IATP submitted the following comment to Ms. Maria Al Jishi, International Policy Advisor, Ministry of Energy, Saudi Arabia and Mr. Martin Hession Senior Policy Advisor, Department of Energy and Climate Change, International Carbon Markets Policy and Negotiations, European Commission, Ireland on August 30, 2024.
Dear Chair Al Jishi,
Dear Vice Chair Hession,
The Institute for Agriculture and Trade Policy (IATP),1 an accredited observer organization, appreciates this opportunity to submit comments on unresolved differences in the SD Tool text. In accord with the procedure for the “Consideration of unsolicited letters to the Supervisory Body,”2 we hope that you will find the following comments merit sharing with all Members and Alternate Members of the Supervisory Body (SB). According to the report of the “Thirteenth meeting of the Article 6.4 mechanism Supervisory Body,” there is an informal working group that is revising SD Tool, version 08.0 “with the aim of adopting the draft tool on the first day of that [the 14th] meeting.”3 Because of the imminence of adoption and the crucial role that successful implementation of the SD Tool plays in the operationalization of the Article 6.4 mechanism, IATP is submitting this letter about unresolved but crucial issues indicated partly in the bracketed text of version 08.0. The SB has done praiseworthy work on the SD Tool since its first version, but important work remains to be done.
Resolving disagreements indicated in bracketed text
Agreement on the adopted text of the SD Tool is a prerequisite for its successful application by activity participants, Designated Operating Entities (DOEs) and host Party authorities, and for the realization of sustainable development benefits resulting from well-designed, monitored and administered mitigation activities. The following sample of bracketed texts indicates the kinds of dilemmas that the SB must resolve before adopting the SD Tool.
Where complete avoidance of risk is not possible, activity participants shall provide evidence that the activities are consistent with safeguarding principles, criteria and host Party laws or regulations [, including agreements that meet the Host Party’s obligations under international law]. In addition, activity participants are encouraged to also apply standards, industry best practices, and/or their own voluntary policies identified as relevant to the environmental and social safeguards principle and are [required][encouraged] to do so in the absence of host Party regulations. 8. In addition, activity participants are [encouraged] [required] to apply relevant standards, industry best practices and/or their own voluntary policies in addition to or in absence of host party laws and regulations. (paragraphs 7 and 8)
Agreement to remove the brackets around “[, including agreements that meet the Host Party’s obligations under international law]” will not be achieved unless the text specifies which international conventions, protocol, treaties and other texts are applicable to the SD Tool. In addition to the “Normative References,” (paragraph 17, p. 10) international agreements are referenced throughout the SD Tool, e.g., in paragraph 53, regarding displacement and resettlement resulting from mitigation activities. Such references should be added as a footnote to the phrase “under international law” in paragraph 7 and should be added to the “Normative References.”
How to resolve the dilemma between “[encouraged]” and “[required]” should be discussed in the context of the “mandatory use” of the SD tool applied to Article 6.4 mitigation activities, including those Clean Development Mechanism activities of Parties that wish CDM credits to be eligible for transfer to the Article 6.4 mechanism registry. (paragraph 5) If the host Party lacks laws and regulations relevant to the environmental and social safeguards principles, surely activity participants must be required to supply evidence in the three SD Tool forms4 that their activities comply with the SD Tool’s environmental and social safeguard principles and sustainable development criteria.
IATP proposes that the SB rewrite paragraphs 7 and 8 to delete “and/or their own voluntary policies.” If buyers of Article 6.4 Emissions Reduction (ER) credits discover that activity participants are allowed to comply with the environmental and social safeguard principles and sustainable development criteria just by applying “their own voluntary principles” in the absence of host Party laws and regulations, they may well not buy any more ER credits that allow activity participants to comply merely by applying their “voluntary principles.” The purpose of the successful application of the SD Tool is not only to realize sustainable development benefits and to ensure compliance with the environmental and social safeguards, but also to enable activity participants to offer for sale ER credits to non-Parties on competitive terms with the voluntary carbon credits of such crediting programs as Verra.
According to a Task Force on Scaling Voluntary Carbon Markets survey in 2020 of buyers and prospective buyers of carbon offset and removal credits, 45% of those surveyed were concerned about “a lack of environmental and social integrity of certain [offset] projects.”5 If sales of ER credits are to increase once the Article 6.4 mechanism is legally operationalized, satisfying the concerns of buyers and prospective buyers about the efficacy of SD Tool environmental and social safeguards will be required.
One important means to satisfy those concerns is missing from the SD Tool text. Nowhere in version 08.0 is it stated where a prospective ER credit buyer will find the three SD Tool forms filled out by activity participants together with the corresponding DOE validations of the activities design and the DOE verifications that the activities have achieved their SD Tool objectives. IATP recommends that the SB describe in a sentence or two where these activity participant and DOE documents will be posted. A logical place to include this sentence(s) would be “Section 2.3: Entry into force” (paragraph 6, p. 5).
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