This study guide summarizes key aspects of the carbon market under Article 6 of the Paris Agreement and related topics. It focuses on the mechanisms under Articles 6.2 and 6.4, their functioning and implications for the voluntary carbon market (VCM).

What is the difference between an internationally transferable mitigation outcome (ITMO) and an Article 6.4 emission reduction (A6.4ER)?

• ITMO is an emission reduction transferred between States under Article 6.2. A6.4ER is an emission reduction generated by an activity approved by the Paris Agreement Crediting Mechanism (PACM) under Article 6.4.

What is the role of authorisation in the context of Article 6.2?

• The authorization in Article 6.2 ensures that the ITMO is properly accounted for and transferred to the acquiring party. Both parties must approve the use of the ITMO to achieve the NDC or other international mitigation purposes (OIMP).

What does the term "first transfer" mean at ITMO and why is it important?

• The “first transfer” is the first official application of the corresponding adjustment (CA) in national registries. It provides certainty and transparency as to when the emission reductions are to be applied to the acquiring country.

What are the main elements of transparency in the Article 6.2 mechanism?

• Transparency in Article 6.2 includes disclosure of information about ITMO, the authorization process, first transfers, ownership, cancellations and use to achieve NDC or OIMP.

What are the key points agreed at COP29 regarding Article 6.4?

• COP29 approved standards for methodologies and emission removals, clarified the authorization process for A6.4ER, and set rules for the transition of CDM activities to PACM.

What is a Mitigation Contribution Unit (MCU) and how can it become an A6.4ER?

• An MCU is an emission reduction that has not been authorized as an A6.4ER. It may become an A6.4ER if the host party issues an authorization statement within a specified timeframe.

What is the process for transitioning activities from the Clean Development Mechanism (CDM) to the PACM?

• CDM activities may be transferred to the PACM after approval by the UNFCCC Secretariat and the designated national authority of the host Party. They must comply with all relevant standards and procedures under Article 6.4.

What are the main tasks of the Supervisory Body under Article 6.4 (SBM) and the UNFCCC Secretariat before COP30?

• The SBM is tasked with developing standards, tools and guidelines for PACM, while the UNFCCC Secretariat is to establish a PACM registry and support the transition of CDM activities.

How might COP29 decisions affect the voluntary carbon market (VCM)?

• COP29 decisions may increase the trust and integrity of the VCM, as A6.4ER and ITMO will also be traded on the VCM.

What are the potential impacts of Article 6 carbon markets on VCM?

• Article 6 carbon markets could stimulate VCM by increasing demand for quality emission reductions, but could also lead to higher prices.

Glossary of key terms

A6.4ER: Emission reductions approved by the Paris Agreement Credit Allocation Mechanism (PACM) under Article 6.4.

Authorization: The process by which a host country approves the use of emission reductions such as A6.4ER or ITMO.

CDM: The Clean Development Mechanism, established under the Kyoto Protocol, operated until 2020.

ITMO: Internationally transferable mitigation result, transferred between States pursuant to Article 6.2.

MCU: Mitigation Contribution Unit, emission reduction that was not authorized as A6.4ER.

NDC: Nationally Determined Contribution, a country's commitment to reduce emissions and adapt to climate change.

OIMP: Other international mitigation purposes, the use of emission reductions for purposes other than achieving NDCs.

PACM: Paris Agreement Credit Allocation Mechanism, Market for A6.4ER under Article 6.4.

First transfer: First official application of the corresponding adjustment (CA) in national registries, transferring the emission reductions to the acquiring party.

SBM: The supervisory authority under Article 6.4, which oversees the functioning of the PACM.

VCM: A voluntary carbon market where companies buy and sell emission reductions to offset their emissions.

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