More on Article 6

In the last blog, we noted one of the outcomes of COP26 was the Article 6 agreement to a set of unified and internationally-controlled standards including provisions to avoid situations where the same emissions reductions are claimed by multiple companies or countries. The focus of the agreement relates to Articles 6.2, 6.4 and 6.8.

Article 6.2 provides for ‘cooperative approaches‘ to be established directly between countries for the purpose of trading Internationally Traded Mitigation Outcomes (ITMOs) between jurisdictions. Countries can cooperate to develop emissions reduction activities in a host country, generating ITMOs that can be transferred to the partner country for use towards their Nationally Determined Contribution (NDC), or to other stakeholders for other international mitigation purposes. The agreement details are at https://unfccc.int/sites/default/files/resource/cma3_auv_12a_PA_6.2.pdf.

An example ITMO project is the commitment by the Australian Government of AUD$104 million to develop an Indo-Pacific Carbon Offsets Scheme, under which it will share technical expertise in carbon accounting with its regional partners, enabling them to meet new Paris Agreement emissions reporting obligations.

Article 6.2 programs must deliver overall mitigation in global emissions, ensuring no net-increase in emissions of participating countries (using appropriate safeguards/limits). Another important requirement is that the activities contribute to Parties’ sustainable development objectives, acknowledging that countries should appropriately respect, promote and consider their respective obligations on human rights, right to health, the rights of indigenous peoples, local communities, migrants, children, persons with disabilities and people in vulnerable situations and the right to development, as well as gender equality, empowerment of women and intergenerational equity.

ITMOs are measured in tonnes CO2-e or in other non-GHG metrics determined by parties that are consistent with their NDCs. Units that can be authorised for use towards an NDC or authorised for use for other international mitigation purposes outside of an NDC.

Article 6.4 provides a top-down global platform described as the Sustainable Development Mechanism. The 6.4 market will replace the Kyoto Protocol’s Clean Development Mechanism (CDM). Details are at https://unfccc.int/sites/default/files/resource/cma3_auv_12b_PA_6.4.pdf.

Activities undertaken under the Article 6.4 mechanism must achieve mitigation of GHG emissions that is additional and use 6.4 approved methodologies that minimize risk of non-permanence and leakage. They must also avoid any negative social and environmental impacts.

Activities are categorized as emission reduction activities or carbon sequestration activities (i.e. removals). The units to be generated will be called A6.4ERs and each unit will represent one tonne of CO2-e.

Article 6.4 activities commence in 2021. For emission reduction activities, crediting periods will be for either five-year (with the option to renew the crediting period twice) or a single non-renewable crediting period of 10 years. For removals, crediting periods will be either 15 year, with the option to renew the crediting period twice.

A Supervisory Body will be established to oversee the Article 6.4 mechanism. The Supervisory Body shall comprise 12 members from Parties to the Paris Agreement, including two members from each of the five United Nations regional groups, one member from the least developed countries and one member from a small island developing nation. There will be an emphasis on ensuring gender-balanced representation on the Body.

The Supervisory Body will maintain a registry to account for the A6.4ERs to ensure they are tracked properly and double counting avoided. Notably, A6.4ERs can be used as ITMOs but not all ITMOs will be 6.4 compliant.

Five percent of the share of proceeds (SoP) from the generation of A6.4ERs will be directed towards the Adaptation Fund. The Adaptation Fund is a source of adaptation finance for least-developed and vulnerable states impacted by climate change.

Certified Emissions Reduction units (CERs) already issued under the CDM may be used towards achievement of an NDC provided that the Project was registered after 2012 . CERs will be transferred from the CDM registry to the 6.4 mechanism registry and identified as pre-2021 emission reductions.

CERs may only be used towards achievement of the first NDC only. In the case of Australia, that means CERs can be applied to its commitment to reduce emissions by 26-28% by 2030. Current CDM registered activities may be transitioned to and registered under the Article 6.4 mechanism.

Article 6.8 provides for the facilitation and collective coordination of non-market approaches (NMAs) to be undertaken by countries to drive emissions reduction. The participants will include various combinations of countries, private sector entities and civil society organisations.

NMAs have been further defined by the NMA framework confirmed at COP26 and in practice are more likely to take the form of multi-stakeholder pledge programs, initiatives, statements, roadmaps and commitments that collaboratively help to implement mitigation and adaptation activities and simultaneously help countries to increase their NDC ambitions. Agreement details at: https://unfccc.int/sites/default/files/resource/cma3_auv_12c_PA_6.8.pdf.