This blog was authored by Pedro Martins Barata, AVP for Carbon Markets and Private Sector Decarbonization at the Environmental Defense Fund.
Since the Glasgow COP two years ago, there have been growing expectations to transform the market-based cooperation approaches outlined in Article 6 of the Paris Agreement into practical, effective actions for reducing global emissions. Article 6 is not just another clause in an international treaty; it serves as a practical framework for cooperative climate action that has the potential to unlock higher ambition for reducing carbon emissions and adaptation actions. As COP28 unfolds, it is set to complete the development stage of these mechanisms, paving the way for tangible, impactful action in the near future.
There are three cooperative approaches described in the text of Article 6, commonly referred to by the paragraphs in which they appear (e.g., 6.2 refers to Article 6, paragraph 2).
- Article 6.2 provides an accounting framework that enables two or more countries to join hands through the transfer of emission reductions, while following rigorous rules to avoid “double counting” of those efforts. Some countries are already forging these decentralized, bilateral collaborations, including Switzerland, Peru, Ghana, Japan, India, Thailand, and Vanuatu. Under Article 6.2, countries may cooperatively pursue project-based or larger scale, jurisdictional emission reduction approaches.
- The second approach, Article 6.4, establishes a centralized, United Nations-controlled mechanism that paves the way for carbon credit trading generated through specific emission-reducing projects or activities.
- The last approach, Article 6.8, focuses on non-market strategies, illustrating that cooperation extends beyond credit trading.
If Article 6 is designed and implemented well, it could help channel resources to developing countries to reduce greenhouse gas emissions more rapidly, equitably, and cost-effectively. These “cooperative approaches” under Article 6 could be a helpful tool to bridge the finance gap and mobilize money where it’s needed most: creating a way for developed countries to shift money, knowledge, and other resources to developing countries to meet their Paris Agreement goals as their populations, economies, and demands for energy grow.
By driving investment up, Article 6 can help drive emissions down, potentially even lower than expected under countries’ current climate commitments. Our analysis estimates that the international carbon market, if operated with integrity, could enable countries to nearly double their mitigation ambition without bearing extra costs, provided that cost savings are reinvested in additional emissions reductions.
Article 6’s Road to COP28
COP26 in Glasgow was a milestone in the life of Article 6, producing a Paris Agreement “rulebook” for international cooperation through carbon markets after several years of challenging negotiations. Fast forward to COP27 in Sharm el-Sheikh, where the Article 6 blueprint began to take physical shape through the creation of reporting formats, review processes, and infrastructure required to track transfers of credits between countries.
Leaving COP27, negotiators reached a consensus on the framework for essential reports, instituted a review process for information submission to the UN tied to cooperative approaches, and offered detailed guidance on the various components of the Article 6 tracking infrastructure, clarifying their interconnections.
What’s On the Table at COP28? Methodologies and Removals
Now, as the baton is passed to COP28, the stakes are high for the Article 6.4 Supervisory Body (SB) that has been tasked with managing the new, centralized mechanism created under Article 6.4. Negotiators appointed to the SB must transform the agreed-upon methodologies from COP26 into actionable recommendations, and develop recommendations on activities involving removals, where carbon is stored by nature or technology. Under its 2023 workplan, the panel must also develop a mechanism registry, accredit operational entities, and facilitate the transition of activities from the previous Clean Development Mechanism – a mechanism operating under the now defunct Kyoto Protocol – to the Article 6.4 mechanism. Their decisions, subject to the COP’s approval, will be pivotal in ensuring that these measures are implemented effectively.
The SB deserves recognition for its remarkable effort in preparing a wide set of documents for adoption at COP28, which collectively will form the fundamental legal structure of the Article 6.4 mechanism. These include:
- An accreditation procedure for validators and verifiers
- An accreditation standard for validators, detailing requirements such as technical competence, financial
- An activity cycle procedure, stipulating the steps and timelines leading to the registration of an activity under A6.4 and the process for issuance of units
- A standard for activities that transit from the CDM
- A detailed procedure for that transition
The SB has also developed initial drafts of the following documents:
- An appeal procedure for stakeholders and Parties to decisions of the SB and a grievance procedure for affected stakeholders of an article 6.4 activity
- A Sustainable Development (SD) Tool, for the assessment of SD co-benefits from article 6.4 activities,
and these have been put out for public consultation. Separately, efforts are being wrapped up on the mechanism registry. Additionally, the governance of the mechanism has been strengthened through the establishment of Expert Panels on methodologies and accreditation. Given this progress, it’s likely that COP28 will confirm many of these documents, effectively establishing much of the Article 6.4 mechanism’s framework by the end of the conference.
On what is potentially the most thorny political issue for discussion at the Article 6.4-related meetings at COP28, the SB has come out with a recommendation on removals, following the request from COP27 to reconsider the issue of acceptability of removal activities under article 6.4 (note that these activities are anyway permissible under article 6.2). The recommendation, if adopted as is by the SB in its current form (we’ll know in two days), would allow for removals to be part of the scope of the mechanism, with some sensible ground rules especially on the issue of controlling for reversal risk. Some of this includes ideas such as stress-testing of buffer pools, ideas first vented but not yet tested in the voluntary carbon market.
In the meantime, countries need not wait to participate in cooperative approaches: Article 6.2 cooperation is available now, and many countries are already moving ahead. Indeed, in the run up to COP28, we’ve seen the first formal notification of intent by a pair of countries – Ghana and Switzerland in relation to a cooperative approach. As the number of countries that have signed cooperative agreements under Article 6.2 grows, there is also growing recognition that capacity building and technical assistance can assist interested countries in accelerating action. For examples of initiatives that are currently in place, see the A6 Implementation Partnership, the West African Alliance on Carbon Markets and Climate Finance, and the Eastern Africa Alliance on Carbon Markets and Climate Finance, among others. Many countries face challenges in understanding what these new approaches would look like in practice, including how mitigation activities can be scaled up to maximize impact beyond small-scale, project-by-project approaches.
Drawing on past lessons learned, it’s crucial for countries, donors, and organizations involved in capacity building to exchange information. This collaboration will help identify both redundancies and areas needing more attention in their work. Well-coordinated capacity building efforts can accelerate carbon market readiness, while also improving the distributional equity of carbon market cooperation worldwide. An effective and equitable post-Paris Agreement model of carbon market cooperation must support as many interested countries and communities as possible to deploy carbon market tools to meet ambitious development and environmental goals – not just those with the current means to do so.
As Article 6 moves forward to implementation, it must operate in a high-integrity, inclusive, equitable, and transparent way. This must include use of high-quality natural climate solutions (NCS) to make sure that we channel critical finance to conserve the power of forests, wetlands, and other critical carbon-storing ecosystems—and support the forest countries, Indigenous Peoples, and Local Communities who safeguard them.
- On Article 6.2, countries should ensure that guidance around reporting, tracking, and reviewing trades enables transparency and quality assurance of Internationally Transferred Mitigation Outcomes (ITMOs), including by “opening their books” to the public and minimizing claims to confidentiality of any information submitted to the United Nations Framework Convention on Climate Change (UNFCCC). Cooperating countries should consider observing additional, more stringent requirements than the minimum specified in Article 6.2 guidance, to ensure that only the highest-quality ITMOs are traded. The principles and recommendations provided in the Tropical Forest Credit Integrity Guide could help, particularly for those countries interested in NCS cooperation.
- Under Article 6.4, nature-based removals should be considered eligible. The majority of existing removals activities are nature-based and methodologies for these types of removals have already been widely tested and monitored over several decades.
The discourse and decisions made at COP28 has the potential to significantly influence the trajectory of Article 6 cooperation. EDF is advocating for countries to work together to ensure that it serves the planet and its diverse communities effectively. With the clock ticking in the race against climate change, now is the time to accelerate action on – and access to – carbon market cooperation.
For more details about Article 6, its implementation, and its future, please see EDF’s Article 6 fact sheet.