Paris Agreement’s Article 6 – Eight Years And Waiting

One of the main instruments to implement the pact was Article 6 of the agreement, which would create a just and traceable way to mobilise finance from the developed countries to the developing or less developed economies in lieu of carbon credits.

In essence, the Paris pact’s new rulebook governing carbon markets, was built over the legacy of the older Kyoto protocol of 1997 and the Clean Development Mechanism (CDM), which too had sought to achieve the same result by dividing the world into two parts, based on each country's historic emissions and development status.

The onus of buying carbon credits was placed on the developed world while the developing world was to invest in green projects without a significant setback to their economic goals, according to the agreement signed in Kyoto, Japan.

Of course, we know now that CDM was a failure of epic proportions, given that the largest emitter in the world - the United States - was never a party to it and was also grossly plagued by the issue of double counting.

Till date, countries like India have credits worth billions of dollars with no one to buy them. It is a serious point of contention in climate negotiations even today as many countries feel cheated and would like to see their earlier credits purchased before the world moves on to a newer system of trade.

Paris sought to define a new, more balanced regime for carbon trading where the onus to buy credits was no longer on just one type of country but on any nation unable to meet its Nationally Determined Contribution (NDC) Goals or its declared goal for reducing emissions.

While the arguments of the developing world remained valid in the eyes of many, this new order was far more acceptable to members of the US Congress and others like them who had opposed the earlier Kyoto protocol.

Although it’s worth mentioning here that one of the first acts of Donald Trump as President of the United States was to get America out of the pact and literally the first act of President Joe Biden was to get it right back in.

Despite the claims of unity and balanced participation, the Paris Agreement still remains a polarising issue in many countries in the West who would like weasel their way out of paying, even if by a few more years, no matter the consequences on the planet.

Taking a closer look, we see that there are two main components of the Paris agreement’s Article 6, one is 6.2 where countries can enter into bilateral agreements with other nations to trade emission certificates on the given areas of abatement and then there is 6.4, which establishes the Sustainable Development Mechanism (SDM), a follow up to the CDM where voluntary offsets can be purchased by corporates in different countries to offset their own emissions and reach net zero.

Both are equally important from a strategic point of view for India which has already come out with a list of 13 subjects where it would engage with the rest of the world in 6.2 trades, these areas include critical subjects like Green Hydrogen, Carbon Capture Utilisation and Storage (CCUS), Bio-CNG and energy storage- all the areas where humongous foreign investment is required to scale up technology at the moment.

However, it has almost been a year since the release of the subjects and even though one country (Japan) has shown interest in engagement, no concrete movement has taken place, mainly as there is no clarity on the basic modus operandi for implementing Article 6 and no one wants to put in their money before that emerges.

The value of Voluntary Carbon Markets, where carbon credits can be bought or sold, recently crossed 2 billion USD and is forecast to grow to up to US$50 billion by the end of the decade. However, this marketplace was facing the same problem -- the absence of a clear 6.4 mechanism or rules for trading.

Recent investigations have shown that without a credible monitoring and standardising authority, the voluntary carbon markets can just as easily become a tool for ‘green washing’ by corporates and not much of the reductions claimed will have any basis on the ground.

These findings have caused many investors to pull out of investing in voluntary carbon projects, restricting the already thin amount of resources available to frontline communities trying to adapt to the changing climate.

This is the fundamental reason why not even a fraction of the US$600 billion that should have been mobilised by now under the Paris principles has not been realised, because there is simply no trade mechanism to support it.

So really what has happened of the Paris Agreement in the 8 years since its signing?

The story of Article 6 gives a very reflective example of this journey. This is the year of the launch of Global Stocktake, a point of pause and reflection for the world to see how far we have come in aligning our emissions to the Paris target and the results are simply morbid, to say the least.

Of course, the world is far off from where it should have been and we are much closer to a 4-degree temperature rise by the end of the century. The fact that despite all of this, even COP 28 has not been able to generate a common consensus on the application of Article 6 is an indication of where we are headed.

The developing countries have been forced to change their positions quite drastically over the years, having to forgo some legitimate claims in favour of the Global North so that there is a common system that everyone can abide by.

However, despite all this, the countries of the Global North have repeatedly failed the world in accepting responsibility or even acting responsibly. As the negotiations reach their final stages at COP 28, the entire world awaits its leaders to do what they have been sent to do and reach common ground for the sake of their own countries, for the planet and for humanity as a whole.

(The author is attending COP28, Dubai as part of the UN-sponsored International Youth Climate Delegate Programme. Views expressed are personal)