Complex 'carbon removals' remain on agenda

International carbon markets are not top of mind when homes are under floodwaters or bones are being flushed out of coastal graveyards.

But a dry document known as Article 6 is drawing a crowd at the COP27 international climate negotiations in the Egyptian resort town of Sharm el-Sheikh.

For governments at the climate talks, net zero doesn't mean no emissions.

Rather, it means reducing greenhouse gas emissions where possible and using carbon credits if necessary.

Last year's talks in Glasgow agreed to support the emergence of a global carbon market but it remains contentious.

Some say carbon markets are a tool to hit targets at the least cost to economies by allowing emissions to be traded away if they're too expensive or industrially impossible to eliminate.

For critics, it's a market-based con to achieve national pledges without real cuts in emissions with definitions so broad they include everything from geo-engineering to planting trees.

Australia's industry-led Carbon Market Institute is at the climate conference pushing for clear and consistent international guidance to cut risk and ratchet up corporate climate ambition.

As it stands, Article 6 sets out how governments can use international carbon markets to transfer greenhouse gas emissions across borders.

Paragraph four, the so-called Article 6.4 Mechanism, includes rules and procedures.

Through this mechanism, a company in one country could reduce emissions and have those reductions credited so it could sell them to another company in another country.

That second company could use them for complying with their own emission reduction obligations, with many committed to net zero by 2050 or before.

The complication is how to treat those cuts in nationally determined tallies without double counting.

And officials overseeing the mechanism agreed overnight it's too complicated to finalise methods and details this year.

Supervisory body vice-chair Piotr Dombrowicki said in a statement the work on carbon removals and methodologies is highly complex.

He said they have advanced the work in Sharm el-Sheikh and will continue next year.

The body agreed to establish a "roster of experts" in accreditation, methodologies and climate policy.

Five meetings on Article 6.4 are scheduled for 2023, starting in Bonn in Germany in March.

The supervisory body remains tasked with building a market mechanism that assists in delivering the Paris Agreement goal to limit global warming to 1.5 degrees.

Meanwhile, financial institutions and companies are putting carbon markets to use, earning and trading credits that each represent a tonne of emissions taken out of the atmosphere.

Australia's new climate laws don't usher in international carbon trading but the Albanese government hasn't ruled it out.

And the unsolved questions of how and what carbon credits to count in national targets mean there's scope for Australia to broker a solution if it hosts talks in 2026.

Countries due to up their emissions reduction targets for 2035 might need to rely on nature-based projects.

But voluntary carbon markets are yet to align with these rules and ensure carbon projects for industrial decarbonisation have water-tight environmental benefits.

Australia's Climate Change Authority says it's in the national interest to lead the development of a high-integrity market.

Article 6 is about much more than least-cost abatement of emissions but the market is still evolving and could be for some time, according to the authority's recent review.

For companies, Glasgow's Article 6 rule book provided some welcome certainty.

But experts say further details are needed for supporting transfers between government and non-government actors and preventing double counting.

The minister has been contacted for comment.