Paris Agreement Article 6 host countries should be in 'driving seat'

Any implementation of Article 6 of the Paris Agreement should aim to put countries where carbon projects will be located -- host countries -- in the driving seat, speakers at a webinar organized by carbon projects certifier Gold Standard said.

Article 6 allows governments to exchange emission reductions to help reach their Nationally Determined Contributions -- abatement goals set by the Paris deal.

For example, Brazil could produce emission reductions from a forestry project and sell them to Spain.

While the Paris Agreements provides some guidelines on how the exchange should work, Article 6 is still a black canvas for many parties. But some have started working on implementing the first legal frameworks allowing an exchange of emission reductions among states.

Switzerland, the most advanced country in this regard, has already signed bilateral partnerships with seven host countries -- Dominica, Georgia, Ghana, Peru, Senegal Thailand and Vanuatu -- and is now in talks with Chile and Morocco.

The legal framework implemented by Switzerland and its bilateral partners requires both Switzerland and the host country to authorize any carbon project -- which are usually privately led -- set up under the partnership, Veronika Elgart, Deputy Head, International Climate Policy in the Swiss Federal Office for the Environment said at the webinar.

That, Elgart said, was something that allows the host country to set the conditions for the activities taking place on its soil. "The host country can guide the investments and chose the projects that will improve his country."

The frameworks -- which are legally binding -- allow both the Swiss government and Swiss private entities to use the emission reductions generated in the host countries to meet their abating needs, with all emission reduction obtaining a Corresponding Adjustment from the host country.

According to Veronika, having a CA in place for emission reductions used both by the government and by private entities help give further control to the host country over carbon activities taking place in its state.

In Australia, the government is building ties with countries in the APAC region, to secure a source of emission reductions needed to meet Australia's NDCs.

Australia has already signed partnerships in 2021 with Fiji and Papua New Guinea and is now looking for more partners in the region, Katie Eberle, Manager, International Partnerships in the Australian Department for Industry, Science, Energy and Resources, said at the webinar.

The steps involved in the project included the signature of agreements on mitigation cooperation under Article 6, the development of emission reduction production capacity in the host countries, as well as the addressing of legal readiness gaps.

Australia aims to work with partners to make informed decisions on which programs they want to approve for international trade, Eberle said.

Priorities

According to Adriaan Korthuis, Co-Founder and Managing Partner at advisory company Climate Focus, the first action that host countries interested in Article 6 activities should take would be setting their priorities and decide towards which sectors of their economy they would like to see finance flow.

"Governments should identify their national interests," Korthuis said. "They should understand the options available [i.e., which carbon projects can be implemented] and make decisions in the long-term interest of their own country."

According to Korthuis, Article 6 implementation will offer the opportunity to really scale carbon markets activities and obtain a real environmental action through the emergence of a sectoral approach.

"If a host country wants to develop for example its transport sector, or energy sector, then carbon markets, by engaging with host government, can really scale and move towards a sectoral approach," Korthuis said.

He noted this approach has so far emerged only for forestry projects, through the so called jurisdictional REDD+ projects, while the rest of the voluntary carbon projects remain focused on a small scale and fragmented approach.

As a further way to give host countries control on the carbon activities taking place on their soil, Korthuis suggested that local government should identify local players and empower them to implement the carbon projects needed, instead of just having large international corporations implementing those projects.

Guarantees

While offering host countries the possibility to be in control, legally binding frameworks such as those signed by Switzerland also offer interested investor a guarantee of commitment from the host countries, Elgart said: "A breach of these agreements would be a breach of international law."

That level of guarantees was what was needed to move investors towards Article 6 activities.

"The private sector is willing to invest but it needs a clear framework on the use of article 6.2 units," Andrea Bonzanni, International Policy Director at the International Emission Trading Association said.