Article 6 can make or break carbon markets at COP29. Here’s all you need to know.
With the 29th Conference of the Parties (COP29) just two weeks away, Article 6 of the Paris Agreement is expected to be a focal point of this year’s negotiations, especially after the limited progress made at COP28 last year. Article 6, considered one of the most complex elements of the Paris Agreement, establishes a framework for countries to cooperate on reducing emissions as outlined in their Nationally Determined Contributions (NDCs). Put simply, Article 6 enables countries to trade carbon credits generated from removing or reducing their greenhouse gas emissions, helping other countries to meet their climate goals. Additionally, Article 6 aims to boost climate ambition by allowing capital to flow from nations or other entities to climate projects in countries that are expected to exceed their NDCs.
Observers have noted that the launch of the UN-backed program could help salvage global carbon markets, which have experienced a significant downturn in the face of a credit quality crisis. The question of whether Article 6 will help resurrect those low-quality credits or set a new higher standard is yet to be answered. With the deadline for countries to submit their updated NDCs looming in February 2025 – exactly nine months before COP30 – ironing out the final details of Article 6 will be instrumental to driving down emissions, enhancing global climate cooperation, and restoring trust in voluntary carbon markets and credits.
As countries work to finalize guidance for the implementation of Article 6, the following explainer breaks down its three trading mechanisms: bilateral and multilateral agreements under Article 6.2, a global carbon market under Article 6.4, and non-market approaches under Article 6.8 which allows for countries to support each other’s climate mitigation efforts without trading carbon credits.
Article 6.2: Bilateral and multilateral agreements
Article 6.2 of the Paris Agreement enables countries and other actors, including private sector companies, to engage in cooperative approaches through the transfer of credits known as Internationally Transferrable Mitigation Outcomes (ITMOs). These transfers, conducted bilaterally or multilaterally, allow parties to trade carbon reductions and removals. Participating parties are required to design their own policies and agreements.
Countries can purchase ITMOs from a host country expected to exceed its NDC, allowing the buyer to contribute to its own climate target, as long as the agreement complies with the requirements set out in Article 6.2. Each country is responsible for drafting their own policies and executing their own trades, allowing for flexibility as they use their preferred stipulations, quality requirements, and safeguards.
Countries also have the flexibility to determine the types of projects included in their bilateral agreements under Article 6.2. However, drafting individual policies and initiating trades requires significant capacity and resources not required when working with a standardized process (such as utilizing Article 6.4). Countries looking to enact their own standards or initiate trades before Article 6.4 is operational may opt to utilize Article 6.2 to trade ITMOs.
Implementation
Article 6.2 is now operational, allowing countries to begin trading carbon credits. At COP27, Ghana became the first country to authorize the export of ITMOs. Since then, other nations have followed suit, with Singapore and Papua New Guinea signing a legally binding implementation agreement at COP28 for developing and trading credits. While bilateral agreements are a critical first step, countries will also need to provide letters of authorization, fulfill reporting requirements, and then monitor and verify the project. It is only after the first monitoring cycle that the first issuance and transfer of credits can take place.
In addition to these requirements, countries also need to develop their own national registries, use a third-party registry, or use the Article 6.2 international registry. The Article 6.2 registry, however, is still under negotiation and not yet operational. Reporting and country authorization requirements are also still under negotiation, with a November workshop scheduled to draft recommendations to discuss at COP29. The first ITMO transfer was completed between Switzerland and Thailand in 2024.
Article 6.4: Establishing a global carbon market
Article 6.4 establishes a global carbon market overseen by the United Nations (UN). Reduction or removal credits traded under Article 6.4 are referred to as Article 6.4 Emission Reductions Units (A6.4ERs). The Article 6.4 Supervisory Body, established as a centralized UN body that will approve methodologies, register projects, and manage the registry. The Supervisory Body is composed of a rotating group of 12 members and alternating members selected from a group of negotiators. The Supervisory Body requires two members from each UN regional group, one from a least developed country, and one from small island developing States.
Before proceeding with a project, developers are required to register with the Article 6.4 Supervisory Body. In addition to being approved by the Supervisory Body, projects must also be approved in the project’s host country before they can issue A6.4ERs. Currently, only reduction or removal credits are eligible, but eligibility for avoidance credits will be revisited in 2028. Units on the Article 6.4 registry can be bought by countries, companies, or individuals.
Mitigation contributions
Units that are not authorized (“unauthorized credits”) for meeting NDC goals or other international mitigation goals are referred to as mitigation contributions. Mitigation contributions can be used for a variety of purposes including “results-based climate finance, domestic mitigation pricing schemes, or domestic price-based measures, for the purpose of contributing to the reduction of emission levels in the host Party.” These units are also referred to as “mitigation contribution A6.4ERs.”
Corresponding adjustments
Both ITMOs and A6.4ERs must include a corresponding adjustment. This means the host country deducts the emissions reductions from their accounting, allowing the purchasing country to count them towards their own NDC. Corresponding adjustments ensure that emissions reductions are not double counted in both countries’ reports. In contrast, mitigation contribution A6.4ERs do not require a corresponding adjustment, but they cannot be used towards meeting NDC goals or for international mitigation purposes.
Share of Proceeds (SOP) and Overall Mitigation of Global Emissions (OMGE)
For Article 6.4 units, contributions referred to as Share of Proceeds (SOP) and Overall Mitigation of Global Emissions (OMGE) are required. The SOP is calculated at 5% in volume of issued carbon units, with an additional monetary contribution of 3% of the issuance fee paid for each request. This amount is then transferred as a contribution to the Adaptation Fund. At COP27, the Supervisory Body established five different project size categories to calculate administrative fees. These fees are the responsibility of the host country, not the buyer, since they are due when issued, not when exchanged.
The OMGE contribution is set as an automatic cancellation of 2% of the issued credit volume. This ensures a net drawdown, rather than continuing to offset emissions globally. These units are sent to a cancellation account set up by the Supervisory Body, and the 2% applies to all issued units, whether they are authorized or not.
For Article 6.2 units, it is encouraged, but not mandatory, for countries to include SOP and OMGE within their bilateral agreements.
Article 6.8: Non-market approaches
Article 6.8 establishes a non-market framework for countries to support other countries without trading carbon credits. Through Article 6.8, a centralized platform will be created where countries can submit planned mitigation projects and highlight areas where support is needed. Other countries can then decide to provide financial or technical support. This online platform would be designed to facilitate finding financial support for projects in need of funding.
The road ahead for Article 6 and voluntary carbon markets
The Article 6.4 Supervisory Body convened in advance of COP29, finalizing key standards for methodologies and greenhouse gas removals. Additionally, they agreed on recommendations to be reviewed by negotiators at COP29. With standards approved, project developers can start to submit their methodologies to the Methodology Expert Panel (supervised by the Supervisory Body). Methodologies that are approved through this standard could begin to issue eligible Article 6.4 units.
As COP29 approaches, Clean Air Task Force (CATF) is focused on ensuring that Article 6 negotiations lead to meaningful progress in establishing a transparent, high-quality global carbon market. A key priority is the enforcement of high standards for international carbon credits, crucial to maintaining the integrity of carbon markets and driving real, measurable emissions reductions.
CATF has long emphasized the importance of transparency in these markets, advocating for clear rules of the road on monitoring, reporting, and verification. Strong transparency measures are paramount to preventing double-counting and ensuring that credits represent legitimate climate action, ultimately restoring trust in the voluntary carbon market.
Looking ahead, we’re paying close attention to the quality of carbon credits through an ongoing assessment of forest carbon and biomass-based carbon removal protocols. Ensuring that these protocols meet key criteria will be essential to maintaining the credibility of carbon credits tied to land-use and forest management.
We’re committed to supporting efforts that ensure only high-quality carbon credits are traded and lead to measurable carbon removals and emissions reductions.
