Article 6 of the Paris Agreement

Article 6 of the Paris Agreement establishes a framework for voluntary international cooperation in achieving emissions reduction targets. It consists of two main components: Article 6.2 for international credit trading, and Article 6.4 for a new and improved crediting mechanism.

Article 6.2: International carbon credit trading

Article 6.2 establishes a framework for countries to engage in international carbon credit trading. This mechanism allows nations to cooperate on climate projects and exchange carbon credits that count toward their Nationally Determined Contributions (NDCs). It incorporates both market and non-market mechanisms to achieve these goals effectively.

In addition, Article 6.2 facilitates the trading of Internationally Transferred Mitigation Outcomes (ITMOs), which are units of emissions reductions that can be exchanged between countries. The aim is to enhance ambition in climate action, promote sustainable development aligned with the Sustainable Developments Goals (SDGs), and ensure environmental integrity.

Article 6.4: The Paris Agreement Crediting Mechanism (PACM)

Article 6.4 creates a UN-supervised system, called the Paris Agreement Crediting Mechanism, for trading emissions reductions, which is managed by the UNFCCC. This mechanism ensures environmental integrity and promotes sustainable development. The credits authorised from this are called A6.4ERs (Article 6.4 emissions reductions).

Recent developments introduced high-quality standards for emissions removal and reporting, rules for transitioning projects from the Kyoto Protocol’s Clean Development Mechanism (CDM), and a linkage between the PACM and national registries for streamlined operation.

The credits generated under this mechanism are intended to fund emissions reduction and adaptation efforts in the host country. This mechanism is designed to ensure that emission reductions are not double counted, requiring corresponding adjustments when credits are transferred between countries.

Article 6 outcomes from COP29

At the 2024 UN Climate Change Conference in Baku (COP29), key outcomes for Article 6.2 included finalising the structure of authorisation for cooperative approaches between countries. This clarified aspects like authorisation date, duration, and applicability to NDCs. Rules were also set to define the "first transfer" of an ITMO, ensuring transparency and certainty when mitigation outcomes are applied via corresponding adjustments.

For Article 6.4, two key standards were adopted from the outset: one for methodologies and another for emission removal requirements, establishing a framework for monitoring and reporting. A final-day decision clarified the authorisation process for A6.4ERs, outlining the content of authorisation statements and the steps for host and recipient countries.

Benefits of Article 6

As mentioned above, Article 6 improves the ability of countries to cooperate with their emissions reduction targets, providing needed flexibility in carbon markets. This international approach is further backed by an enhanced credit marketing mechanism, PACM, that promotes transparency and sustainable development.

Article 6 also enhances cooperation between private and public climate action to increase that flexibility through standardisation. With greater global alignment on climate action overall, a higher demand for A6.4ERs and ITMOs may drive up prices, which would stimulate greater investment in emissions reduction activities over time.

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