How can Countries and Businesses Collaborate Under Article 6 to Achieve Climate Goals?

The Paris Agreement transformed climate change from a looming disaster into a call for collective, game-changing action. It came as a bold climate pact that turned heads when nearly every country on Earth agreed to tackle climate change together in 2015, keeping aside their historical footprints. Think of it as the world’s climate playbook, with one major goal: keep global temperatures from rising more than 2°C above pre-industrial levels, and if we can, hold it to 1.5°C.

One of the most important arrows in its quiver, to involve the business communities in the fight against climate change, has been Article 6. This has been a reliable and an innovative tool for climate financing across the geographies for internalizing the cost of emissions into economic value chain.

Nationally Determined Contributions and Article 6

At the heart of the Paris Agreement is a commitment by countries to craft their own climate action plans, known as Nationally Determined Contributions (NDCs). But Article 6 introduces a dynamic twist: recognizing that some nations may struggle to meet their emission reduction targets on their own, it opens the door for a global marketplace of climate solutions. Countries can essentially buy and sell emission-reduction efforts, creating a cooperative network that not only curbs carbon emissions but also accelerates progress toward the Sustainable Development Goals (SDGs) in developing nations.

Internationally Transferrable Mitigation Outcomes (ITMOs) allow countries to invest in emission-reducing projects abroad and in a way, count those reductions toward their own climate goals. Countries must secure authorization from their partners in this collaboration. This approval process is vital because it ensures that emission reductions are properly credited and encourages transparency in international cooperation.

Countries Participation

Many nations eager to take advantage of Article 6 have started their "readiness" preparations. This means building the necessary systems, frameworks, and monitoring procedures to participate fully in the international carbon marketplace. Being "Article 6 ready" isn’t just about trading emissions—it’s about seizing the opportunities offered by the Paris Agreement, including non-market approaches, and making sure that everything is handled fairly and transparently.

First ITMO Transfers

Countries like Japan and Switzerland have set up robust systems for integrating these specialized ITMOs or carbon credits into their NDCs, creating a road to meet their climate commitments. Take Switzerland, for example—it has pledged to cut its greenhouse gas emissions by half by 2030. To reach this ambitious target, the Swiss government is leveraging ITMOs. This approach not only helps Switzerland meet its climate goals but also accelerates climate mitigation projects that bring critical development benefits to countries in need.

A prime example of this cooperation unfolded at COP 27, where Ghana officially authorized the transfer of mitigation outcomes to Switzerland, thanks to a climate-smart rice project that trained thousands of rice farmers. The United Nations Development Programme (UNDP) was instrumental in brokering this bilateral agreement, which operates under Article 6.2 of the Paris Agreement. It’s a win-win, where Switzerland fast-tracks its climate progress while supporting sustainable development in Ghana.

How can Countries Benefit from it?

Cooperative approaches offer big advantages for countries, especially in securing funding for climate mitigation projects. These approaches allow developing nations to access advanced technologies and innovations that might otherwise be unaffordable, enabling investment in crucial economic sectors. Carbon markets play a pivotal role by leveraging funds for green technologies that would not be viable without this additional support.

Importantly, cooperative approaches also allow for non-transferred mitigation outcomes, where some emission reductions are retained by the host country to meet its NDCs. These efforts also help lower technology costs, break down investment barriers, and introduce new skills and technologies for future emission reductions.

In addition to mitigating climate change, cooperative efforts provide sustainable development benefits like improved public health, clean water access, job creation, and reduced inequalities. The effectiveness of these approaches, however, hinges on well-structured domestic policies and frameworks that facilitate the approval, registration, and authorization of mitigation activities, ensuring alignment with national climate and development goals. This enables transferring nations to focus investments strategically, yielding long-term benefits.

What's Next for International Cooperation in Climate Action?

What makes the Paris Agreement stand out? Instead of rigid rules, countries set their own goals. No enforcement police here—just public accountability, global peer pressure, and a shared sense of responsibility. This is where provisions like Article 6 come into play. Countries can cooperate with each other and support each other in meeting their climate goals.

There is a potential to play a significant role in achieving global climate goals. However, several challenges need to be addressed, such as preventing double counting of emissions reductions, ensuring equity, and promoting sustainable development.

As countries gain experience with Article 6, we can expect to see further development and refinement of the mechanisms. International cooperation and collaboration will be crucial for maximizing the benefits of Article 6 and ensuring its effectiveness in addressing climate change.