London, 11 November (Argus) — The current price of many internationally-transferred mitigation outcomes (Itmos) generated under Article 6.2 of the Paris Agreement is discouraging participation in the carbon trading mechanism, head of carbon markets at the UN development programme’s climate hub Leticia Guimaraes told delegates at the UN Cop 30 climate conference in Belem, Brazil.
The price of an Itmos must capture not just the cost of the emissions reduction activity itself, Guimaraes said, but also the transaction and opportunity costs governments face when making so-called corresponding adjustments to their nationally determined contribution (NDC) to the Paris deal — which ensures emissions cuts are not double counted.
“Many current prices do not yet internalise these factors,” she warned, “limiting participation and risking the long-term viability of cooperative approaches”.
Expectations that Article 6 will bring large flows of climate finance to all countries must also be managed, Guimaraes said, given that not all countries with low emissions or limited institutional capacity will have equal opportunities to generate Itmos.
Other hurdles to Article 6.2 development include a reluctance by countries to issue authorisations under the mechanism, Guimaraes said, many of whom are concerned about overselling their emissions reductions they may later need to meet their own NDC targets.
The EU’s lead negotiator on international carbon markets, Martin Hession, also spoke of a “capacity crunch” stemming from a reluctance to authorise Itmos transfers. The bloc is running a capacity building project with Peru, Tanzania and Sri Lanka designed to provide a systemic framework for Article 6 in those countries.
While the EU will not make use of Article 6 within the next NDC cycle, which runs to 2035, it has provisionally agreed to allow the use of international carbon credits from 2036 onwards as part of efforts to reach its domestic 2040 emissions cut target.
Marrying project-level emissions accounting with national-level inventories and NDCs is also “one of the hardest challenges” for host countries, Guimaraes said, requiring national experts, inter-operable data platforms and co-ordination between ministries.
And the foundations of using the mechanism — national registries, authorisation procedures and transparent monitoring and reporting frameworks — all require substantial upfront investments and years of capacity development, she said.
Boyoung Kang, a director at South Korea’s environment ministry, pointed to a lack of procedural foundation or understanding among most countries on elements such as monitoring, reporting and verification, registries, methodologies, and corresponding adjustments, as a key reason why the country has yet to see practical results from its implementation of Article 6.2, which it began in 2023.
Some projects on the ground involve local officials who have never heard of the Paris deal, and are reluctant to give administrative permissions to outsiders, she said.
But the growing number of countries now indicating they will consider using Article 6 as part of their latest NDC submissions presents more opportunities for collaboration, she said. And the country is planning to increase its funding for readiness initiatives to support project host countries next year.
By Victoria Hatherick
