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What the ITMO! Can we rely on Article 6 to reduce global carbon emissions?


In the early hours of Tuesday morning, negotiations came to a close on the UN climate change plenary, much to the dismay of UN technical body chair Paul Watkinson. China, with the support of India, and a group of African nations, demanded that the meeting be closed without finalising agreements over reporting of carbon emissions.

What is the backstory? What has been taking place so far at COP that led to this dramatic nullifying of the climate change plenary, therefore increasing the likelihood that ongoing negotiations from the Paris agreement will be delayed further?

The holdup in the Paris agreement

A lot of attention at COP25 so far has been on the negotiations of article 6 - deciding how to implement a global carbon market system. It is the last key section of the Paris agreement remaining unresolved, and so the closure of the Paris agreement is tied to a compromise being found in discussions of article 6.

The global carbon market system is based on Internationally Transferred Mitigation Outcomes (ITMOs). These act as a carbon coupon allowing countries to transfer the financial burden of decarbonisation. A country may purchase ITMOs in order to reduce their own net carbon emissions in the most cost-effective way. This allows the physical emissions of a country to remain above zero, whilst still meeting international targets by accounting for paid-for emissions reductions external to the country.

Earlier this year, when the UK announced its plans for a legally binding commitment to net zero emissions under the recommendation of the committee for climate change. They stated “Net zero means any emissions would be balanced by schemes to offset an equivalent amount of greenhouse gases from the atmosphere”.

There are several key things to consider about commitments to “net zero” which make use of financially balancing emissions:

  • Are these emissions being balanced internally or internationally?

  • Are decarbonisation goals being implemented with a single year target, or over a cumulative multi-year window?

  • Does ITMO trading benefit or disadvantage countries with the least resources to tackle climate change?

Location, Location, Location

Internal balancing for the UK would mean that any carbon offsets used come, for example, from planting trees or by developing carbon capture storage sites which must be situated in the UK.

Externally balanced emissions, however, allow countries like the UK to under-develop their decarbonisation goals - importantly, the extensive use of international CO2 balancing would be incompatible with 1.5 or 2.0 degree goals set out by the Paris agreement.

The use of carbon offsets at a company-level allow some of the biggest polluting companies to slow down decarbonisation. UC Berkeley research fellow Dr. Haya criticises offsetting polluters, stating “We’re allowing businesses in California like Chevron and Phillips and other large emitters to continue to emit.", and goes on to state that these offsets "don’t actually represent real emissions reductions”.

Journalist George Monbiot compared carbon offseting to religious absolution critiquing the glacial (perhaps no longer such a good metaphor to describe a long time span) progress made when relying on carbon offsets. This is a comparison also backed in the Financial Times by Camilla Cavendish.

Article 6 focuses on cooperation through carbon markets, but in this framework allows countries to include use of ‘less bad’ fossil fuels, as part of their carbon offsetting reduction. Artificially cheap carbon offsets allow further exploitation of this framework, encouraging companies to continue developing fossil fuel technologies under the premise that carbon offsetting will therefore lead to a reduction and not an increase in fossil fuel consumption.

Another location accounting problem is the import consumption - governments are all too happy to claim a direct reduction in emissions, when the reality is a move to importing goods which incur these manufacturing emissions. In the same statement where the UK government discussed its plans for net zero by 2050, they make the again the tired claim “The UK has already reduced emissions by 42% while growing the economy by 72%” - a claim debunked time and time again. This includes a debunking given by Greta Thunberg whilst she addressed Westminster in April two months prior to the government net zero 2050 statement! If the UK government is willing to use such disingenuous statements to avoid accountability now, how on Earth can we believe they are serious about meeting targets for 2050?

Offset Manipulation

When a country agrees to reduce emissions by some percentage at an agreed year in the future, are the carbon balance books a realistic representation of the country’s decarbonisation efforts and success? Countries using ITMOs (the internationally transferable mitigation outcomes), can schedule these offsets so that the carbon accounting for a specific year is greatly reduced, whilst the preceding and successive years come in much higher.

The provision in the text which allows this sort of loophole has been removed during this COP. A trajectory and averaging target must now be applied, which strips away the possibility of a ‘single year’ commitment cheat.

Another loophole still available to countries, that was to be addressed by the climate change plenary, is “carbon adjustments”. Research suggests that carbon offsets will be “double counted”, and there needs to be extensive framework in place to ensure that a carbon offset put in place is only paid for and counted once.

Addressing Climate Justice

Article 6 received criticism at the joint environmental defence fund & world resources institute press conference on Tuesday for its removal of the section addressing human rights.

Climate justice has been a popular topic at COP25 with rooms scheduled for discussion reaching capacity. In an earlier COPCAS blogpost, PhD candidate Gwyneth Matthews discussed reframing tackling climate change to target social and sustainability goals, and wrote that “Climate change involves societies, livelihoods, cultures, and wellbeing. So, when we are looking at solutions to tackle climate change we need to involve and include all people.” Are ITMOs and carbon financing compatible with a just decarbonisation?

In the Climate Justice Alliance’s carbon pricing vol 1. booklet prepared for COP25, they state “The majority of the tools for mitigating climate change, both within the US and globally, focus on carbon pricing and carbon counting, and continue to exploit people and communities most impacted by climate change, while providing special favors to the very fossil fuel and agricultural industry corporations most responsible for climate change.” The booklet outlines the principles of the Climate Justice Alliance and explains why justice-based approaches are critical to our success. As one example of carbon offsets being incompatible with climate justice, they claim that many deforestation and degradation mitigation offsets see communities incur accounting burdens and land grabs - communities who themselves see none of the profits from the carbon offseting.

Put boldly by human rights and indigenous attorney Alberto Salamando: “These offset schemes [outlined in the Paris climate agreement] provide a financial laundering mechanism for developed countries to launder their carbon pollution on the backs of the global South. Case-in-point, the United States’ climate change plan includes 250 million megatons to be absorbed by oceans and forest offset markets. Essentially, those responsible for the climate crisis not only get to buy their way out of compliance but they also get to profit from it as well.”

What does this mean for article 6 and today’s negotiations?

In Tuesday’s plenary, backed by other major polluters, China has sought to weaken the requirements for reporting emissions. Real representative reporting of emissions is quite fundamental to the success of carbon finance.

Article 6 alone isn’t going to address climate justice, and if it is to work at all in reducing emissions, it requires some base level of good will from the countries with the most wealth. Without being applied in conjunction with a mechanism (such as a form of carbon tax) that directly targets and penalises the worst emitters, offsetting will not be able to keep us on track with warming limits outlined in the Paris agreement.

Developing countries should make use of all resources available to them through carbon offset crediting but remain wary of its broader implementation. We must call out the worst emitters who fail to reduce emissions, using offsets to delay and impede progress.