Article 6 of Paris Agreement and Internationally Transferred Mitigation Outcomes (ITMOs)

The Intergovernmental Panel on Climate Change (IPCC) released its First Assessment Report in 1990 highlighting the profound impact of human activities on global temperatures. One particularly striking piece of data from the report was the projection that, if greenhouse gas emissions continued to rise at the then-current rate, global temperatures could increase by 1.5 to 4.5 degrees Celsius by the year 2100. This range of potential temperature rise, combined with evidence of observed temperature increases and predictions of severe consequences such as more frequent and intense weather events, melting ice caps, and rising sea levels, served as a wake-up call to policymakers. In response to these alarming projections, the international community negotiated and adopted the Kyoto Protocol in 1997, introducing the concept of carbon markets through mechanisms such as emissions trading, the Clean Development Mechanism (CDM), and Joint Implementation (JI), all designed to provide flexible and cost-effective ways to reduce global emissions.

However, the Kyoto Protocol was not very impactful  due to the absence of major emitters like the United States and non-compliance by almost all major developed economies. This progressively altered at COP 21 where climate action has shed off its poluters-pay principle and seems to be more acceptable by the powerful economies, results in  196 Parties ratifying it. This broad participation aimed to ensure that all countries, regardless of their development status, would be involved in climate action. This is when Paris Agreement was introduced as a boon and included Article 6 in it. It turned out to be a crucial component of the global effort to combat climate change. It provides a framework for countries to cooperate and share efforts to achieve their climate goals. One of the key mechanisms outlined in Article 6 is the use of Internationally Transferred Mitigation Outcomes (ITMOs).

What are Internationally Transferred Mitigation Outcomes (ITMOs)

ITMOs are a tool for enhancing flexibility and cooperation in global climate action, making it easier for countries to achieve their emissions reduction targets collectively.

It is a mechanism under the Paris Agreement that allows countries to trade emissions reductions, helping them meet their climate targets, known as Nationally Determined Contributions (NDCs). ITMOs enable countries that exceed their emissions reduction targets to transfer the surplus reductions to other countries that are struggling to meet their goals. This system promotes cost-effective mitigation strategies and global cooperation in reducing greenhouse gas emissions.

ITMOs are strictly regulated to ensure environmental integrity, prevent double counting of emissions reductions, and support sustainable development. For instance, a country like Ghana, engaged in carbon credit projects such as biochar applications, could generate ITMOs if it achieves more emissions reductions than required for its NDC. These ITMOs can then be traded internationally, providing financial benefits to the country while contributing to global climate efforts.

Article 6 of Paris Agreement

Article 6 of the Paris Agreement is vital in facilitating the private sector’s role in executing and funding emission reduction efforts, which is essential to complement government actions. This article outlines how countries can voluntarily collaborate to achieve their climate goals by allowing the transfer of carbon credits generated from greenhouse gas (GHG) emission reductions. These credits help one or more countries meet their climate targets.

Specifically, Article 6.2 establishes a framework for trading GHG emission reductions or ITMOs, between countries. Meanwhile, Article 6.4, similar to the Kyoto Protocol’s Clean Development Mechanism, sets up a system for trading GHG emission reductions among businesses. Once these reductions are approved and accepted by the host country, they are recognized as ITMOs and are overseen by the Conference of Parties, the decision-making body of the UN Framework Convention on Climate Change.

Key Provisions of Article 6 and What it Does

• Cooperation and Collaboration: The article encourages countries to cooperate and collaborate on climate mitigation efforts, including through the development of joint projects and the sharing of knowledge and resources.
• Avoidance of Double Counting: To prevent double counting of emissions reductions, Article 6 requires countries to have robust accounting systems in place to ensure that ITMOs are only counted once.
• Sustainability and Environmental Integrity: The article emphasizes the importance of ensuring that ITMOs are generated through sustainable and environmentally sound activities.
• Sustainable Development: It also recognizes the need to consider sustainable development objectives when implementing Article 6 provisions.
• Cost-Effectiveness: By allowing countries to trade emissions reductions, ITMOs can help countries achieve their climate goals in a more cost-effective manner.
• Flexibility: ITMOs provide countries with greater flexibility in meeting their NDCs, as they can supplement domestic efforts with emissions reductions purchased from other countries.
• Incentive for Ambitious Climate Action: The potential to trade ITMOs can incentivize countries to undertake ambitious climate mitigation efforts, as they can generate revenue by selling surplus emissions reductions.
• Technology Transfer and Capacity Building: ITMOs can facilitate the transfer of technology and expertise between countries, helping to accelerate the deployment of climate-friendly solutions.
• Market Development: The creation of a global market for ITMOs can contribute to the development of new financial instruments and investment opportunities.

Challenges and Opportunities

Despite the potential benefits, the implementation of Article 6 and the use of ITMOs also present several challenges and considerations. The successful implementation of Article 6 will require the development of clear and robust rules governing the creation, transfer, and use of ITMOs. There is a risk of “hot air” being generated, where countries claim emissions reductions for activities that would have occurred anyway, without additional climate action. Ensuring that ITMOs are generated through sustainable and environmentally sound activities is crucial to maintaining the integrity of the Paris Agreement.

The use of ITMOs should be accompanied by measures to address social and equity concerns, such as ensuring that benefits are distributed fairly.