SB64 has been meeting in Bonn since 8 June. Alongside the annual COP, the ‘subsidiary bodies’ (SBs) – the United Nations’ technical negotiating bodies – meet several times a year to negotiate the rules for implementation within the global process, based on the Paris Agreement. Discussions are once again focusing on the details: methodologies, registries, processes. So far, nothing new. Still, the tone has changed. Fewer debates on principles, more pressure to implement.
As welcome and important as the negotiations in general – and this ‘mindset shift’ – may be, they do not go far enough.
For in truth, the international carbon market has long since shifted. We are leaving the rule-making phase and entering the implementation phase. We wish to emphasise this quite deliberately: with the de facto end of the Clean Development Mechanism (CDM), it is not simply a chapter that is drawing to a close. It is a structural turning point. For many years, the CDM was far more than a mechanism. It was market infrastructure, an investment channel and a reference system all at once. Its end is therefore not a technical detail, but a clear signal: old certainties no longer apply.
The question of which rules apply is therefore outdated. The new question should be:
- How will the market of tomorrow take shape, and who will shape it?
- What role can or should host countries play?
- What is the best way to promote this mechanism?
- What measures can be implemented to make it attractive for national NDCs?
Article 6.4: central, but by no means a trivial matter
Article 6.4 is currently often described as the ‘new global standard’. And indeed, there is much to suggest that it will become the benchmark for internationally binding markets. However, the international compliance market of the future will function differently from what we have seen in the past. It is structurally more complex and more political.
Supply and demand no longer arise simply from project development and buyer interest. They depend on government decisions: on integration into national climate strategies (NDCs), on authorisations, on corresponding adjustments. This is not a side issue. It is the market.
At the same time, the pressure is becoming clear: despite progress, current climate targets continue to put us on a path towards a 2.3 to 2.8-degree rise. If we are honest, this is where the real relevance of this market lies. It is not an optional tool, but part of the answer to a climate policy that structurally falls short of what is necessary. Without international cooperation mechanisms, a central part of the solution is missing.
Many countries are ready to use Article 6. Yet the structures, processes and experience needed to really get the market up and running are often still lacking. What looks clear on paper – such as Corresponding Adjustments or integration into national climate targets – has so far proved highly complex in practice. Yet it is precisely here that it will be decided whether the Article 6 market meets expectations and realises its potential, or falls well short of them. The latter would be a disaster overall: as a flexibility and financing mechanism, Article 6 can be a decisive lever – provided it delivers.
Orientation becomes a decisive factor
When markets no longer arise automatically from supply and demand, the role of the players also changes. It is no longer enough simply to develop projects or supply credits. What is needed are those who help build the system, understand it and make it navigable.
At myclimate, we see this precisely as our mission: we have been working in the carbon markets for over 20 years, have been a key player in the Swiss Domestic Compliance Scheme for many years, and, building on this, are also actively involved in Switzerland’s Article 6.2 efforts, whilst systematically expanding our expertise in Article 6.4 and CORSIA.
Our approach is deliberately comprehensive: from due diligence and sustainable development impact to the involvement of local partners, and always with an eye on the interplay between market, regulation and implementation.
If you want to understand the market, you need to dig deeper
Our new paper – written by colleagues who are not only observing the transition from the CDM and voluntary market mechanisms to Article 6, but are also actively shaping it – brings together our long-standing expertise, the latest scientific findings and discussions with numerous partners and market participants worldwide. It addresses what we consider to be the most relevant questions:
- What will really change with the end of the CDM.
- Why Article 6.4 is not a mechanism that is easy to implement, driven purely by supply and demand.
- And what factors determine whether this market will work.
If you would like to understand the direction in which the international compliance carbon market is heading and the role that Article 6 will play in this, it is well worth taking a look at the full paper, which we would be happy to share with you on request.
For early adopters and those at an advanced stage, we recommend focusing on national ‘Programmes of Activities’ for an entire sector or a key technology. Within the framework of the PoA, a generic business model can then be developed that allows all technically qualified market participants to take part. This, of course, must comply with all necessary UNFCCC processes – in particular, the early and ongoing involvement of the Designated National Authority (DNA) and the ministry responsible for the sector.
These approaches will be described in a technical paper to be published shortly. Until then, our Article 6.4 experts are available to support you in getting started.