Article 6.4, often referred to as the Paris Agreement’s credit allocation mechanism, sets out key principles for the creation of a global carbon credit market. This market allows countries to achieve their nationally determined contributions (NDCs) and net-zero emissions targets through the purchase and sale of carbon offset credits. By this year, the Parties to the Paris Agreement were to finalise the technical rules and procedures necessary to implement the mechanism under Article 6.4.

By October 2024, the UN-backed oversight body responsible for setting the framework for the Paris Agreement's credit mechanism has finalized two key standards on carbon removal and the development of carbon allocation projects. First standard (standard) contains requirements for the development and evaluation of projects under this credit mechanism. The second standard sets criteria for projects that remove greenhouse gases from the atmosphere.

These standards provide the necessary guidance for developers of carbon offset projects, including the development and submission of methodologies for their projects. This enables these projects to be registered under the Paris Agreement’s credit allocation mechanism and increases the dynamism of the global carbon market by ensuring the verifiability of emission reduction projects. The credit mechanism also facilitates direct financing for the implementation of these projects, thereby incentivizing countries and the private sector to reduce their carbon footprint.

The Authority plans to continue its work in 2025, in particular to clarify the rules on credit risk. Notably, a recent decision requires the Authority’s work to be guided by “the best available science.”

The adoption of Article 6.4 standards at COP29 represents an important step towards a more efficient and integrated global carbon market. However, the Paris Agreement parties still need to agree on several remaining aspects of Article 6, including Article 6(2), which would allow different parties, such as countries and private companies, to exchange emission reductions through bilateral agreements. Spring