Article 6 of the Paris Agreement recognizes that countries may choose to cooperate in meeting their national climate goals (or nationally determined contributions (NDCs)), including through international carbon trading. Decisions under the United National Framework Convention on Climate Change (UNFCCC) from COP26 in Glasgow and beyond provide important guidance to countries and other market participants on how carbon credits or “mitigation outcomes” should be internationally transferred. 

In December 2023 at COP28 in Dubai, countries failed to agree on the next iteration of guidance, which dealt a blow to market actors seeking clear rules and guidance. This delay not only prolongs uncertainty for country-to-country transactions, but also has implications for the international aviation carbon market, as well as for voluntary carbon market players who wish to partake in Article 6. While gaps in guidance can create market uncertainties, they do not prevent cooperation under Article 6.  

Each year, countries convene in Bonn, Germany to negotiate the technical elements of the Paris Agreement with a focus on Article 6 guidance as part of the annual UNFCCC intersessional meetings. While countries made some positive progress in Bonn, it all comes down to whether agreement can be reached at COP29 in Baku to adopt this next tranche of guidance.  

Here are Pollination’s key takeaways on the outcomes of the Article 6 discussions and why they matter: 

• Changes in authorisation and revocation: While changes to authorisation, including potential revocation of authorisation, remains an important topic under Article 6.2, Parties did not spend significant time forming compromises or narrowing the options on this topic. In Bonn, Parties chose not to dwell on highly contentious issues that likely require political-level interventions, instead they focused on more technical topics in the hope that they could reduce the number of outstanding issues in advance of Baku. While there may be benefits in allowing countries to change the scope of authorisation, such as the intended use of internationally transferred mitigation outcomes (ITMOs) (e.g., for NDC achievement vs. other international mitigation purposes), the ability for a government to revoke or withdraw authorisation poses concerns for market predictability and stability, especially for private sector actors.  

• International registries: Countries debated the functionalities of the international registry under Article 6.2 and the extent of its interoperability with the Article 6.4 mechanism registry, national registries, and other international registries. Two camps with differing positions emerged:  

– Supporters of centralisation: Some countries want a more centralised approach to the international registry, whereby it could service all potential registry functions, including issuing carbon credits, for countries that do not have national registries; and 

– Supporters of decentralisation: Another group of countries prefer a more decentralised approach, where the international registry serves a tracking and recording function, though the credits would be issued elsewhere (e.g., in the Article 6.4 Mechanism registry, national registries, or third-party registries).  

Most, but not all, developing countries support the more centralised model, as they argue that a fully-functional and interoperable international registry is essential for their access to carbon markets. Whereas, those favouring a more decentralised approach want to maintain the original spirit of cooperative approaches under Article 6—with Article 6.2 providing a decentralised path, and Article 6.4 providing a centralised one. They also fear that centralisation could harm the market’s ability to differentiate carbon credit quality. 

• Emission avoidance: The topic of emissions avoidance has created significant market confusion, as there’s no globally agreed definition of the term. The lack of agreed definition has made negotiations on whether it should be eligible under Article 6.2 and 6.4 very difficult. The term first arose under Article 6.2 years ago when a Party was pushing to be able to use carbon markets as compensation for forgoing fossil fuel extraction. Whereas, another Party more recently called for emissions avoidance to be defined as the “full displacement or prevention of GHG emissions expected to be generated by planned GHG emitting actions in energy, transport, manufacturing, agriculture, human induced deforestation, and other GHG emitting development activities.” Most understand the term to encompass activities to avoid GHGs from something that is not currently an emissions source but will become one without intervention.*1 

In Bonn, countries agreed to continue consideration on the eligibility of emissions avoidance under Article 6.2 and 6.4 at the 68th meeting of the Subsidiary Bodies in 2028. They also clarified that, in the meantime, emissions avoidance activities are not included in the current guidance for Article 6.2 and 6.4. However, without a globally agreed definition of emissions avoidance, market confusion is, unfortunately, likely to persist between now and 2028.  

Overall, the spirit in Bonn was positive and constructive; however, much work remains to resolve the outstanding issues. Hopefully the goodwill engendered in Bonn will set up countries for a productive session in Baku. In the meantime, national-level progress to operationalize Article 6 will and should push forward, as the lessons we learn from Article 6 implementation provide the greatest insights to help inform negotiations and improve future guidance.  

 As in previous years, the private sector will continue to play will play a pivotal role in Article 6 operationalization by serving as project developers, carbon credit buyers, capacity builders, investors and more. By staying apprised of Article 6 developments, carbon market stakeholders can confidently navigate current and emerging Article 6 guidance, as well as their implications for the voluntary carbon market.  

*1. It is important to be aware of the erroneous conflation of avoided deforestation as avoided emissions. Forests experiencing deforestation are a current emissions source and an intervention is needed to reduce those emissions, thus representing emissions reductions. Alternatively, the restoration of degraded forests or afforestation/reforestation activities to enhance forest carbon stocks and represent emissions removals.