Today is Monday, February 5 2024.
Article 6 is intended to promote cooperation among jurisdictions, countries, with regards to carbon credits transfer.
Have in mind that not all countries may have enough technologycal processes nor natural resources - or even valid and internationally accepted methodologies - that would allow them to develop their own carbon credits to help them achieve their climate targets.
As such, there would be room for international trade of carbon credits, reason why, within the Paris Agreement, there is a set of carbon market rules and standards. These rules are called Article 6.
Issue is that, as you may recall after COP-28 in Dubai, they are still under negotiation by companies and governments.
Among the challenges, to name a few, there is the critical issue of how it would relate to the NDC Nationally Determined Countributions, besides transparency and integrity issues around carbon credits, carbon removal efforts, who will check that and hold countries accountable, including for the risk of double counting. And on top of that, during COP-28 we got the strong feeling that that not all countries Environmental Ministers are much favourable of market based financing approaches, of trading reduction efforts of greenhouse gas emissions from one country to another.
Here are two sections of the Article 6 of the Paris Agreement worth mentioning in this article:
* Article 6.2: the framework of standards that governments should follow when making deals with one another.
* Article 6.4: the rules and standards towards "a good carbon removal", underpinning carbon credit markets.
Under Article 6.2, countries are already signing deals and memoranda of understanding that transfer ownership of carbon removals from one country’s balance sheet to another. A few examples:
- Chile and Tunisia with Switzerland.
- Morocco with Norway.
- Papua New Guinea and Singapore.
- Rwanda with Kuwait and Singapore.
There is still a lot to be determined through negotiations, including Article 6.8 - not mentioned - of non-market mechanisms to help countries reach their climate targets. Maybe for another attempt of deliberation in Baku, COP-29.
Click at the image below to have an idea of the next steps related to Article 6 ("... the last session in Dubai, the CMA did not ... but requested").
To accelerate and create granular standards towards removals, carbon credit markets need an entity that would take on the helm as the Global Carbon Credit Supervisory Body.
Like the PCAOB for external accounting firms, also oversighting the registries of carbon credits, including the "Big 4" - another curious similarity to the accounting world - Verra, Gold Stardard, American Carbon Registry and Climate Action Reserve.
United Nations headquartered in New York? IETA in Switzerland? World Bank in Washington DC, A6IP in Japan, ICVCM in the United Kingdom, Unidroit in Rome, other in another location?
Time will tell.
