If there is one piece of advice I would give to someone new to climate-watching, it would be this: make friends with failure.

This is no council of despair – quite the contrary, in fact. 

The more you learn about climate change, the more serious and complex the problem appears. And so, almost automatically, the higher you will begin to set your standards.

You will realise it’s not good enough just to decarbonise the power sector.

You’ll see that solar panels or electric cars can’t solve all our problems.

And you’ll understand that there is no true sustainability without justice. 

Such higher standards are a positive development. What hurts is the subsequent collision with reality, as that greater understanding serves to reveal greenwash and delay, reshuffled funding and half-kept promises. Yet risking failure is essential to win anything worth having. Only by making friends with the pain of failure today, can we hold out for something better tomorrow. 

In this article, I want to follow this idea into the carbon markets discussed last week. Can it help free us from the mainstream conversation about what constitutes ‘failure’ in climate governance?

The Article 6 puzzle

For all the outrage around the Global Stocktake, the real failure of COP28 was the negotiations around carbon markets. Before we dive in, here is a brief refresher.

Article 6 of the Paris Agreement enshrined the principle of international cooperation in carbon markets. The two most important elements are Article 6.2, which seeks to regulate and certify bilateral carbon trading between nations; and Article 6.4, which seeks to create a central, UN-controlled exchange mechanism with common standards.

Since 2015, progress has been slow; but COP26 finally saw the adoption of a ‘rulebook’ for Article 6. Throughout 2023, the ‘Article 6.4 Supervisory Body’ hammered out an agreement-before-the-agreement on issues such as accreditation, activity cycles, and the CDM transition. Consequently, expectations heading into COP28 were high.

Buoyed by this momentum, some countries had already begun exploring pilots for bilateral carbon trading under Article 6.2. To see what this might look like, let’s turn to the case of Bangkok.

You can count on me (twice…)

In the spring of 2023, Switzerland made headlines by announcing it had signed the second ever such deal, an agreement to purchase ITMOs (Internationally Transferred Mitigation Outcomes, i.e. bilateral carbon credits) from Thailand. The Bangkok E-Bus Programme would see Swiss-funded electric buses rolled out across capital, with the abated emissions contributing to Switzerland’s NDCs. Cue cheers from the climate and development community. 

But in the middle of COP, an investigation from Swiss climate thinktank AllianceSud tore a gaping hole in the Bangkok deal. They claimed that it failed the basic ITMO principle of additionality – the buses would likely have been rolled out by 2030 anyway. Most worryingly of all, they discovered there is no way to concretely evaluate the quality of the deal, because the environmental and financial calculations underpinning it are hidden behind the veil of ‘commercial confidentiality.’ 

Not that the governments will listen, in the face of such strong incentives to make such a deal work. Thailand obviously benefits from the FDI. Switzerland, on the other hand, has been one of the countries pushing bilateral trade certification hardest (with over a dozen agreements already), because it is relying on ITMOs to meet 2/3 of the cuts needed for its mandated 2030 emissions target. 

The soul of the system

Meanwhile, the Conference of the Parties was busy pulling off its party trick – snatching defeat from the jaws of victory. Despite their preparation, Article 6 negotiations collapsed in acrimony, and the meeting ended with no text at all for either the 6.2 or 6.4 streams. 

That’s right – no text at all. Not even on the elements they had spent all year agreeing upon!

On the one side of negotiations was the US, pushing a light-touch, free-market option which would see the UN rubber-stamp certificates generated by a patchwork of national and regional schemes – with all the black-box, marking-their-own-homework approach to transparency that characterises VCMs today. 

On the other side stood the EU and various developing nations, who demanded a more rigorous, centralised system with standardised protocols and disclosures, transparently policed by the UNFCC. 

In the words of Carbon Market Watch, this was, ‘a battle for the soul of carbon markets.’ If the US had won, then deals in the style of the Bangkok buses would receive UN approval, and the root-rot that has undermined VCMs would become the new norm for national trading schemes too. We would be looking at the next big greenwashing scandal, one that risks undermining the foundational accounting unit of climate governance itself – the Nationally Determined Contribution.

Deal or no deal?

In the end, carbon markets may not even need Article 6. There are already 30 compliance schemes globally, covered 20% of global emissions (including parts the US and Chinese economy) and growing fast. But they vary widely in quality, with only the EU and the UK meeting the minimum price-per-ton for Paris compliance. To reach net-zero, all markets need to be pulled up to match the best, rather than sink to competing with the worst. 

Switzerland is the canary in the coal mine in this regard; it joined the gold-standard EU ETS in 2020, but is still trying to find cheaper ways out of its obligations through bilateral pilots like the Bangkok deal. Which path it chooses will depend on whether Article 6 ends up following the US or the EU model. It is critical that we do not agree a framework that becomes the starting pistol for a global race to the bottom. 

Yes, COP28 failed to agree Article 6. But this was a case of no text being better than the wrong text, lest the world become awash with low quality, Bangkok bus-style deals. The EU didn’t win, but at least it didn’t lose.

Seen through this lens, the COP 28 negotiation is one failure I am happy to make friends with.