UNDP carbon expert Alexandra Soezer explains how cooperation mechanisms outlined by Article 6.2 of the Paris Agreement can boost climate action and the Sustainable Development Goals
What is Article 6 of the Paris Agreement, and why is it important?
November 9, 2022
We are already witnessing the devastating impacts of climate change across the world, and are fast approaching a 1.5°C rise in global temperature – a crucial tipping point after which irreversible damage will be done. We know what we need to do to curb global warming: greenhouse gas emissions must fall by 43% compared with 2019 levels. And yet, currently the combined Nationally Determined Contributions (NDCs), countries’ climate pledges under the Paris Agreement, would mean only a 10% greenhouse gas emission cut, putting the world on track for 2.5°C.
What is Article 6?
Public funds won’t be enough to finance developing countries’ NDCs. Most emission reduction activities need to be implemented and financed by the private sector. Suitable finance approaches are therefore required – and this is where Article 6 of the Paris Agreement can help.
Article 6 acknowledges that countries can pursue voluntary cooperation in the implementation of their Nationally Determined Contributions to allow for higher mitigation ambition and to promote sustainable development. Article 6.2 outlines the possibility of cooperative approaches and the transfer of Internationally Transferrable Mitigation Outcomes (ITMOs) between different actors, including countries and private sector companies, through bilateral agreements. ITMOs use a carbon dioxide equivalent (CO2e) metric for a new set of market provisions or other greenhouse gas mitigation outcomes that are defined under Article 6.2 of the Paris Agreement.
The mechanisms set out under Article 6.2 on cooperative approaches also underline that beyond emissions reductions, climate mitigation projects can directly or indirectly yield many development benefits – including job creation, technology transfer to increase access to energy, support to livelihoods and food security, gender empowerment and more.
How does it work?
Let’s take an example of cooperative approaches that are already put in place by Switzerland, Ghana, and Vanuatu.
Ghana presented at a dedicated event at COP27 the first-ever bilaterally authorized project to be implemented under this mechanism. Vanuatu presented the first unilateral authorized project, which will pave the way for implementation. By entering these voluntary cooperation approaches through bilateral agreements with Ghana and Vanuatu, Switzerland will reduce its federal administration’s greenhouse gas emissions by using Internationally Transferrable Mitigation Outcomes (ITMOs) to accelerate the implementation of climate mitigation projects with strong development benefits in developing countries. These ITMOs will not be counted towards Switzerland’s NDC but are complementary and will be cancelled without use to any NDC.
In Ghana, the ITMO project on sustainable rice cultivation – which is the first project which will obtain formal authorization for the transfer of ITMOs from a seller country and buyer country – is supporting the training of thousands of rice farmers in climate-smart agricultural practices to reduce methane emissions and enable a more efficient use of water. Another project, for which the Ghana’s Environmental protection agency has established a Public Private Partnership with IRECOP, will generate ITMOs from four composting facilities.
In Vanuatu, the implementation of a rural electrification project for which the Department of Energy will partner with the Vanuatu National Green Energy Fund, and enable the country’s population currently without electricity to have access to reliable, affordable electricity through solar power.
Other projects under development are landfill gas to energy projects in Georgia, a large-scale climate smart agriculture project and a composting project with Emmsa in Peru. In Ukraine, UNDP is currently identifying projects with Astarta on enteric fermentation and manure management.
How is UNDP supporting this process?
UNDP helps to design and implement projects under this Article 6.2 mechanism through its Carbon Payment for Development facility (CP4D) which aims to leverage carbon markets to enable private investments in support of the SDGs. CP4D promotes learning by doing through a dual goal – building deep understanding of carbon finance at the political, regulatory and technical level while delivering climate and social impacts quickly and at scale. The CP4D is capitalized with US$ 125 million to allow for the implementation of more than 6 million ITMOs between 2022 and 2030.
Through this initiative, UNDP provides direct financial incentives for ITMO project implementation and is among the first to create concrete demand for a significant volume of ITMOs. UNDP is engaging with project developers, who have the capacity to upfront invest in projects and set up public private partnerships with governments. The financial incentives are then paid ex-post based on third-party verified ITMOs. In other cases, we work with academia and beneficiaries directly to implement high impact projects, for example in the agricultural sectors in Ghana and Peru.
UNDP is also providing technical support to help countries address the new complexities of carbon markets. This consists in evaluating a country’s regulatory and institutional gaps, as well as the development of Article 6 regulatory frameworks to guide the implementation of Article 6 projects and provide a robust broader framework for carbon markets. With support from UNDP, Ghana is one of the few countries who has already developed such a framework, and we are currently supporting Georgia, Senegal, Ukraine and Uruguay to develop similar Article 6 frameworks. In order to respond to huge demand on Article 6 capacity building, we have developed, together with UNFCCC and other partners, a dedicated online course.
UNDP is also partnering with UNFCCC, the World Bank and the European Bank for Reconstruction and Development to develop a digital infrastructure for carbon markets and simplify ITMO project workflows. As part of this, UNDP has set up the digital Carbon Cooperation platform which helps countries to process ITMO projects more transparently and efficiently. The platform will be linked with the World Bank Climate Action Data Trust to create an end-to-end digital system for Article 6 implementation.
The CP4D is an example of UNDP’s Sustainable Energy Hub ‘future-smart’ approach to development – harnessing new mechanisms, such as the ones detailed in Article 6, partnerships with governments and the private sector, as well knowledge and capacity building to advance integrated development outcomes. It is the kind of innovative approaches that is required to tackle the climate crisis and help put the world on sustainable development pathways that leave no-one behind.