How Article 6 powers global climate cooperation?

October 11, 2023
Photo: UNDP Kazakhstan

The Paris Agreement sets the stage for a global fight against climate change. Central to this effort is Article 6, a tool promoting innovative financing and cross-border collaboration. Here's how it's changing the game. 

At the heart of the Paris Agreement lies a commitment by countries to set individual climate protection plans, known as "nationally determined contributions" (NDCs). Article 6 champions a unique approach. Recognizing that some nations might falter in achieving emission reductions solo, it facilitates the trade of pollution-reduction efforts. Think of it as countries buying and selling emission reduction credits. Beyond just curbing carbon, this cooperative spirit boosts progress toward the Sustainable Development Goals (SDGs) in developing countries.

A driving concept in Article 6 is "Internationally Transferrable Mitigation Outcome" (ITMO), which allows countries to cut their greenhouse gas emissions by investing in projects that reduce emissions in other countries. However, to use ITMOs to meet emission reduction targets, countries need authorization from fellow participants. This authorization process is crucial for international cooperation under Article 6 because it determines when emission reductions achieved in one country can be counted as ITMOs.

Several countries that are keen to collaborate through Article 6, have started to prepare their Article 6 ‘readiness’ which means that a country is ready to use international cooperation and opportunities provided by the Paris Agreement effectively. It involves having in place capacities and systems and organizing institutional framework and related monitoring procedures so a country can fairly and transparently make the most of these agreements and understand non-market opportunities too.

The World’s first case of ITMO transfer 

There are countries like Japan and Switzerland that have established clear systems and frameworks for purchasing and incorporating these specific credits into their NDCs. 

For instance, Switzerland has a climate pledge to cut its greenhouse gas emissions in half by 2030. For that, the Swiss Government plans to achieve it by leveraging ITMOs. This strategy not only allows Switzerland to meet ambitious climate goals but also expedites the execution of climate mitigation projects that deliver significant development advantages in developing countries.

As a result, last year during the COP 27 (Climate Change Conference) the Government of Ghana officially authorized the transfer of mitigation outcomes to Switzerland as a result of the climate-smart rice project that supports the training of over thousands of rice farmers. UNDP played a crucial role in facilitating this bilateral agreement between Ghana and Switzerland which operates under the framework of Article 6.2 of the Paris Agreement.

How can Kazakhstan advantage of participating in cooperative approaches?  

Engaging in cooperative approaches holds numerous benefits for Kazakhstan. Firstly, it can help secure funding for expensive climate mitigation measures. By engaging in these approaches, Kazakhstan can access cutting-edge innovations and technologies that might otherwise be out of reach and unaffordable. This presents an opportunity to attract investment into vital economic sectors and finance ambitious projects requiring substantial resources. 

The critical aspect of carbon markets is that this is an instrument to leverage funding into green technologies that can not be economically feasible without this additional support. 

There can be non-transferred mitigation outcomes that are beyond the emissions reductions being transferred. Some of the emission reductions achieved may be retained by the host country to contribute to its NDCs. Moreover, these activities can lay the groundwork for future emissions reductions by lowering technology costs, addressing barriers to investment and behavioral changes, or introducing new technologies and skills.

Moreover, cooperative approaches can yield sustainable development benefits as climate mitigation efforts come with positive side effects too such as improving public health, ensuring access to clean water, creating decent employment opportunities, reducing societal inequalities, and further incentives for climate mitigation projects.  

The effectiveness of cooperative approaches depends on well-crafted domestic framework and policies which facilitate the approval and registration of mitigation activities and an authorisation processand that actively involve the government in the transfer of ITMOs. Transferring nations thus possess the capacity to specify the activities they grant authorization for. This empowerment enables them to strategically promote investments in activities aligned with their national climate and sustainable development objectives, resulting in strategically valuable lasting benefits.

UNDP increasing the understanding of national Article 6 implementation 

Since Kazakhstan fully recognizes the imperative of transitioning towards a greener future and ratified the Paris Agreement in 2016, UNDP has been actively supporting the government in fulfilling its reporting and transparency commitments under the Agreement. As an important component of Kazakhstan's climate policy, UNDP has been focusing on preservation of forests through the BIOFIN initiative which creates a favorable legal environment to implement carbon offset mechanisms for international and transnational businesses operating in the country.

For UNDP, empowering countries to take the lead is paramount. It is not enough for countries to merely be aware of projects within their jurisdictions; they must have the authority to prioritize projects based on their NDC targets and long-term low carbon development plans.

However, with this increased oversight and decision-making power comes a heightened sense of responsibility. Countries must possess the technical capacity to thoroughly evaluate and approve projects, knowing that they will be held accountable for their choices. This responsibility should also come with the opportunity for financial rewards, recognizing the efforts invested but keeping in mind the sustainability of the investment of private sector, who usually pre-finance the projects.

Even if a country chooses to rely partly on independent standards, it remains imperative for the government to assess the alignment of projects with national strategies and goals. Approval or authorization by the government ensures that projects are in harmony with the country's vision, the Paris Agreement, the NDC and the LEDS – without shortcuts or loopholes.

In order to help address these new complexities of carbon markets, UNDP has set up a dedicated Facility, Carbon Payment for Development with a comprehensive support package that consists of 3 pillars:

(i) technical assistance and capacity building

(ii) Digital solutions to streamline the implementation processes 

(iii) Direct financial incentives through carbon payments based on verified mitigation outcomes.

UNDP Resident Representative in Kazakhstan, Katarzyna Wawiernia (1), Ambassador of Japan to Kazakhstan, H.E. Jun Yamada (2), and Minister of Ecology and Natural Resources of the Republic of Kazakhstan, Yerlan Nysanbayev (3), giving a speech at the National Consultations

Photo: UNDP Kazakhstan/Batyr Aubakirov

As part of these offer, from October 11 to 13, UNDP, in collaboration with the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan, will host national consultations in a workshop format in Astana, Kazakhstan. The main goal is to provide guidance on implementing Article 6 of the Paris Agreement and to develop Kazakhstan's Article 6.2 Framework. 

Photo: UNDP Kazakhstan/Batyr Aubakirov

This event presents a valuable opportunity for the country to enhance its readiness and knowledge base regarding the effective and efficient utilization of mechanisms outlined in Article 6. It will also facilitate an assessment of existing readiness capabilities and the prioritization of future steps in climate change. 

Photo: UNDP Kazakhstan/Batyr Aubakirov

*** These national consultations are organized with the support of BIOFIN initiative that develops and promotes financial solutions including carbon offsets for low-carbon green development.