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Moving towards next generation carbon markets

Observations from Article 6 pilots

April 2019 – Parties at the international climate negotiations in Katowice (COP24) were able to agree on the many aspects of the rulebook for the implementation of the Paris Agreement. While Parties have made significant progress over the latest negotiation rounds in defining the rules for market-based instruments, the finalization of the Article 6 rules is still pending and has been postponed to COP25 in Chile. Carbon markets therefore remain in limbo.

This period of uncertainty has given rise to a number of initiatives that aim to build practical experience, which can subsequently inform the evolving carbon market rules. As negotiators continue to grapple with the technical intricacies of the rules, these Article 6 pilot initiatives can offer vital insights.

This study provides the first comprehensive overview of about a dozen ongoing Article 6 pilots and analyzes the emerging trends and early experience with Article 6 operationalization. It looks particularly at how the pilots are responding to the new challenges resulting from the rules of the Paris Agreement. We see that today’s pilots have already been addressing these challenges in their engagement with partners with innovative approaches that go beyond the established practices of the Kyoto Protocol.

This study is a product of the Climate Finance Innovators Project supported by the International Climate Initiative (IKI). The authors encourage readers to provide feedback to the project coordinators which will inform future updates of the study. For this purpose, please contact Stephan Hoch and Sandra Greiner.