Article 6.4 Explained: The Framework, Features, and Future Impacts

A step toward harmonising global carbon markets

Carbon Credits

Project Development

Jan 9, 2025

Carolina Amu Trujillo

In our COP29 blog, we focused on providing an overview of the key highlights from the conference, one of the most significant ones being the progress made on Article 6. Notable developments occurred specifically with Articles 6.4 and 6.2, both critical in shaping new rules for global carbon markets.

With that in mind, we are launching a two-part series to explore articles 6.4 and 6.2 in-depth, examining their impact on the market from multiple perspectives. But first, let’s start with the “basics”:

What is Article 6?

Article 6 of the Paris Agreement provides a framework for countries to voluntarily cooperate in achieving their Nationally Determined Contributions (NDCs) by enabling the transfer of carbon credits. These credits, generated from reducing greenhouse gas (GHG) emissions, can help one or more countries meet their climate targets.

The article is divided into three parts:

Article 6.2: Establishes the foundation for trading GHG emission reductions, also known as "mitigation outcomes," between countries.
Article 6.4: Introduces a mechanism, similar to the Clean Development Mechanism of the Kyoto Protocol, for trading GHG emission reductions under the supervision of the Conference of the Parties (COP).
Article 6.8: Focuses on non-market approaches, encouraging cooperation through finance, technology transfer, and capacity building without involving the trading of emission reductions.

This framework supports global efforts to meet climate goals by fostering innovation, collaboration, and efficient resource use.

In this blog, we will dive deeper into Article 6.4

Breaking Down Article 6.4

Article 6.4 of the Paris Agreement introduces a centralised mechanism designed to facilitate international cooperation in reducing greenhouse gas (GHG) emissions and promoting sustainable development. Known as the Paris Agreement Crediting Mechanism, Article 6.4 creates a global voluntary carbon market (VCM) where both countries and private entities can trade carbon credits, allowing for emission reductions in one country to be used toward the climate targets of another. The mechanism operates under the supervision of the Article 6.4 Supervisory Body (SB), which ensures transparency, accountability and effectiveness in how credits are issued and tracked. These credits, called Article 6.4 Emission Reductions (A6.4ERs), must meet strict criteria to ensure credibility and environmental integrity.

The key features of Article 6.4 include:

A Supervisory Body oversight: which establishes rules, approves methodologies and ensures compliance.
A contribution to Global Climate Goals: credits can be used toward a buyer country's Nationally Determined Contributions (NDCs) but must avoid double counting through corresponding adjustments.
Support for developing countries: a portion of the proceeds is dedicated to the Adaptation Fund for developing countries

How will it work?

The process for approving and authorising projects under Article 6.4 is clearly defined as follows:

The host country approves the project
An independent organisation - the Designated Operational Entity (DOE) - checks if the project meets the criteria
The project is registered if it passes the checks
The project is monitored, and emissions reductions are verified
Carbon credits (A6.4ERs) are issued
The crediting period can be extended if initially approved by the host country and after being assessed by the DOE
Some credits (A6.4ERs) go to the Adaptation Fund for developing countries and account for cancellation.
The remaining credits (A6.4ERs) can be traded and used by the buyer country towards its Nationally Determined Contributions (NDCs) or other international mitigation purposes.

The Influence of Article 6.4 on the Carbon Markets

Before the full operationalisation of Article 6.4, the global carbon market state can be summarised in one word: fragmentation. The market is dominated by private standards and multiple methodologies for calculating emission reductions, leading to inconsistencies and varying levels of quality. Moreover, it operates largely independent of national commitments under the Paris Agreement, raising concerns about the effectiveness of carbon offsets in achieving global climate goals.

Article 6.4 addresses these challenges by creating a more standardised, transparent, and effective space. It seeks to transform the market by improving accountability and fostering better cooperation between countries and the private sector, ultimately enhancing progress toward global climate goals.

What’s expected post-Article 6.4 full Operationalisation

A Centralised Framework: Article 6.4 introduces a centralised framework that integrates voluntary and compliance markets under the supervision of the United Nations Framework Convention on Climate Change (UNFCCC).

Standardised Methodologies: The mechanism establishes standardised methodologies for calculating emissions reductions, ensuring greater consistency and comparability.

A Link to NDCs: Article 6.4 Emission Reductions (A6.4ERs) can be used towards countries' Nationally Determined Contributions (NDCs), directly linking the voluntary carbon market to national climate commitments.

Increased Credibility: The oversight of the UNFCCC and the stringent requirements for A6.4ERs are expected to increase the credibility and quality of carbon credits.

Opportunities for the Private Sector: The mechanism provides clear pathways for private standards to adapt and align with Article 6.4, allowing them to participate in the global carbon market.

Influence at Project and Country Levels

At the Project Level: Article 6.4 sets strict criteria for project eligibility, including:

Additionality: Activities must demonstrate that they cause emission reductions or removals that would not have occurred without the mechanism.
Real and Measurable Benefits: Reductions must be quantifiable, verifiable, and linked to real climate action.
Risk Minimisation: Measures must be in place to address risks related to non-permanence, leakage, and potential negative environmental and social impacts.
Stakeholder engagement: Local communities and Indigenous Peoples must be consulted.

For project developers, this means:

Increased rigour in baseline setting and risk assessments.
Higher accountability for monitoring and reporting.
Opportunities to align projects with national priorities and secure international recognition.

At the Country Level: Host countries must meet several prerequisites, such as having:

Submitted NDCs.
Established a national authority for Article 6.4.
Defined the types of activities they will approve.

This empowers countries to:

Directly integrate carbon market activities into their NDCs.
Leverage international support for sustainable development goals.
Ensure that private sector efforts align with national climate strategies.

How Private Standards Fit In

Article 6.4 presents an opportunity for private standards. While some adaptations and challenges are expected, the overall aim is to create a more robust and transparent system for carbon crediting, which can benefit both project developers and buyers:

Existing standards can be integrated into the Article 6.4 mechanism: Private standards like Verra, which currently verify and certify carbon credits, may be eligible to become Designated Operational Entities (DOEs) under Article 6.4. This means they could continue to play a role in validating and verifying emission reductions but within the framework and rules of the Article 6.4 mechanism.

Changes and adaptations will be necessary: Private standards will likely need to adapt their methodologies and procedures to align with the requirements of Article 6.4. This may involve changes to how they assess additionality, monitor projects, and account for reversals, among other things.

Increased rigour and standardisation: Article 6.4's mechanism is expected to have more stringent requirements and standardised procedures than some existing private standards. This could increase rigour and transparency in verifying and certifying carbon credits.

Potential benefits for projects and companies: Projects certified under Article 6.4 may benefit from increased credibility and recognition, as the UNFCCC oversees the mechanism. This could lead to greater demand for their credits and potentially higher prices. Companies that use these credits may also benefit from improved transparency and accountability in their carbon offsetting efforts.

Challenges and uncertainties: Transitioning to Article 6.4 may challenge some private standards as they adapt to the new requirements. There may also be uncertainties around the specific rules and procedures that will be implemented, which could affect the timeline and costs associated with the transition.

The Evolution of Monitoring

Article 6.4 introduces enhanced requirements to ensure transparency and accountability:

Increased Rigour: Monitoring under Article 6.4 requires more stringent standards than some existing private standards. This includes specific requirements for data collection, quality assurance, and risk assessment.

Focus on Reversal Risk: A key change is the emphasis on assessing and mitigating the risk of reversals, which occur when previously stored greenhouse gases are released back into the atmosphere. This includes conducting regular risk assessments and developing risk mitigation plans.

Post-Crediting Period Monitoring: Monitoring continues even after the crediting period ends to assess and quantify any reversals that may occur.

Specific Requirements for Removals: Activities involving removals (e.g., forestation and carbon capture) have additional monitoring requirements, including using specific methodologies and accounting for removals and potential reversals.

Consequences for Non-Compliance: Failure to submit monitoring reports or adhere to monitoring requirements can cause the suspension of credit issuance and other penalties.

This robust framework helps address historical concerns about the integrity of carbon credits. It aims to ensure that the credits issued under the mechanism represent genuine and lasting emissions reductions or removals.

The Big Picture

Article 6.4 represents a significant step toward harmonising global carbon markets. Integrating voluntary and compliance mechanisms allows public and private entities to collaborate on ambitious climate action. This means opportunities for businesses and project developers to align with stringent international standards while contributing to sustainable development and climate mitigation goals where enhanced monitoring plays a significant role.

Stay tuned for part 2 of this series, where we will dive deeper into the development of Article 6.2.