Article 6 of the Paris Agreement is a key provision on carbon markets. It allows countries to cooperate voluntarily to achieve the emission reduction targets in their Nationally Determined Contributions (NDCs) through the transfer of carbon credits. Article 6 includes two market mechanisms and one non-market mechanism:
- Article 6.2: Enables countries to trade carbon credits bilaterally or multilaterally to meet NDC targets. Credits transferred under this mechanism are called Internationally Transferred Mitigation Outcomes (ITMOs) and must follow rules that prevent double counting.
- Article 6.4: Establishes a UN-supervised mechanism that issues carbon credits, known as Article 6.4 Emission Reductions (A6.4ERs). Projects must be approved by both the host country and the Supervisory Body before credits can be issued. This mechanism is designed to support sustainable development and encourage private sector participation. It is intended to replace the Clean Development Mechanism (CDM) over time and is sometimes called the Sustainable Development Mechanism (SDM).
- Article 6.8: Provides a framework for cooperation without trading emissions. It covers initiatives such as technology transfer, capacity building, development aid, and policies to reduce emissions.
