COP29 is a critical opportunity to unlock Article 6 and power global carbon markets

A global carbon market could help us reach the goals of the Paris Agreement. But making it a reality means reaching consensus on Article 6 at COP29.

One of the most pressing outstanding priorities at the next UN climate summit, COP29 in Baku is how to implement Article 6 of the Paris Agreement . Article 6 outlines how countries can cooperate to reach their climate targets through a carbon crediting mechanism.

What is Article 6?

Under Article 6, countries can transfer carbon credits – which are earned from their own emission reductions – to help other countries meet their targets. This is widely considered one of the most important mechanisms for reducing global carbon emissions.

There are three tools that countries can use under Article 6. Central to Article 6 is Article 6.4, which establishes a new carbon crediting mechanism called the Paris Agreement Crediting Mechanism (PACM). The PACM is designed to ensure high integrity with strict rules for validating, verifying, and issuing carbon credits. Article 6.2 allows countries to exchange emission reduction credits, while Article 6.8 provides non-market opportunities for countries to cooperate towards their NDCs, through initiatives like mitigation and adaptation.

Years after the Paris Agreement, many aspects of Article 6 remain unresolved. Limited progress was made on resolving these issues at the Bonn Climate Change Conference in June, with failure to reach consensus on several issues.

The issues on the table

The most contested questions around Article 6 are whether avoided emissions can generate carbon credits and which elements of the PACM should be centralized.

At COP28, the question of whether emissions avoidance and conservation enhancement could be eligible for generating carbon credits was controversial. Critics worry that permitting these approaches, especially if they are loosely defined, could flood the market with low-quality emissions avoidance projects.

Another ongoing debate is around which components of Article 6 should be controlled by a central authority or managed independently by individual countries. At present, the need for consensus has meant that the centralized PACM has seen slower uptake than cooperative approaches.

A critical tool

So far, Article 6 has proved a significant challenge – but there is an urgent need to find agreement and implement it.

Carbon markets are one of the most powerful tools to tackle climate change. Robust, credible international markets in high-quality carbon credits would make the entire process of mitigating and adapting to climate change much more efficient. They could mobilize resources to help developing nations access financial resources and boost investment in clean energy technologies such as large-scale carbon capture and storage, while reducing emissions globally. They present the opportunity to reduce the cost of implementing NDCs by as much as $250bn in 2030 – in other words, removing 50 per cent more carbon emissions at no additional cost .

For this to happen, the international market must be credible, with transparency and accountability throughout. This requires urgently tackling the outstanding issues around Article 6 at the next opportunity – COP29 in Baku.

COP29: an open opportunity

Article 6 could be the critical tool in the global push to reach the ambitions of the Paris Agreement. If agreement can be reached on a few outstanding issues, COP29 could prove one of the most consequential summits yet as the opportunities of carbon markets are unleashed.

But approving Article 6 will require national governments and other stakeholders to prioritize cooperation to reach consensus. COP29 is a precious opportunity to do so.

Article originally published on the IEF website - https://www.ief.org/news/cop29-is-a-critical-opportunity-to-unlock-article-6-and-power-global-carbon-markets