Provides a formal framework for non-market approaches (NMA) for climate cooperation between countries where no trading of emissions is involved. These approaches can include technology transfer, capacity building, development aid, or taxes to discourage emissions. However, they are less well-defined than A6.2 and A6.4.

Fig. 1: Carbon trading mechanisms under Article 6

Source: Adapted from The Nature Conservancy (2023)

How do carbon markets work?

Carbon markets allow countries and governments to buy and sell emission reduction credits to help them reach climate targets. The underlying principle is fairly straightforward: country A can buy a credit, the money from which pays for country B to restore a rainforest or a natural carbon sink. Country B benefits from receiving funding for its efforts to restore ecosystems, while country A can count that credit towards offsetting its own hard-to-abate emissions and meeting its NDC targets. If the rules are properly defined and implemented, carbon markets can, in theory, unlock additional finance and cut the cost of reducing emissions.

There are two types of carbon markets:

Compliance markets are regulated markets. They are used by companies and governments to obtain and surrender emissions permits (allowances) or offsets in order to meet – or comply with – predetermined regulatory targets. They are regulated by regional, national or international carbon reduction regimes, and examples include the California and Chinese markets. Kyoto Protocol market-based mechanisms are also part of the compliance market.² A6.2 and A6.4 are both compliance markets.

Voluntary markets (VCM) are unregulated. They function outside compliance markets and enable companies and individuals to trade carbon credits on a voluntary basis. The credits generated by these markets are not allowed to fulfil compliance market demand, unless they are explicitly accepted into compliance regimes. Unregulated VMCs exist because of companies making voluntary net zero and carbon neutrality claims, often for PR purposes. A6 does not apply directly to voluntary markets but is very likely to influence them (see below).

Offsetting is not the same as reducing emissions

However, the concept of offsetting carbon emissions has faced criticism for being a distraction from emissions reductions. Offsetting is at best a zero-sum game and by design does not reduce emissions: done properly it merely compensates for emissions growth by a reduction elsewhere. If it lacks environmental integrity (i.e. does not result in real emission reductions where it promises to) it leads to an overall increase in emissions.

The quality of credits has come under fire, with critics pointing out that the majority of offsetting projects are not permanent and do not actually reduce or remove emissions. Nature-based offsets, for example, are vulnerable to climate impacts such as extreme weather and forest fires.

Credits need to be issued from projects that are ‘additional,’ meaning the reductions would not have occurred without the project. Credits issued from renewable energy projects are no longer seen as ‘additional’ emission reductions, as they are already profitable without relying on revenues from selling credits.

Reports have also shone a light on the overuse of credits as a way to avoid emissions reductions. Countries and corporates are putting unrealistic demands on offsets, making assumptions that massively overestimate the amount of land available for offset projects.

Why will Article 6 be so important at COP29?

While the framework of A6 – the ‘Article 6 Rulebook’ – was agreed at COP26, slow negotiations at COP27 and COP28 have left key details undefined and open to interpretation. The longer we wait for effective carbon markets – that sell only a small number of high-quality offsets for hard-to-abate emissions – to become a reality, the further we delay essential emissions reductions. The release of the IPCC Sixth Assessment Report in 2023 confirmed that we cannot afford to invest in ineffective solutions. Straightening out the details of A6 could ensure that ineffective offsetting is not allowed.

Agreeing on the practical details remains one of the main objectives of COP29, with countries and the private sector already gearing up for A6 implementation. The current context for the conference means there are many reasons eyes will be on A6.

The integrity of carbon markets has come under fire

A series of investigations have raised major red flags over the integrity of the voluntary carbon market. An analysis released in 2023 found that 90% of Verra’s rainforest carbon credits do not represent real emission reductions. Additionally, a systematic review of 90% of all carbon offsets in the VCM, estimated that “only 12% of the total volume of existing credits constitute real emissions reductions.” As a result, demand and prices have fallen, particularly for nature-based offsets, and the value of the VCM has shrunk by 61% in the past year alone after peaking in 2022 at over USD 2 billion.

Corporations have distanced themselves from offsets due to increased scrutiny over credit quality and accusations of greenwashing, as well as crackdowns from regulators on claims of “carbon neutrality”. Developing stringent rules for the global carbon market under A6.4 could set a precedent for high standards and restore faith in carbon trading if paired with regulation to ensure that credits are only used to offset hard-to-abate emissions.

Questions are being raised as to whether, in practice, the use of offsetting aligns with 1.5°C. Setting higher standards and proper review processes that exclude previously issued credits with poor integrity could ensure that a smaller number of high-quality, expensive offsets become the norm, rather than flooding the market with poor-quality credits that undermine 1.5°C. However, even if done perfectly, carbon offsetting is at best a zero-sum game and should only be used to compensate for emissions in hard-to-abate sectors.

Lack of agreement on details means A6 is being misused

A6.2 has been operationalised and countries can already technically start trading A6.2 credits, despite there still being many details that need ironing out – including crucial review and transparency processes. This has resulted in the announcement of large-scale deals that potentially lack integrity and do not disclose their methodologies. Carbon markets are being pushed as a climate solution and are growing without any regulations or laws, particularly in Africa.

For example, UAE company Blue Carbon has signed MoUs with eleven countries to gain rights to massive portions of land and develop carbon credits, with only a small proportion of the benefits going back to the government and local communities. The UAE also announced in 2023 that it would buy USD 450 million worth of carbon credits from the African Carbon Markets Initiative, which aims to achieve a 19-fold increase in the size of the African carbon market by 2030.

We are at a crunch point for land

Demand for land is increasing as high food prices put pressure on increasing production, leading to indigenous land rights abuses, pressure on farmers and unstable ecosystems. NDCs and corporate targets are drastically over-relying on land for mitigation. The Land Gap Report states that to meet the nature-based mitigation pledges in NDCs alone, a land mass almost four times the size of India is needed – and that is before corporate targets are taken into consideration. Improving A6 standards and transparency could help to reduce the burden on land.

Financing for nature is becoming more urgent

As scrutiny of forest credits grows and emissions avoidance credits are no longer eligible for use under Article 6, negotiations at COP29 may turn towards alternative ways to pay for the protection and restoration of nature – especially in the lead-up to COP30 in Brazil, which is expected to focus on forestry – and alongside ongoing negotiations on financing for nature in the Convention on Biological Diversity. This is essential for adaptation and mitigation – the IPCC estimates that protecting natural forests currently contributes between five to seven billion tonnes of CO₂ per year to climate mitigation efforts.

Initiatives such as the LEAF Coalition aim to bring the public and private sectors together to mobilise funding for tropical forest protection, and similar announcements may follow. However, like other carbon offsetting schemes, these initiatives have raised concerns, including over the threat to indigenous rights and enabling greenwashing. Negotiations on A6.8 – outlining non-market mechanisms for making contributions – can help to answer questions around what the Paris Agreement means for nature, and who pays.

What is REDD+ and how does it relate to Article 6?

REDD+ is a UN financing mechanism, outlined in Article 5 of the Paris Agreement. ‘REDD’ stands for Reducing Emissions from Deforestation and Forest Degradation, while the ‘+’ encompasses additional activities of conservation, sustainable management of forests and enhancement of forest carbon stocks. Under the REDD+ framework, developing countries can receive results-based payments for emissions reductions when they reduce deforestation.

However, emissions reductions from REDD+ projects should not be treated as carbon credits or be used for offsetting purposes. Reductions are verified under the UNFCCC’s REDD+ Measuring, Reporting and Verification process and are known as REDD+ Result Units or RRUs. To verify RRUs, the UNFCCC requires national-scale accounting and reporting to address leakage and permanence. RRUs are also subject to safeguards.

Ultimately, UN REDD+ projects are only designed to enable the transfer of money to countries engaging in forest-related activities, so the REDD+ framework misses some essential criteria to qualify as a carbon standard. For example, there is no fixed methodology, with countries given freedom in how they measure results.

REDD in the VCM

RRUs under the REDD+ programme have never been implemented in the UN carbon trading system. However, the accounting methodologies of the VCM standard Verra enable credits from REDD projects to be traded in the VCM. In the VCM, REDD is used to describe the category of projects related to avoided deforestation.

Verra is the leading provider of REDD credits and had certified over 97 REDD projects, generating 445 million credits as of 2023. Verra provides carbon credit project developers with a large amount of flexibility when estimating emissions reductions, enabling them to choose among several different methodologies to calculate the amount of credits their projects would create. As a result, emissions reductions are often overstated, among other issues, and REDD credits have drawn increasing criticism in recent years. Other major carbon registries, such as the Gold Standard, do not allow the inclusion of REDD activities.

Eligibility of REDD+ credits under Article 6

Some REDD+ activities can be considered for inclusion under A6.4 if they meet the relevant criteria and involve emission reduction and removal – as opposed to emissions avoidance, which are not eligible for use under A6.2 or A6.4. For use under A6.4, the UN’s A6.4 Supervisory Body would have to approve REDD+ related methodologies. However, to be traded as ITMOs under A6.2, countries only need to decide that REDD+ activities meet the criteria under A6.2 – which can be decided nationally.

Some submissions from countries and organisations have already called for REDD+ activities to be included in A6. For example, the Coalition for Rainforest Nations (CfRN), a non-profit and single-issue negotiating block of 50 countries, led by Papua New Guinea and Costa Rica, helped establish the concept of REDD+ in 2005 and is a major proponent of its use. CfRN claims that there are “no legal reasons” that RRUs cannot be used like other carbon credits and traded in global carbon markets.

The CfRN has promoted the idea of REDD+ “sovereign” credits, where countries are able to sell their UN-verified RRUs from REDD+ projects. The CfRN has already set up a platform where host countries can sell UN-verified RRUs to businesses and individuals on the VCM, called REDD.plus. The platform is completely separate from UN infrastructure.

In 2022, Gabon said it planned to issue 90 million RRUs, citing its right to do so under Article 5 of the Paris Agreement. However, the country failed to find buyers for its credits. Additionally, Xpansiv, the world’s biggest VCM platform, reversed plans to host trading of RRUs in 2023 due to technical reasons and lack of demand.

In September 2023, CfRN launched a for-profit spin-off, called ITMO Ltd., which sells post-2020 RRUs. It has renamed these RRUs as ITMOs, therefore classing them as equivalent to credits traded under A6.2. CfRN has signed MoUs with countries including the Democratic Republic of the Congo, Honduras and Belize to sell their credits through this platform. In August 2024, it supported Suriname in the development of 1.5 million ITMOs, which were back-issued from 2021 through improvements in addressing deforestation and forest degradation. ITMO Ltd. claimed, “These are the world’s first carbon credits from the new Paris Agreement Carbon Markets where countries are allowed to issue and trade their Sovereign Carbon with other countries and the private sector.”

There is not much that can be done to prevent the creation of ITMOs from REDD+ activities, as this is up to countries under A6.2. However, it is possible that there will be no buyers for these low-quality credits, preventing this approach from being used widely.

Negotiations have progressed slowly since COP28

While the adoption of the Article 6 Rulebook lays out the fundamental rules for how A6.2 and A6.4 are to operate, negotiations over the past few years have been slow, leaving a great deal of work to be done – and the devil lies in the detail. At COP28, lack of consensus on many agenda points meant countries failed to adopt decisions on A6.2 and A6.4. The COP29 President has highlighted that it will be a priority for technical issues around Article 6 to be finally resolved at COP29.

Parties met at negotiations in Bonn in June 2024 to discuss “crunch issues” for 6.2, “including authorizations, the agreed electronic format, sequencing of reviews and addressing inconsistencies, and registries.” Generally, there is a divide between countries that want to see more regulation over carbon trading and those that want trading to occur with little oversight.

Few decisions were made in Bonn, with many core issues to be discussed again in Baku. However, negotiators did approve an appeals and grievance procedure under A6.4. Another positive development is the decision in Bonn that emissions avoidance will not be allowed under either A6.2 or A6.4 and that this will only be reopened for discussion in 2028 – a win for environmental integrity. It is unlikely that they will be included again at this later date.

The Supervisory Body (SB) for A6.4 also held meetings throughout 2024. As negotiators were not able to reach an agreement on the recommendations put forward by the SB on A6.4 during COP27 and COP28, the SB has taken a different approach for COP29: instead of releasing recommendations on methodology requirements and on activities involving removals for approval by during COP, the SB has converted these into internal SB standards which “procedurally do not require CMA approval”, according to Olga Gassan-zade, member of the A6.4 SB. This approach seeks to avoid the standards being open for line-by-line edits for countries’ approval at COP29. However, countries must still endorse this approach at COP29 and provide guidance if needed.

During pre-COP meetings, the SB agreed upon mandatory environmental and human rights safeguards, which will be enforced through a “sustainable development tool.” The ‘SD Tool’ provides a structured approach for users to conduct a risk assessment, identify and assess potential positive and negative impacts on sustainable development goals, and monitor and report on indicators.

As in previous years, it is essential that while parties are keen to get things up and running, rushing the negotiation process may jeopardise transparency and proper safeguards for environmental integrity and human rights.

What are the key sticking points for COP29?

Article 6.2 (bilateral trading between countries)

While ITMOs are already being traded, there are still some key elements that need to be agreed upon to ensure the functioning and integrity of trading. The bottom-up approach and lack of transparency requirements under A6.2 means there is a risk it may be exploited. Negotiations in Bonn, as well as those in past years, failed to reach an agreement on many key issues, which will be discussed again at COP29.

Ensuring transparency

So far under A6.2, countries have been given a broad scope to decide whether key details of carbon trading should remain confidential, including the type and quantity of offsets traded. There are no limits on what information can be treated as confidential – while countries “should” explain why information is confidential, there are no requirements to do so. This is particularly concerning as, unlike A6.4 where credits are subject to UNFCCC authorisation, under A6.2 countries themselves decide if credits meet their standards. Countries do not have to provide any information before they announce the issuance and use of ITMOs.

Discussions during Bonn on what information should be disclosed, and if any of this should be compulsory, failed to reach a consensus and will continue during COP29. Activists and civil society have previously raised concerns that a lack of transparency will make it hard to ensure deals struck between countries are meeting integrity standards. Carbon Market Watch suggests that in addition to the authorisation of ITMOs (which can be done at any stage of the process, including after they have been issued and even sold for use), cooperative approaches should also be authorised, requiring upfront disclosure of information.

Strengthening the review process

A review team, made up of technical experts assigned by nations participating in A6.2, is mandated to check deals struck under A6.2 for inconsistencies and ensure all rules are being met. The scope and remit of this team has been weakened considerably during previous negotiations. There are also questions about how confidential information will be treated in this review process. Although the review team is able to carry out checks on ‘inconsistencies’ that are deemed confidential, they may not be able to make their findings public or impose any sort of consequences.

At discussions in Bonn, the development of a code of conduct for how to treat and review information identified as confidential was requested for negotiation at COP29. Recommendations on the review process and associated confidentiality will be negotiated at COP29 and have the potential to give more weight and authority to the review process. This is particularly important, as there are no safeguards to prevent human rights abuse under A6.2 – which is a major concern given the human rights abuse and land abuse cases in other carbon market schemes, particularly the CDM.

Clarifying the authorisation process

The authorisation process for ITMOs, including timing and the possibility of revoking credits, was debated during talks at Bonn. Some countries want flexibility to take back their authorisation at a future date, if, for example, they are unable to meet their NDC targets, which could threaten the integrity of trading under A6.2. The authorisation process could also enable revocation of ITMOs under “extreme circumstances”, such as fraud or human rights abuse. Recommendations on country authorisation requirements will be discussed at COP29.

Deciding on registries

To trade ITMOs, countries either need to set up their own national registries to track the types of credits being sold by who and from where, which can involve a lot of time and capacity, or use a third-party registry or use the A6.2 international registry. The A6.2 international registry is still under negotiation and not yet operational which has stalled progress on A6.2. Some countries are in favour of linking the A6.2 international registry with the A6.4 registry, while others oppose it. Decisions regarding a registry are not likely to have huge implications for the environmental integrity of A6.2, but the type of registry decided upon could help ensure countries have equal access to A6.2 regardless of national capacity and pre-existing carbon trading infrastructure.

Who has already signed deals under Article 6.2?

There are already 91 cooperative agreements at various stages of implementation under A6.2, with Japan, Singapore and Switzerland having signed the most of all countries. However, most of these only represent an intention to trade in the future and are not legally binding – only 22% are at the signed bilateral phase.

Only deals for five projects have issued authorisation statements, Switzerland’s agreements with Ghana, Thailand and Vanuatu, and only one transfer has occurred under A6.2 – from Thailand to Switzerland for a “Bangkok E-Bus Programme” at the start of 2024. However, it is typically a lengthy multi-year process for countries to authorise A6.2 agreements.

Under A6.2, governments can agree for companies to trade ITMOs within the overarching frameworks established by those governments, enabling private sector participation in ITMO transactions.

The involvement of some companies has raised concerns. For example, the UAE-based private company Blue Carbon has come under fire for bilateral deals announced with eleven countries, most in Africa. One deal gives customary land rights of around 10% of the land area of Liberia to Blue Carbon, which claims to be generating credits by adhering to REDD+ standards. However, key gaps arise: for example, REDD+ credits must be ‘additional’ – meaning the emissions reductions would not have occurred in the absence of the project – which is not true in the case of Liberia, as the purchased land already includes nature reserves.

Article 6.4 (project-based emission trading)

The A6.4 Supervisory Body (SB) has been set up to establish the rules for a new global carbon market. As trading under A6.4 will be overseen by the UN, key rules need to be agreed upon before the global market for carbon trading can be set up.

Many aspects of A6.4 have already been decided by the SB, and not all outstanding items are set to be discussed at COP29. However, there is potential for countries to request the SB to set future timelines to review guidance that is not up for discussion during the conference.

Aspects of A6.4 to be discussed at COP29

Approving standards on methodologies and removals

The SB has developed standards on methodology requirements and on activities involving removals. However, as the SB has its own governing power, it can make decisions without requiring approval during COP. During COP29, it will only need to seek approval on the two standards it has developed on methodologies and removals. It has only asked the decision-making body at COP to endorse this approach and provide additional guidance.

Although there are some shortcomings in the texts, it is likely that these standards will be approved. Even if the standards are adopted, countries are able to request changes to the mandate of the SB, providing them with more specific guidelines on the guidance they are able to provide. For example, they may request that scientists will need to be involved in the development of the methodological requirements.

Development of registries

Transactions under A6.4 will be recorded in a registry, the features of which are still to be discussed at COP29. Developing an effective registry can help improve the integrity and transparency of A6.4. Carbon Market Watch recommends that the registry provides publicly available and up-to-date information on each project and a record of all transactions and holders of A6.4ERs, among other information. Some countries have raised the need for a registry that connects both A6.2 and A6.4 transactions, as well as registries outside the UN system, however, views on this were split in Bonn.

Other outstanding issues on A6.4

Transfer of Clean Development Mechanism (CDM) credits

The SB has developed a standard on methodology requirements, but, until new A6.4 methodologies are approved, the first 6.4 activities will likely be from transitioning CDM projects, which are likely of lower quality compared to current methods, threatening the integrity of A6.2 transfers. This will likely include large amounts of credits from reforestation and renewable energy activities from countries like Brazil and India, which issued many CDM credits. So far, the transition has been approved for nine activities which include hydropower, renewable energy and clean cookstove projects – all likely to have low additionality.

Developing clear guidelines for authorisation

Under A6.4, emission reduction credits authorised by host countries to be used towards NDCs, or other international mitigation purposes, must undergo a corresponding adjustment (CA) to ensure they are not double-counted. This means that if an emission reduction credit is authorised for sale to another country, it must be taken off the host country’s balance sheets and only accounted for by the purchaser. However, it remains unclear when exactly a 6.4ER credit is required to undergo a CA. At COP27 it was suggested that if a country does not authorise the use of credits for trading, these could be used as a “mitigation contribution 6.4ER”, where they do not require a CA as they will only be claimed for use by the host country. Lack of clarity means contribution credits may be double counted and could create what some observers have termed a ‘subprime market’ in carbon credits, which could overestimate progress towards 1.5°C.³ The issue of double counting may also be exacerbated if changes can be made after authorisation.

Human rights considerations

The Sustainable Development Tool is designed to mandate environmental and human rights safeguards and the appeals and grievance procedure are important steps in the right direction, but also contain room for improvement. Given the corruption and fraud within carbon market schemes, there are concerns that the measures as-are will not go far enough to prevent this in future. According to the Institute for Agriculture and Trade Policy, the Sustainable Development Tool still lacks “criteria that Parties could use to combat carbon market related corruption”. Both the Sustainable Development Tool and the appeals and grievance procedure have been agreed upon, however, it is possible that countries can ask for this to be reviewed and strengthened in future.

Will countries favour A6.2 over A6.4?

One other distinctive feature of A6.4 is a requirement that credits issued will have 2% of credits cancelled for Overall Mitigation of Global Emissions (OMGE) and 5% of credits forwarded towards a global adaptation fund to help Global South countries finance efforts to adapt to climate change. This means that conducting transactions under A6.2 is comparatively less costly than under A6.4, and might result in A6.2 becoming the favoured mechanism – particularly as the infrastructure to start trading already exists and it is still unclear when exactly trading under A6.4 can commence.

Trading under A6.2 still requires countries to develop their own national registries and spend time and effort signing agreements with other countries or organisations. However, transactions under A6.2 may be conducted with lower integrity, as countries can decide their own guidelines for issuing credits, whereas UN guidelines have to be used to trade credits under A6.4.

Article 6.8 (Non-market Approaches)

A6.8 remains the least well-defined and discussed approach under A6. As the ongoing scrutiny of VCM reduces confidence in market-based mechanisms and developed countries fail to deliver their fair share of climate finance to developing countries, some countries and civil society groups are likely to shift attention towards A6.8 as an alternative financing mechanism for climate action.

For example, Souparna Lahiri from the Global Forest Coalition said in June 2023 that A6.8 is an “opportunity for the global south to find sources of climate finance to strengthen resilience and take real climate action, instead of surrendering land, resources and rights to the global north.” Peter Riggs from the Climate Land Ambition & Rights Alliance highlighted that A6.8 could be the better mechanism as it is “not limited to a carbon metric” and can better support co-benefits such as the protection of biodiversity and Indigenous rights. Additionally, leaders of eight Amazon basin countries signed the so-called Belém Declaration in 2023, which highlights A6.8 as an opportunity for establishing funds for protecting the Amazon.

A key issue is that the term non-market approaches (NMA) is not well defined. At COP26, the Glasgow Committee was established to continue work on A6.4 and has since put together a technical report including examples of NMAs. Work is continuing on the development of a “web-based platform”, which could potentially match countries in need of climate financing with those providing funds. However, discussions in Bonn in June 2024 failed to highlight many concrete initiatives under A6.8.

To be successful in presenting a practical alternative to market mechanisms, there will need to be a larger focus from parties on operationalising A6.8 at COP29.

How will negotiations impact the voluntary carbon market?

While A6 does not directly address the interaction between voluntary and compliance carbon markets, decisions made under A6.4 are likely to indirectly influence the VCM, particularly in relation to double-counting. A key concern is that ambiguity in the A6.4 text opens up the possibility of issuing credits that are not authorised by countries. These ‘non-authorised’ credits could be traded internationally for use in the VCM without requiring a Corresponding Adjustment – meaning they may be double counted and result in greenwashing if used by companies to make offsetting claims.

Increasing scrutiny over offsetting claims has pushed the VCM to consider new rules. The Voluntary Carbon Market Integrity Initiative developed a Claims Code of Practice in 2023 which addresses double counting. The Integrity Council for the VCM (ICVCM, formed by Mark Carney’s Taskforce for Scaling up the VCM) has also released a set of Core Carbon Principles to measure the quality of carbon credits. However, this alone is unlikely to resolve the deep-rooted integrity issues in the VCM.

VCM standard setters have different positions on the use of authorised vs non-authorised credits. Verra and the ICVCM, for example, will continue to sell non-authorised credits – stating in 2023 that a CA should not be obligatory in the VCM – whereas Gold Standard does not sell them. Regardless, both Verra and Gold Standard have begun developing labels for credits that have been authorised by host countries under A6 and issuing guidance for projects seeking compliance under A6.

Although VCMs don’t have to abide by A6 rules, it is unlikely that credible, standard-setting bodies will want to appear as having weaker standards than the UN under A6. Just as many VCM registries used methodologies and standards from the CDM, it is expected that A6 guidelines will heavily shape the future guidelines of the VCM. For example, the ICVCM is awaiting decisions from the A6.4 SB.

Decisions around authorised and non-authorised credit sales on VCMs, as well as decisions around avoidance credits (which make up roughly 75% of all certified credits and the definition of a ‘high integrity’ removal, could drastically limit the scale of VCM growth. Growth in compliance markets through more widespread implementation of A6.2 and A6.4 could reduce the significance of VCMs. While some countries, like Singapore, are investing in growing the VCM, others, like Australia and Japan, are planning to trade domestic carbon credits under A6, instead of using the VCM. Many countries have put carbon trading plans on hold until the rules for carbon trading under A6 are finalised.

Actors in these markets should also note that all countries who have ratified the Paris Agreement have agreed that simple offsetting is no longer acceptable and that credits must deliver climate adaptation finance.

This briefing was originally published in November 2023 and was updated in November 2024.

1
The Supervisory Body consists of 12 member parties to the Paris Agreement and will have met 14 times by the opening of COP29.
2
The Clean Development Mechanism (CDM), Joint Implementation (JI) and the EU Trading System (ETS).
3
It was also decided at COP27 that credits (known as Certified Emissions Reductions) issued under the previous carbon trading scheme (the Clean Development Mechanism) established under the Kyoto Protocol registered after 2013 can be transferred to the A6.4 for use against a first NDC without a corresponding adjustment by the host country.

Report: Middle East embraces solar energy revolution

December 4, 2023 by ZCA Team Leave a Comment

The Middle East experienced the second fastest renewable energy capacity growth in the world in 2022.

Countries in the middle east saw a 57% increase in solar and wind capacity from May 2022 to May 2023. Investments in solar energy alone are set to triple between 2022-2027 compared to the previous five years, presenting an opportunity for the region to diversify away from fossil fuels.

Download the report

Iran, Jordan and the UAE positioned themselves as frontrunners in the race to diversify their energy mix, followed by Oman, Qatar and Lebanon. Gulf sovereign wealth funds, which collectively oversee USD 3.7 trillion in assets, have also recently turned their focus to renewables.

Solar is the dominant renewable energy technology, representing 92.7% of total installed renewable capacity in 2022, and the region has some of the lowest solar photovoltaic costs globally. In the UAE, the host country of COP28, solar energy is almost 50% cheaper than the global average. According to the International Energy Agency’s Stated Policy Scenario, solar power generation in the Middle East is projected to increase ninefold by 2030, reaching a peak share of 10%, in comparison to the current 1%.

This report is the fifth in a series of reports looking at evidence of the pace of growth in the clean energy transition. The report builds on several pieces of research on exponential systems change released by RMI, Systems Change Lab and others this year, which shows that change is happening faster than we think.

Quotes

“The COP28 President Sultan Al Jaber has urged governments to agree to triple renewable energy capacity and double energy efficiency by 2030. This report reinforces evidence of the potential in renewable capacity across the Middle East. These figures not only highlight the region’s progress but also its readiness for a transformative shift in line with Dr Sultan’s vision. To fully realise this vision, our ambition should extend beyond expansion in renewables. We must also commit at COP28 to a just phase-out of all fossil fuels. COP28 represents a vital platform to champion this holistic approach, setting a precedent for a balanced and transformative global energy policy.”
Shady Khalil, Campaigns Lead, Greenpeace MENA

“Countries in the Middle East are aware that they need to do more on energy transition. Each one of them has its own pace, but the trajectory is clear for the region: energy transition is inevitable, especially on the renewables front. Some countries in the region don’t have the capacity to access the financing needed for projects, and they would need support on building their own capacity and showing institutional discipline. Other countries need to make painful decisions to allow for renewable projects to be more competitive. The countries with both financial and institutional capacity should accelerate the development of renewable projects and act as role models for others in the region and beyond.”

Laurie Haytan, MENA Senior Officer at the Natural Resource Governance Institute

Towards a science-based definition of ‘unabated’ fossil fuels

November 23, 2023 by ZCA Team Leave a Comment

Key points:

Unabated fossil fuels refers to the use of coal, oil and gas without substantial efforts to reduce the emissions produced throughout their life cycle.
However, there is no rigorous definition of the term that is widely agreed on.
Despite this, the term ‘unabated’ in relation to fossil fuels has become central to international negotiations at the G7, G20 and UN climate summits, and is set to be a key point of debate at COP28.
Without a rigorous definition, the use of inadequate technologies and weak policies on abatement could fail to curb fossil fuel emissions, undermining global efforts to limit temperature rises.
A science-based definition of abatement should include near-total capture of emissions, permanent storage of captured carbon dioxide, the near-total elimination of upstream and transport emissions, and rigorous monitoring and reporting processes for fossil fuel companies and projects.
To limit warming to 1.5°C, the use of fossil fuels that do not meet these stringent requirements must be rapidly and substantially reduced to a minimum by 2050.

Abated vs unabated fossil fuels

Abated fossil fuels refer to the use of coal, oil and gas where the emissions from their extraction are minimised, and emissions from their use are almost completely prevented from entering the atmosphere through technologies like carbon capture and storage. Unabated fossil fuels are the use of coal, oil and natural gas where this does not take place – which currently account for 99.9% of fossil fuel emissions.¹

At this year’s COP28 summit, the term ‘unabated’ is set to be key to negotiations on phasing out fossil fuels. The concept was first used in major international agreements on climate and energy two and half years ago, and since then it has been mentioned repeatedly in G7, G20 and UN Framework Convention on Climate Change agreements and communiques. Despite this, the term has not been officially defined, and countries have signed agreements that refer to unabated fossil fuels without agreeing on its meaning.

The absence of a clear definition presents a huge threat to efforts towards mitigating climate change, and risks a situation where governments and companies pursue policies that are far removed from what is needed to achieve the Paris Agreement goal of limiting warming to 1.5°C.

What is carbon capture and storage?

Carbon capture and storage (CCS) technology separates carbon dioxide from other gases, and then transports and stores it. CCS is mostly used to refer to the removal of carbon dioxide from large single-source emitters, such as power stations or industrial facilities.

‘Unabated’ fossil fuels in international diplomacy

2021

The term ‘unabated’ was first used in major climate and energy negotiations in the concluding statement of the G7 climate and energy ministers meeting in the UK in May 2021, when governments committed to end direct support for unabated thermal coal power. The same promise was made by the G20 in October that year. At COP26, 39 countries went further and committed to end direct international support for all unabated fossil fuel energy projects. The Glasgow Climate Pact, summarising key agreements from COP26, called on countries to phase down unabated coal power for the first time.

2022

In 2022, building on the commitments from the previous year, G7 countries pledged to phase out generation of unabated coal power domestically, while G20 states agreed to accelerate the phase-down of unabated coal power. Ahead of the COP27 summit in Egypt, India said it wanted to expand the agreement made at COP26 and reach a deal on phasing down all unabated fossil fuels. This proposal gathered significant support from around 80 countries, including the EU, US, Canada and Australia. However, the final summit agreement only repeated the commitment from COP26 to accelerate the phase-down of unabated coal power, with Saudi Arabia and Russia reportedly strongly opposed to any broader deal on fossil fuels.

2023

This year, G7 countries committed to work towards ending the construction of new unabated coal fired power generation and to accelerate the phase-out of unabated fossil fuels. However, G20 countries failed to agree on a similar proposal to phase down all unabated fossil fuels – only agreeing to phase down unabated coal power.

Heading into COP28, the battle over unabated fossil fuels is now centre stage in the UN climate talks. This year’s COP President Sultan Al Jaber wants the summit to accelerate work that leads to an “energy system free of unabated fossil fuels in the middle of this century” and support “a responsible phase down of unabated fossil fuels”. The EU is backing this in its negotiating position for COP, recognising the need for a global phase-out of unabated fossil fuels. However, the bloc has noted that abatement technologies currently only exist at limited scale and should be used for hard to abate sectors. The US is slightly less committed, saying only that it aims for a ‘shift away’ from unabated fossil fuels rather than a phase-out. A coalition of 131 major global companies have also thrown their weight behind the phase-out of unabated fossil fuels.

The 16-country High Ambition Coalition is calling on governments to go further at COP28 and agree to a full phase-out of all fossil fuel production and use, noting that current abatement technologies will play a minor role in reducing emissions and they should not be used to delay climate action. At the other end of the spectrum, the same countries that blocked an agreement on an unabated fossil fuel phase-out at the G20 and last year’s COP – such as Saudi Arabia, Russia and China – could remain staunchly opposed to any reference to fossil fuels at COP28.

While there are significant gaps between the negotiating positions of countries heading to COP28, it is clear that debates on the phasing down or phasing out of fossil fuels, abated or unabated, will be central to negotiations.

Differing definitions of unabated fossil fuels

There are currently a range of differing definitions of ‘unabated’ fossil fuels:

Dictionary definitions highlight the breadth of potential interpretations of the term abatement, varying from a ‘reduction in the amount or degree’ to ‘putting an end to’.
US Special Envoy for Climate John Kerry has said that the term means “something different to different people” and that countries’ intentions aren’t all the same. In his view, abatement means “capturing the emissions to keep you on a track to reach the Paris goals. Very straightforward.”
The International Energy Agency (IEA) defines unabated fossil fuels as the use of those fuels for combustion without carbon capture, utilisation and storage (CCUS).²
The Intergovernmental Panel on Climate Change (IPCC) defines them as “fossil fuels produced and used without interventions that substantially reduce the amount of GHG emitted throughout the life cycle; for example, capturing 90% or more CO₂ from power plants, or 50–80% of fugitive methane emissions from energy supply.”

Agreeing this definition in the IPCC report was itself controversial and contested. According to one of the IPCC report’s lead authors “A few [countries] came out very aggressively wanting this abated, unabated language in there right in front of fossil fuels, because otherwise, we just want a fossil fuel phase out or phase down. Fundamentally, it’s about a political collision between those parties that want to keep using fossil fuels and those parties that want to phase them out completely.”

The dangers of an ambiguous definition

An ambiguous definition of unabated fossil fuels could have huge implications for future warming, since fossil fuel emissions could be nearly completely halted or just reduced. On top of this, there are risks around the term allowing for low carbon capture rates or excluding upstream emissions.

Carbon capture rates

The IEA and Kerry’s definitions of unabated fossil fuels are problematic as they both refer to carbon capture – but not all CCS projects capture high rates of carbon. As a recent study pointed out, not having a clear definition of abatement could allow for carbon capture rates as low as 50%.

This is very relevant given the track record of CCS projects to date. There are currently only 41 CCS facilities operating worldwide, and many of those have achieved relatively low capture rates. For example, the estimated capture rates at some high-profile CCS projects are:

65% at Boundary Dam, a coal power plant in Washington State, US
45% at Gorgon, a gas processing facility on Barrow Island, Australia
39% at Quest, an oil refinery in Alberta, Canada
Under 10% at Century Gas Processing Plant in Texas, US

Upstream emissions

Upstream emissions – which come from the extraction and production of fossil fuels – are not included in the IEA and Kerry’s definitions of unabated fossil fuels, despite accounting for almost 15% of total energy-related greenhouse gas emissions. This figure includes emissions of methane, a greenhouse gas far more powerful than carbon dioxide. The global energy industry is responsible for an estimated 37% of human-caused methane emissions. The IEA does not incorporate upstream emissions into its definition, despite stating that significant reductions in operational and methane emissions from the energy sector are necessary to reach net-zero emissions by 2050.³ A definition of abatement that only looks at carbon capture, without addressing upstream emissions, misses a significant share of global fossil fuel emissions.

Key components of a science-based definition

Based on the latest reports from the IPCC, IEA and academic literature, the following key components are needed for a rigorous, science-based definition of abatement:

High carbon capture rates: There must be near-total capture of fossil fuel combustion emissions, with carbon capture rates of at least 90-95%. If carbon capture technology successfully and consistently reaches this rate, then the definition should be reviewed and increased to further reduce residual emissions. Carbon capture technology is not feasible for mobile or small emitters, such as in transport or domestic gas boilers and stoves. The IEA does not see any role for CCS in the use of oil in its net zero scenario, only for gas and coal.
Geological storage: Once captured, carbon dioxide must be stored underground permanently. Alternative uses of captured carbon dioxide, such as increasing rates of oil extraction or for short-lived products like fizzy drinks, are incompatible with a science-based definition of abatement as the carbon is not permanently removed.
Near total containment of upstream and transport emissions: Emissions from the production and transport of fossil fuels, including methane emissions, need to be virtually eliminated. This should include methane intensity levels of 0.5% at the very most, and ideally 0.2% or lower – which large parts of the oil and gas industry claim to have achieved.⁴ Together with post-combustion capture, this should ensure that the definition of abatement includes all Scope 1, 2 and 3 emissions from fossil fuels.⁵
Monitoring, reporting and verification: To ensure that these standards are met, there needs to be rigorous monitoring of all facilities and infrastructure along the fossil fuel supply chain. This data should be publicly reported, and verified by third parties where possible.

Since the term ‘unabated’ has become central to international climate negotiations, it is vital that countries agree on a rigorous science-based definition of the term. If there is no agreement on what unabated fossil fuels are, then any agreement to phase them out is arguably meaningless, as each country could impose their own interpretation. It could lead to countries and companies implementing policies that are interpreted as being in line with a phase out of unabated fossil fuels, but that undermine progress towards the Paris Agreement goal of limiting warming to 1.5°C.

The need to rapidly and substantially reduce the use of unabated fossil fuels to limit warming to 1.5°C is clear. In the IEA’s Net Zero Emissions scenario, total use of coal, oil and natural gas falls by 87% by 2050, while the IPCC makes clear that reaching net-zero energy emissions will require “minimal” use of unabated fossil fuels.

1
Global CCS capacity represents 0.1% of global fossil fuel emissions https://www.iea.org/data-and-statistics/data-tools/ccus-projects-explorer & https://www.globalcarbonproject.org/carbonbudget/22/files/GCP_CarbonBudget_2022.pdf.
2
CCUS includes the use of carbon technology where captured carbon dioxide is used, for example in other industrial processes, whereas CCS refers only to where captured carbon is stored.
3
The IEA’s Net Zero Emissions scenario provides a pathway for the global energy sector to achieve net-zero carbon dioxide emissions by 2050.
4
Methane intensity refers to the amount of methane that is leaked or released into the atmosphere as a percentage of the total amount of gas sold.
5
Scope 1 emissions are direct emissions from sources owned or controlled by a company, Scope 2 are indirect emissions from the energy it uses, and Scope 3 includes emissions the company is indirectly responsible for in its value chain, including from the use of the products it sells.

Key points:

Overview

For a livable future, no new fossil fuels

New oil and gas approved by Charter companies in 2024 could result in 5 billion tonnes of CO2 pollution

Table 1: Committed carbon pollution from oil and gas fields approved by Charter companies in 2024

Ten companies are responsible for over 90 percent of new reserves approved by Charter members in 2024

Figure 1: Charter companies driving the most oil and gas expansion in 2024

Charter companies are on track to invest hundreds of billions in new oil and gas

Charter companies are projected to increase production by 17 percent by 2030

Figure 2: Charter companies’ projected oil and gas production vs IEA 1.5ºC scenario

Conclusion

Methodology

Key points:

Current financing structures found lacking

How much climate finance is needed?

Tracking climate finance – and accounting disagreements – to date

Fig. 1: OECD’s recording of climate finance from developed countries, 2013-2022 (USD billion)

Table 1: Climate finance from current contributor base as a proportion of GNI, 2013-2022

Fig. 2: Developed countries progress towards meeting their fair share of climate financing in 2022 (%)

Search for solutions to fill the finance gap

What could expanding the contributor base amount to?

Table 2: Estimated contribution of candidate countries’ spending

Moving finance forward

Key points:

MDBs could unlock hundreds of billions in climate finance

MDBs make moderate progress on reforms

Table 1: Progress by seven MDBs on reforms

MDBs’ current contribution to climate finance

Figure 1: MDB’s climate finance per region per type of income

Under-utilised finance tools by MDBs

Role of MDBs in the NCQG

Key points:

The scientific urgency to act

Fig. 1: Oil and gas production from new and existing fields vs a 1.5°C aligned pathway

Fig. 2: Oil and gas production forecasts and scenarios

Methodologies to define a just and equitable transition

Fig. 3: Transition capacity of selected countries by GDP per capita and oil share of government revenue

Table 1: Equitable oil and gas phase out assessed on country’s non-oil and gas GDP per capita

Table 2: Equitable oil and gas phase out using the Civil Society Equity review framework (selected countries)

The role of financing in the transition

Timelines for planning the energy transition

Leadership needed from the G7 and G20

Key points:

Update: Progress on A6 at COP29

What is Article 6?

Fig. 1: Carbon trading mechanisms under Article 6

How do carbon markets work?

Offsetting is not the same as reducing emissions

Why will Article 6 be so important at COP29?

The integrity of carbon markets has come under fire

Lack of agreement on details means A6 is being misused

We are at a crunch point for land

Financing for nature is becoming more urgent

What is REDD+ and how does it relate to Article 6?

REDD in the VCM

Eligibility of REDD+ credits under Article 6

Negotiations have progressed slowly since COP28

What are the key sticking points for COP29?

Article 6.2 (bilateral trading between countries)

Who has already signed deals under Article 6.2?

Article 6.4 (project-based emission trading)

Aspects of A6.4 to be discussed at COP29

Other outstanding issues on A6.4

Will countries favour A6.2 over A6.4?

Article 6.8 (Non-market Approaches)

How will negotiations impact the voluntary carbon market?

The Middle East experienced the second fastest renewable energy capacity growth in the world in 2022.

Quotes

Key points:

Abated vs unabated fossil fuels

What is carbon capture and storage?

‘Unabated’ fossil fuels in international diplomacy

2021

2022

2023

Differing definitions of unabated fossil fuels

The dangers of an ambiguous definition

Carbon capture rates

Upstream emissions

Key components of a science-based definition

New oil and gas approved by Charter companies in 2024 could result in 5 billion tonnes of CO₂ pollution