COP29's Article 6 Agreements

Article 6 agreements, finalized at COP29, have established a robust framework for international carbon trading. Here's how they redefine opportunities for exporters. With the global carbon market expanding rapidly, these agreements enable countries and businesses to trade carbon credits efficiently, channeling significant investments into emissions reduction and sustainable projects. For Indian exporters navigating regulations like the EU’s Carbon Border Adjustment Mechanism (CBAM), Article 6 offers a strategic pathway to compliance and competitiveness. This blog, crafted for World of Circular Economy, explores the mechanics of Article 6, its real-world applications, challenges, and transformative potential for global trade and sustainability. Join us to understand how these agreements unlock new avenues for credible climate action and market access. 

Article 6: The Foundation of Global Carbon Trading 

Article 6 of the Paris Agreement facilitates international cooperation by allowing countries to trade mitigation outcomes, essentially carbon credits, to meet their Nationally Determined Contributions (NDCs). It comprises three pillars: Article 6.2 for bilateral and multilateral agreements, Article 6.4 for a UN-supervised crediting mechanism, and Article 6.8 for non-market approaches like technology transfers. The COP29 agreements, finalized in Baku, operationalized these pillars with clear rules on authorization, registries, and standards to ensure transparency and integrity. 

These rules mandate countries to authorize Internationally Transferred Mitigation Outcomes (ITMOs), maintain public registries, and report to the UNFCCC to prevent double-counting. The Paris Agreement Crediting Mechanism (PACM) under Article 6.4 replaces the Kyoto Protocol’s Clean Development Mechanism (CDM), incorporating safeguards for human rights, environmental protection, and Indigenous Peoples’ consent. For exporters, this means access to verified credits that align with CBAM and India’s Business Responsibility and Sustainability Reporting (BRSR), reducing compliance costs and enhancing market access. 

COP29’s Impact: A New Era for Carbon Markets 

The COP29 agreements mark a milestone by fully implementing Article 6. Article 6.2 now supports bilateral trades with transparent registries and UNFCCC reviews to address reporting inconsistencies. Article 6.4’s PACM has adopted methodologies for emission reductions and removals, ensuring additionality and alignment with Paris temperature goals. CDM projects, such as renewable energy initiatives, can transition to PACM, with credits issued for reductions achieved post-2020. 

These agreements are expected to mobilize significant financial flows for NDCs, Analysts estimate tens of billions in potential cost savings through cooperative approaches. For Indian exporters, particularly in steel and cement, Article 6 enables trading credits to offset CBAM tariffs. Early adopters like Ghana, which authorized ITMO exports in 2022, demonstrate the potential, having secured deals with European partners. 

Article 6.2 governs cooperative approaches, allowing countries to trade ITMOs bilaterally or multilaterally. COP29 clarified authorization processes, requiring public registries and NDC adjustments to ensure transparency. Real-world examples highlight its momentum. Singapore and Papua New Guinea signed an agreement at COP28 to develop credits, while Japan’s Joint Crediting Mechanism has 29 bilateral deals, including with Vietnam for renewable energy credits. Norway committed 740 million dollars to Article 6.2 projects, funding initiatives like solar farms. 

For Indian exporters, Article 6.2 opens doors to monetize low-carbon practices. A steel manufacturer adopting green hydrogen can sell ITMOs to EU buyers, offsetting CBAM costs and generating revenue. Challenges include establishing national ITMO frameworks, but COP29’s transparency rules reduce risks by ensuring UNFCCC oversight. 

Article 6.4: Centralized Crediting Mechanism 

Article 6.4’s PACM is a UN-supervised system issuing certified credits (A6.4ERs). COP29 finalized standards for methodologies, additionality, and removals, with safeguards for human rights and environmental integrity. CDM projects, like wind farms in China, can transition to PACM, issuing credits for reductions since 2021. The first issuances are expected soon, with methodologies covering renewables, reforestation, and direct air capture. 

For exporters, PACM credits are a reliable tool for CBAM compliance, as EU importers prioritize A6.4ERs. Indian solar projects, such as those under the National Solar Mission, can generate credits, funding NDCs and creating jobs. The mechanism’s focus on quality addresses voluntary market criticisms, with mandatory reporting ensuring accountability. 

Article 6.8: Non-Market Cooperation 

Article 6.8 promotes non-market approaches, such as technology transfers and capacity-building. COP29 recognized the Non-Market Approaches (NMA) Platform, fostering collaboration on biodiversity and development. India can leverage this to access European green tech, enhancing solar and wind capacity without trading credits. This supports exporters by strengthening low-carbon supply chains, supports developing nations through knowledge-sharing. 

Implementing Article 6 requires robust national frameworks, which can be complex for developing countries. Inconsistent reporting risks credit invalidation, but UNFCCC reviews mitigate this. Technical capacity gaps, noted by the LDC Group at COP29, demand support, which initiatives like Norway’s funding address. 

Opportunities are vast. Article 6.2 bilateral deals can fund India’s 500 GW renewable target, with credits offsetting CBAM tariffs. PACM credits attract investors, with 70 percent of global buyers favoring verified options. Exporters with verified low-carbon products may achieve higher market preference.. 

Real-World Examples: Article 6 in Practice 

Verified projects illustrate Article 6’s impact. Ghana’s 2022 ITMO exports under Article 6.2 funded agroforestry, generating 2 million dollars for local farmers. Japan’s Joint Crediting Mechanism supported a 100-megawatt solar project in Vietnam, issuing credits bought by Japanese firms to meet NDCs. In India, a 2024 CDM-transitioned wind farm in Tamil Nadu issued 200,000 credits under PACM, attracting European buyers and funding expansion. These examples show how Article 6 channels finance high-impact projects, benefiting exporters and communities. 

The Path Forward for Indian Exporters 

Indian exporters should map emissions, verify credits through PACM or bilateral deals, and align with BRSR and CBAM. Early action can secure EU market access, with 75 percent of importers preferring Article 6-compliant suppliers. This supports India’s net-zero goal and creates 1 million green jobs by 2030. As Mukhtar Babayev, COP29 President, noted, Article 6 is a transnational solution driving climate finance.