The implementation of Article 6, particularly Article 6.4, marks a significant milestone in advancing international carbon markets under the Paris Agreement. Last year, at COP29, negotiators reached key agreements for a UN-regulated carbon market, solidifying key elements of Article 6.4 as a transparent, standardised mechanism for crediting emission reductions and facilitating cross-border carbon credit trading. This enhanced structure aims to support countries and private sector entities in reducing emissions, in line with the Paris Agreement's ambition to limit global warming to well below 2°C.
Previously, bilateral agreements such as the 2022 deal between Singapore and Switzerland—to transfer credits from renewable energy projects in Southeast Asia—highlighted the potential of Article 6. However, these fell under Article 6.2, which enabled cooperative approaches but lacked uniform oversight and standardisation. The establishment of the UN market under Article 6.4 addresses these gaps by introducing a globally recognised system with standardised rules, independent verification, and greater regulatory oversight.
COP29 resolutions introduced mechanisms to prevent double counting, finalise governance structures, and integrate registries under Articles 6.2 and 6.4. These developments mark a significant step forward in ensuring a credible and transparent global carbon market, particularly under Article 6.4, which is designed to facilitate high-integrity carbon credit transactions.
A core strength of Article 6.4 is its emphasis on additionality—ensuring that carbon credits genuinely represent emissions reductions that would not have occurred in the absence of the carbon market mechanism. Without such a system, many projects could simply continue business as usual while claiming credit for reductions they would have made regardless. To combat this, Article 6.4 enforces stringent additionality tests, independent audits, and stricter validation criteria, preventing the proliferation of "phantom credits" that do not reflect real-world emissions cuts.
Beyond additionality, environmental integrity under Article 6.4 extends to addressing leakage and permanence—two critical challenges in carbon markets. Leakage occurs when emissions reductions in one area lead to increased emissions elsewhere. For example, protecting one section of a forest might push deforestation activities to another unprotected area, negating the intended climate benefits. Similarly, permanence is crucial to ensuring that carbon sequestration efforts—such as afforestation or reforestation—yield lasting benefits. If carbon stored in forests is later released due to wildfires or land-use changes, the initial gains are lost. Article 6.4 integrates safeguards to mitigate these risks by requiring buffer reserves, continuous monitoring, and regulatory oversight.
Another key advantage of Article 6.4 is its built-in social safeguards to protect local communities, indigenous peoples, and natural habitats from unintended negative impacts. Carbon offset projects, particularly in the forestry and land-use sectors, can directly impact livelihoods by restricting land use or shifting economic activities. Recognising these risks, Article 6.4 mandates robust stakeholder engagement, ensuring that projects adhere to principles of free, prior, and informed consent (FPIC) for indigenous groups, incorporate transparent benefit-sharing mechanisms, and align with human rights protections. This approach promotes equity and sustainability, ensuring that carbon markets deliver climate benefits without harming vulnerable communities.
However, despite this progress, challenges remain as debates over the eligibility of emission avoidance credits and the transition of projects from the Kyoto Protocol's Clean Development Mechanism (CDM) into the Article 6.4 system remain contentious. These unresolved issues require further negotiation to ensure the integrity and credibility of the global carbon market.
The stakes are high, as fully operational Article 6 mechanisms could unlock an estimated $1 trillion in annual climate financing by 2030. With the framework for Article 6.4 now in place, countries and private entities have a unique opportunity to scale up carbon market, reducing the need for fragmented bilateral agreements and fostering greater trust and participation in international carbon markets. Moving forward, nations must prioritise strengthening global partnerships, addressing unresolved concerns surrounding emission avoidance credits, and refining procedures for transitioning CDM projects into the Article 6.4 system. By addressing these challenges and refining implementation mechanisms, Article 6.4 has the potential to become a cornerstone of international climate action, ensuring that carbon markets contribute meaningfully to global decarbonisation efforts.
Contributor:
