What is Article 6?
Article 6 of the Paris Agreement would enable companies and governments from different countries to trade or share carbon offset credits – called Internationally Transferable Mitigation Outcomes (ITMOs). The goal is to spur international investment and cooperation in greenhouse gas emissions (GHG) reduction initiatives as part of the fight against climate change.
How it might work
An example of how this might work: Country A has a desire to reduce its GHG emissions; meanwhile, Country B has technologies and expertise that could help make that happen. Article 6 would provide a mechanism for Countries A and B to work together on this project, provide accounting for the emissions reductions enabled per Paris Agreement protocols, and have Country A share or trade some of its emissions reduction credits to Country B in exchange for its assistance.
LNG storage tanks in Shanghai, China.
Another example: let’s say a country with a developing or emerging economy wishes to use lower-emissions fuel sources as it tries to stem rising GHG emissions arising from economic growth. Unfortunately, pressing energy needs means this country continues to build coal-fired electricity plants, even though coal is a high-emissions energy source. One option would be for this country to import natural gas—a reliable, low-cost energy source that produces significantly fewer GHG emissions than coal—from another country, while negotiating shared ITMOs as part of the deal.
This latter example could be a meaningful to Canada which has abundant natural gas resources and is looking to build liquefied natural gas (LNG) facilities along the West Coast to ship to overseas markets.
Carbon offsets shared through Article 6 could help incentivize Canadian companies to build liquefied natural gas (LNG) facilities using electrification, producing low-emissions natural gas that could be shipped to markets in Asia and South America. This would, for example, help displace coal power production in China, resulting in as much as a 65 percent reduction in GHG emissions.
In principle, Article 6 would allow for the development of initiatives to reduce greenhouse gas emissions through international cooperation—initiatives that might not otherwise happen.
The challenge
Article 6 was debated for more than two weeks of negotiation at COP 24 in December 2018 but participants failed to finalize this chapter. Negotiators struggled with a host of issues such as ensuring additionality and avoiding double counting of offset credits. There have also been calls for Article 6 to guarantee that international carbon offset projects don’t cause negative environmental or human rights impacts on Indigenous and other local communities.
Draft decisions were carried over to COP 25 in 2019, which took place in Madrid, Spain December 2 through 13, with a new deadline of finalizing them at that time. However, this deadline was not met due to disagreements among various nations, and the issue has again been deferred—this time to COP 26 in Glasgow, Scotland, U.K. This is a complex issue, but it is hoped that these rules are in place soon after COP 26.
What it means for Canada
Canada must look beyond its borders to take a global perspective on emissions reduction. To encourage international partnership and adoption of the rules, Article 6 can facilitate sharing of ITMOs between participating nations as an option that enables the shift from coal to natural gas use, and results in a net reduction in global emissions.
Recognizing ITMOs would be beneficial for Canada in two ways:
- They would help Canada achieve its commitments under the Paris Agreement in addition to domestic measures underway.
- Canada can grow its natural gas and LNG industries to meet global market demand, helping to reduce global emissions while creating economic growth and jobs across the country.
