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Article 6 of the Paris Agreement outlines the framework for how countries can internationally trade carbon credits to help reach their climate targets. Under Article 6.4, a host country can generate carbon credits by reducing greenhouse gas (GHG) emissions through the Paris Agreement Crediting Mechanism (PACM) and subsequently transfer them to a buyer.
“Over the last couple of months, we have been – in an accelerated fashion – implementing the [Article 6] rules in a very concrete way. We’ve done baseline standards, we’ve done additionality, so we’re ready for business,” Martin Hession, chair of the PACM, said on the panel.
“We’ve designed a mechanism for a more ambitious future,” Hession said.
But challenges remain, as the panel discussed on June 11. Particularly through how countries incorporate the framework into their own contexts, leading to issues around capacity building, transparency and delays, the panelists said.
Capacity building, or the process of strengthening the infrastructure and knowledge around Article 6 readiness and implementation, remains a challenge for some.
“The challenge is out there to match that ambition. What I’m worried about is will we see that ambitious framework emerge? And there’s a capacity-building issue, we still have a lot of work to do in terms of understanding what long-term strategies are and what they mean for market strategies,” Hession said.
“I really feel a sense of implementation, which is very good. At the same time, Article 6 is complex and [so is its] implementation. We are providing capacity building, so we are regularly communicating and providing support to the countries,” Kazuhisa Koakutsu, director at the Article 6 Implementation Partnership Centre, said.
Progress has been made through the United Nations Framework Convention on Climate Change (UNFCCC) capacity-building work program, launched during COP 27, but participants noted that capacity building ran in parallel with setting the legal regulatory framework for implementation.
“It’s something new; people know about Clean Development Mechanism (CDM) but not what Article 6 is. So basically, we need to build the capacity in parallel with setting up all these legal regulations for Senegal,” Madeleine Diouf Sarr, director of climate change, ecological transition and green finances at the Ministry of Sustainable Development of Senegal, said.
But for others, Article 6 can provide the tools to develop capacity building and other long-term strategies.
“In a pathway to net-zero, where there’s a lot of political steps to take, one needs a strategy to identify what your mitigation options are, what’s least cost, what’s got the highest social benefits. To actually do that long-term planning, you need tools, and they don’t necessarily need to be perfect,” Hession said.
“If you’ve got a horizon scanning tool that allows you to determine what’s transformative for me and at what price and what stage of my development, I think it makes that job easier,” he said.
“Our rules are not that complicated; applying them requires thought, that’s the difficulty,” he added.
“We’ve learned the hard way that where there is profit, policy and people, there’s always complaints, and that is very symptomatic of Article 6,” Daniel Tutu Benefoh, acting director at the climate change unit, Ghana’s Environmental Protection Agency, said.
“It is a matter of trust and context, that you can do all the policies, regulations, negotiations, frameworks, people and teams put in place, [but] if there’s no confidence in the country, if there’s no confidence in the project, if there’s a lack of trust in the process, it doesn’t [make it],” Benefoh said.
“Do we want to have a mad rush for letters of authorization that by 2030 we find out are all hot air? So, I think it takes a lot of transparency and trust to get it down,” he added.
To boost transparency, it was also noted that Article 6 implementation needs to be communicated in a manner which shows it helps the host countries achieve their climate ambitions and meet their Nationally Determined Contributions (NDCs).
“That is important, and that has to be transparent and communicated in a way builds transparency in the country, with partners and with the private sector,” Benefoh said.
Another key challenge was the sheer magnitude of work host countries needed to do for Article 6 readiness and implementation. This included setting the legal and regulatory framework alongside capacity building and communicating transparently.
“The transaction is linked to your NDC, you have to make some corresponding adjustments. You need to ensure that you have transparency and building credibility and you’re informing the population on what you’re doing. So basically, I need to guarantee the environment [we’re] working on, is a stable environment,” Sarr said.
“So, there is a need for having transparent rules, having clarity, but also building capacity. You’re doing all these things in parallel, so this is a magnitude amount of work and of energy,” she added.
“It does take time. The core issue here is how is this contributing to getting us to Paris goals, and that takes time and analysis,” Hession said.
These delays are causing some market uncertainty, with host countries required to complete the above work to engage with Article 6 and make corresponding adjustments to carbon credits from projects within their country. This can be seen within the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) Phase 1, with delays in issuing letters of authorization, keeping prompt supply tight.
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