Introduction to Article 6 of the Paris Agreement: Carbon credits and climate goals
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Introduction to Article 6 of the Paris Agreement: Carbon credits and climate goals
Article 6 of the Paris Agreement enables countries to work together to meet global climate targets through emissions trading. This blog explores the structure of Article 6, its significance in carbon markets, and its role in limiting global warming.
Key concepts and acronyms in Article 6
ITMO: Internationally Transferred Mitigation Outcomes, which are traded under Article 6.2.
MOU: Memorandum of Understanding, an agreement defining the terms of ITMO transactions.
OMGE: Overall Mitigation in Global Emissions, a concept ensuring no over-crediting in carbon trading.
NDC: Nationally Determined Contributions, the climate actions and emissions reduction targets that each country commits to under the Paris Agreement.
What is Article 6 of the Paris Agreement?
Article 6 of the Paris Agreement is a framework allowing countries to cooperate on reducing greenhouse gas emissions through the transfer of carbon credits. Adopted in 2015, the Paris Agreement aims to keep the global temperature rise below 2°C, ideally at 1.5°C. Article 6 creates a system for countries to meet these goals collectively, focusing on two main pathways: Article 6.2 and Article 6.4.
Article 6.2: Bilateral agreements and flexibility
Under Article 6.2, countries can form bilateral agreements to trade emissions reductions, known as Internationally Transferred Mitigation Outcomes (ITMOs). This system allows each country to define its standards and trading terms, fostering flexibility. However, since each country’s approach to carbon trading differs and can change over time, countries can mutually agree upon a common understanding of environmental integrity as it best fits their national goals.
Article 6.4: A UN-supervised carbon market
Unlike Article 6.2, which focuses on bilateral agreements, Article 6.4 establishes a carbon market with UN oversight. This market will enable countries and companies to offset their emissions globally, with rigorous environmental standards ensuring that all emissions reductions are additional, measurable, and permanent. Article 6.4 also mandates the cancellation of 7% of credits generated, 2% for OMGE and 5% for the global adaptation fund to aid the Global South’s climate efforts, making Article 6.2 the preferred mechanism for global carbon credit trading.
 "Differences between Article 6.2 and Article 6.4 in Article 6 of the Paris Agreement.")
Article 6 of the Paris Agreement explained - the differences between Article 6.2 and Article 6.4
The role of corresponding adjustments in Article 6 of the Paris Agreement
Corresponding adjustments prevent double-counting of carbon credits. For example, if Country A sells a carbon credit to Country B, Country A cannot count that reduction in its own emissions inventory. This adjustment is crucial for maintaining the integrity of global emissions reductions.
Conditional vs. unconditional NDCs: How Article 6 fits in
NDCs are the foundation of the Paris Agreement, representing each country’s commitments to emissions reductions. Countries outline conditional and unconditional NDCs. Conditional NDCs require international support, while unconditional NDCs can be achieved independently. Article 6 facilitates conditional NDCs by allowing countries to trade credits, incentivising stronger targets.
Ensuring environmental integrity in Article 6 transactions
Environmental integrity is a core principle of Article 6, ensuring all credits are additional, measurable, and real. While Article 6.4 provides strict oversight, Article 6.2’s bilateral agreements offer countries the flexibility to tailor their rules within their MoUs, allowing alignment with each nation's NDC and decarbonisation goals. In practice, this flexibility can encourage high-quality standards that support both near- and long-term decarbonisation targets.
Learn more about the COP negotiations and the global negotiation process here.
Challenges facing Article 6 implementation
With the approval of Article 6.4 at COP29 in Baku, the global carbon market is now poised for a new phase of development. The finalisation of this framework allows us to move forward with building the capacity to operationalise Article 6.4, bringing it from policy into practical implementation. While some countries, like Guyana, had previously advanced through unilateral actions such as generating ITMOs independently, the agreed-upon framework now provides a consistent approach for these instruments across all markets.
Conclusion
Article 6 of the Paris Agreement is a transformative framework for climate action, enabling countries to achieve emissions targets through carbon trading. As challenges are resolved, Article 6 has the potential to accelerate global progress toward net-zero emissions, fostering a sustainable future for all. The fact that operationalising Article 6.4 has seen positive momentum at COP29 is very encouraging and allows us to figure out the best ways to engage with a global carbon market. Read more about the UN global policy framework and the latest news from COP29 here.
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