COP events provide industry with insights about how nations are aligning on tackling shared climate challenges. Last year’s COP27 event placed a new level of importance on the connection between food security, equity, and climate change. The clear need to increase the level and equity of financing for innovations and the implementation of efforts required to improve access to quality food, especially in resource-limited regions, was made apparent. COP28 built on this momentum by declaring that “food systems must urgently adapt and transform in order to respond to the imperatives of climate change.” While conversations on food and agriculture like this were evident, albeit less forward facing than at COP27, most of the effort affecting agrifood and CPG was on aligning the policy direction for voluntary carbon markets (VCMs) to create future confidence.
How far did COP28 move the needle on improving VCM certainty?
The discussion of three aspects of Article 6 of the Paris Agreement was front and center, but articles 6.4 and 6.8 are most important to consider as they affect the potential of VCMs to gain credibility. Overall, the event maintained the existing levels of uncertainty.
Article 6.4 creates a mechanism for new methodologies to be submitted for approval. At COP28, parties could not agree on identifying baselines for carbon capture. Seven European nations provided a highly progressive framework ahead of the event, stressing that for those organizations making climate claims, six key areas must be included: public disclosure of emissions and targets, alignment of standards to the Paris Agreement, prioritization of emissions reductions as opposed to offsets, utilization of high-quality credits only, consideration of impacts on sustainable development, and inclusion of regular and transparent reporting.
Article 6.8 outlines non-market-based cooperation opportunities that are not transactions. Nations agreed on a path forward, but that path primarily includes the final creation of an information portal and the determination of specific non-market approaches available to parties. Therefore, a framework of need has been established that now requires guidance.
If you look at how funding and markets responded after COP28, it’s clear there is still uncertainty. Prices for established VCM credits continued to slump coming out of the event in all areas but carbon capture. Therefore, uncertainty continues to be the conversation around VCMs in 2024, even though the leading standards developers claimed they will come together to help build certainty and accountability moving forward, a statement that must be backed up by implementation efforts.
Continuing work on food and agriculture
Limited progress was made on the Sharm El-Sheikh Guidebook on Just Financing. Parties were unable to reach consensus on the text after a full year of development, indicating that some nations have highly specific challenges that are not shared globally and are likely to continue to experience inequitable funding levels. While some nations have made headway in offering funding like Switzerland, others have not, highlighting limited accountability. Creating consensus to initiate a shared funding mechanism will continue to prove difficult.
The COP28 Food and Agriculture Declaration will bring an additional and ongoing element to future COP events. Moving forward to 2025, the event is prioritizing the integration of agriculture and food in national strategies and policies supporting land and human resilience, funding mechanism scale-up, acceleration of evidence-based innovations, and strengthening of equitable trade.
Lux Take
Agriculture and food will indeed become a staple at COP events moving forward, with sustainable agriculture gaining a foothold. Expect these events to become a nest for lobbyists in the future and for nations to leverage funding mechanisms to accelerate the adoption of approved practices. The challenge that remains is to define approved practices. The advancement of Article 6.8 revealed this as a major unmet need. Nations can typically agree at a high level, but building the menu of options will take longer than expected. For now, expect action to occur at the national level, but watch for regional activity to determine future risks and opportunities.