Understanding Article 6 and its purpose
The Paris Agreement, adopted in 2015, is a global agreement in which countries agree to work together to combat climate change. One part of this agreement is Article 6. In simple terms, “sharing is caring” is the bottom line of this article. It encourages voluntary international cooperation to achieve each country’s climate goals, also known as Nationally Determined Contributions (NDCs).
Why does Article 6 matter?
Article 6 is a crucial tool in the fight against climate change. By working together, countries can reduce greenhouse gas (GHG) emissions more efficiently and cost-effectively while supporting sustainable development and ensuring environmental integrity. The idea behind it is that some countries have more resources, technology, or capacity to reduce emissions than others and can share these resources or credits to support weaker nations. By allowing emissions trading and promoting cooperative approaches, projects can:
- Stimulate innovation in technologies to reduce emissions or remove CO2 from the atmosphere
- Provide funding for climate projects in developing countries
- Ensure that global emissions are reduced cost-effectively and equitably
- Enable the sharing of knowledge and resources between countries
- Help countries to achieve bigger and faster results needed to meet the 1.5° C goal
How does Article 6 work?
Article 6 works through three main mechanisms:
- Emissions trading (Article 6.2)
Countries can trade emission reductions (called “mitigation outcomes”) internationally through mutually agreed bilateral agreements. For example, if one country reduces emissions more than it requires, it can sell extra reductions to another country that needs them to meet its own targets. These trades must follow strict rules to ensure transparency and avoid double counting of emission reductions.
- A new global carbon market (Article 6.4) – Paris Agreement Crediting Mechanism (PACM)
Article 6.4 establishes a carbon market mechanism overseen by a United Nations body called the Article 6.4 Supervisory Body. This body establishes centralised rules for trading carbon credits, replacing bilateral agreements. It approves and oversees projects that generate and transfer carbon credits from specific emission reduction or removal initiatives. To issue UN-recognised carbon credits, both the host country and the Supervisory Body must approve the projects. These credits can be purchased by countries, companies, or individuals to meet their climate change commitments.
- Non-market approaches (Article 6.8)
Not all cooperation has to involve market transactions. This article covers international initiatives such as knowledge sharing, capacity building, and technology transfer, aiming to help countries achieve their climate goals without relying on carbon trading.
The operationalisation of these mechanisms, particularly Article 6.4, was further developed at COP29, where negotiators adopted standards to underpin a global UN-backed carbon market (PACM). This development will make it easier to create, buy, and sell carbon credits, which are critical to achieving national emission reduction targets and net-zero goals.
Do you want to know more about the changes made to Article 6 at the last COP29 in Baku, Azerbaijan? Then click here.
What are the challenges?
While Article 6 offers exciting opportunities, it also comes with some challenges:
- Avoiding double counting Double counting occurs when the same emission reductions are claimed by both the host country and the country purchasing carbon credits. This undermines environmental integrity and global climate goals. To avoid this, robust accounting systems and international rules are needed to track and report emission reductions transparently.
- Ensuring real impact Reductions must be taken seriously and not just look good on paper. If emission reductions are not real, additional, or permanent, the overall effectiveness of the Article 6 mechanisms will be compromised. In this case, “additional” means that the reductions would not have occurred without the Article 6 intended activity.
- Securing social equity and sustainable development There is a risk that Article 6 activities could benefit wealthier countries or lead to negative social or environmental impacts in host countries (e.g., displacement of communities or depletion of local resources). Therefore, safeguards and guidelines must be put in place to ensure that Article 6 promotes sustainable development and delivers social justice to all.
These risks are receiving particular attention during the COP 29 negotiations, as well as in ongoing monitoring body meetings throughout the year, and the remaining challenges explain why negotiations have progressed more slowly than many market participants had hoped. However, with the recent agreements in Baku on Article 6.4 infrastructure, methodological rigour, accountable registries, and sustainable development safeguards will be further refined before full operationalisation. These developments are expected to provide much-needed clarity on the governance and integrity of the mechanism, paving the way for its full operationalisation while maintaining investor confidence and alignment with global climate goals.