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LESSONS FROM : ARTICLE 6 NEGOCIATION

While it might seem like a suitable tool for the LEAVIT initiative, numerous challenges lie ahead:

1.   Article 6.2 is off to a slow start : theoretical operability hindered by the ongoing need to finalize additional reporting requirements and country authorizations.

2.   Article 6.4's uncertain future: already 4 years of delay and the lack of agreement on structural issues during COP 28 does not bode well for a operationalization with the next 2 to 5 years

​3.  Currently not conducive to avoidance projects: The concept of avoided emissions currently does not meet the criteria for serving as a basis to generate any type of carbon credits under Article 6.

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Article 6 of the Paris Agreement serves as a cornerstone for international cooperation in combating climate change. Encompassing nine pivotal paragraphs, it lays the groundwork for voluntary collaboration among nations to achieve their climate goals. The recent agreement at COP26 in Glasgow marked a significant milestone, establishing rules for the implementation of international carbon market mechanisms.

1. ARTICLE 6.2 : FACILITATING EMISSION TRADE THROUGH BILATERAL AGREEMENTS

Article 6.2 empowers countries to engage in emission reductions and removals trading via bilateral or multilateral agreements, resulting in Internationally Transferred Mitigation Outcomes (ITMOs). They can be measured in carbon dioxide equivalent (CO2e) or using other metrics, such as kilowatt-hours (KWh) of renewable energy.

Ghana and Switzerland, in collaboration with Vanuatu, have made history by approving the first-ever voluntary cooperation under Article 6.2. In this groundbreaking initiative, Switzerland is committed to reducing its greenhouse gas emissions by supporting Ghanaian rice farmers in adopting sustainable agricultural practices, thereby mitigating methane emissions. Simultaneously, the agreement with Vanuatu aims to provide access to renewable energy sources, ensuring electricity for those currently without it.

 

The UN Development Program endorses this collaboration through its Carbon Payment for Development facility, offering technical assistance, digital solutions, and direct financial incentives.

 

However, challenges persist in the form of lengthy negotiation processes and the need for streamlined reporting and authorization protocols.

NAVIGATING THE LANDSCAPE OF ARTICLE 6

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2. ARTICLE 6.4 :  A UN SUPERVISED GLOBAL CARBON MARKET

Article 6.4 stands as a crucial component of the Paris Agreement, envisioning the establishment of a global carbon market overseen by a dedicated United Nations 'Supervisory Body.' The objective is to create a transparent and standardized mechanism for trading emissions reductions and removals on an international scale.

 

Projects seeking UN-recognized credits under Article 6.4, known as Article 6.4 Emission Reductions (A6.4ERs), must undergo a rigorous approval process. This involves scrutiny from both the country where the project is implemented and the UN Supervisory Body. 

The UN Supervisory Body evaluates projects based on predetermined criteria, such as additionality (the emissions reductions would not have occurred without the project), permanence (the emissions reductions are durable over time), and leakage (the project does not lead to the displacement of emissions elsewhere).

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Article 6, despite its crucial role in facilitating international cooperation on climate action, has faced significant delays in its implementation. Originally intended to be finalized at COP24, the negotiations extended for several years, reaching only a incomplete resolution at COP26 in Glasgow in 2021. This prolonged timeline reflects the complexities and intricacies associated with forging a global consensus on carbon market mechanisms

1. DOUBLE COUNTING DILEMMA

One significant hurdle is the risk of double counting, where the same emission reduction or removal is counted more than once in international carbon markets. The application of "corresponding adjustments" is the primary tool to avoid this, but the inclusion of voluntary credits outside the Article 6 system introduces loopholes, enabling double counting in unregulated private schemes.

THE CHALLENGES IN ARTICLE 6 IMPLEMENTATIONS

2. TRANSITION FROM CDM TO ARTICLE 6.4

The transition of Clean Development Mechanism (CDM) projects to the 6.4 mechanism introduces challenges, allowing the rebranding of potentially flawed CDM credits as 6.4ERs. Some CDM projects can continue using outdated methodologies until as late as 2025, posing a risk to the integrity of emission reduction efforts.

3. ARTICLE 6.2 VS ARTICLE 6.4 PARADOX

A paradox emerges as stringent rules are negotiated for the highly regulated UN-governed carbon market (6.4), while countries can engage in highly unregulated exchanges of carbon credits under Article 6.2 cooperative approaches, lacking independent oversight.

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The outcomes of COP28 regarding Article 6 underscored the challenges and complexities inherent in forging international consensus on carbon market mechanisms. The absence of a breakthrough left the nascent UN carbon markets in a continued state of uncertainty, yet this also prevented the adoption of inadequate rules that could have facilitated questionable trading practices.

 

The vision of unrestrained markets, driven by the influence of the private sector, failed to convince cautious nations that stood their ground to defend safeguards and regulations. The need for robust environmental and human rights guardrails in carbon credit trading was emphasized, especially in light of scandals related to the voluntary carbon market over the past 12 months.

Confidentiality disagreements further complicated negotiations, particularly concerning the reporting of existing and future trades under Article 6.2. The final draft text lacked limits on information designated as "confidential," potentially reducing the review of countries' deals to a mere formality. The failure to establish new rules left existing bilateral deals in a transparency limbo. Countries such as Switzerland, Japan, and Singapore now face the challenging task of anticipating future rules that might affect their current trades.

Concerning Article 6.4, COP28 aimed to provide clarity on three crucial topics: the authorization of units, the interconnection between the 6.2 and 6.4 registries, and the eligibility criteria for emissions avoidance and conservation enhancement. However, the lack of agreement during COP28 implies a likely delay in the operationalization of the Article 6.4 market by at least another year. 

Simultaneously, the outcomes of COP28 have reverberations on the voluntary carbon market. Decisions stemming from COP28 signal changes for this market, challenging actors to align with Article 6 standards.

COP 28 OUTCOME : STRUGGLE FOR AGREEMENT

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The concept of avoided emissions – whereby a project makes assumptions about how its existence could lead to future emissions being avoided – do not qualify for now as a basis to generate any kind of carbon credits under Article 6.

 

A dedicated UN body is tasked with assessing whether avoided emissions can be a valid basis for generating credits, adding complexity to the evolving landscape of international carbon markets.

WHAT ABOUT AVOIDED EMISSIONS ?

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