The Article 6.4 mechanism of the Paris Agreement

The Article 6.4 mechanism of the Paris Agreement

The Article 6.4 will create a global carbon market overseen by a United Nations entity referred to as the “Article 6.4 Supervisory Body” (6.4SB). Once operational, a project must gain approval from both the implementing country and the Supervisory Body before issuing UN-recognized carbon credits, known as Article 6.4 emission reductions or A6.4ERs. Buyers can include countries, companies, or individuals. A6.4ERs must be used (and any necessary adjustments made) within the NDC period in which they originated.

The Article 6.4 rules aim to prevent double counting through “corresponding adjustments,” with the selling country deducting credits from its greenhouse gas inventory, and the buyer accounting for them to meet climate goals.

2% of A6.4ERs will be cancelled (overall mitigation in global emissions, or OMGE), and 5% will go to the Adaptation Fund for reselling (share of proceeds, or SOP).

Clean Development Mechanism projects can transition to the Article 6.4 mechanism with approval from the project’s host country and compliance with new rules, except for methodologies. CDM methodologies can be used until December 31, 2025, or the end of the current crediting period, whichever comes first. From 2026, full compliance with Article 6 is required.

Transitioned CDM credits to A6.4ERs can be used for countries’ first nationally determined contributions if produced from projects registered on or after January 1, 2013.

For a successful launch of the Article 6.4 mechanism, consensus on methodologies, removals, rules on monitoring climate projects, assessing reversal risks, sustainable development tool, and dispute procedures is crucial. The finalization of rules for implementing Article 6.4 may take some years, during which the Article 6.2 mechanism and Voluntary Carbon Standards will play leading roles in realizing climate projects.