4.1 Bilateral Cooperation
Since the adoption of Article 6 of the Paris Agreement, many countries have initiated bilateral cooperation under the context of Article 6.2 of the Paris Agreement. The bilateral cooperation provides the necessary framework for countries to cooperate in implementing Article 6, including by setting the modalities for cooperation relating to authorization, transfer of ITMOs, mutually agreed environmental integrity standards and sustainable development consideration, as well as reporting and avoidance of double counting, which must be implemented consistently with the Article 6.2 guidance and relevant decisions. Depending on the forms of cooperation and arrangements between Parties, bilateral cooperation may be implemented through implementing agreements, Memorandum of Understanding (MoU) and/or other forms of documents.
4.1.1 Bilateral Cooperation Status
A total of 89 bilateral cooperation agreements and arrangements between 58 Parties under Article 6.2 indicating a growing interest in harnessing market-based mechanisms through cooperative approaches. Bilateral cooperation consists of 54 Memoranda of Understanding (MoU), 21 Bilateral Agreements (BAs), and 14 “others”, which include declarations of intents and other forms of bilateral agreements. Japan, through its Joint Crediting Mechanism (JCM), leads in terms of participation, having signed an MoU with 29 partner Parties. Switzerland has concluded 14 bilateral cooperation (13 BAs and 1 MoU), and Singapore has concluded 18 bilateral cooporations (3 BAs and 15 MoU) The growing number of bilateral agreements reflects a significant commitment to climate action through international cooperation, which is crucial for developing more robust carbon markets. Agreements facilitate collaboration between Parties, allowing them to share resources, expertise, and best practices in addressing climate change.
4.1.2 Bilateral Cooperation between Parties
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A total of 58 Parties engaging in bilateral cooperation, consisting of 48 Host Parties and 10 Acquiring Parties. Ghana stands out in the implementation of Article 6, having successfully engaged with five acquiring parties. Senegal and Indonesia also demonstrate strong engagement in this area, each collaborating with four acquiring parties. Their involvement shows a broader trend of increasing participation among developing nations in international carbon trading, highlighting the importance of cooperative efforts in achieving global climate goals.
4.1.3 Number of Projects Under the Bilateral CooperationThere are 286 ongoing projects under bilateral cooperation frameworks in accordance with Article 6.2 of the Paris Agreement. Japan accounts for a substantial 264 ongoing projects through JCM, Switzerland ranks as the second-largest contributor, with 20 projects. These initiatives show the increasing adoption of Article 6.2 as Parties leverage cooperative mechanisms to meet their NDCs and foster global sustainable development.
4.2 Article 6.4 Mechanism (PACM)The Article 6.4 mechanism also known as the Paris Agreement Crediting Mechanism (PACM) allows Parties to participate in international carbon markets by enabling generation and transfers of "Article 6.4 mechanism emission reductions" (A6.4ERs) and removals. The Designated National Authority (DNA) is responsible for approving Article 6.4 activities and ensuring they align with national climate objectives. Effective communication between DNAs and the Article 6.4 mechanism Supervisory Body is critical to uphold the rules of Article 6.4. Parties must submit Host Party Participation Requirements, establishing the conditions that Parties must meet to participate in the mechanism. Participants in a proposed Article 6.4 mechanism activity must additionally demonstrate consideration of the Article 6.4 mechanism benefits by submitting prior consideration notifications. The prior consideration notification is required before the start of project activities. It serves as an initial step, creating transparency and a record of the project’s intention to participate in the international carbon market.
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4.2.1 Article 6.4 DNA & Host Party Requirements
The submission of DNA information shows a growing global engagement with the Article 6.4 mechanism and a total of 95 Parties formally submitted information regarding their Designated National Authorities (DNAs). About 35 Parties submitted DNA details in Africa, showcasing significant progress across the continent. In Asia, 18 Parties submitted DNA information as well as 15 submissions for Latin America and the Caribbean. The submission of DNAs is a key step for Parties intending to participate in international carbon markets in the Context of Article 6.4 mechanism and cooperate to enhance climate action, as it establishes the institutional groundwork needed to participate in Article 6.4 mechanism.
To date 10 parties, Benin, Bhutan, Dominican Republic, Ghana, India, Mali, Morocco, Myanmar, Togo, and Uganda have submitted their host Party participation requirements for Article 6.4 mechanism. The submissions for the Article 6.4 Host Party Participation Requirement include a description of how a Party’s participation in the Article 6.4 mechanism contributes to sustainable development, and how the activities, and any associated emission reductions or removals, would contribute to the achievement of a Party’s NDC
To date 10 parties, Benin, Bhutan, Dominican Republic, Ghana, India, Mali, Morocco, Myanmar, Togo, and Uganda have submitted their host Party participation requirements for Article 6.4 mechanism. The submissions for the Article 6.4 Host Party Participation Requirement include a description of how a Party’s participation in the Article 6.4 mechanism contributes to sustainable development, and how the activities, and any associated emission reductions or removals, would contribute to the achievement of a Party’s NDC
While many Parties have a DNA for Article 6.4 mechanism, only a limited number have officially communicated the Host Party participation requirements for Article 6.4 mechanism and their specific roles and responsibilities. This gap in readiness highlights the importance of additional support to empower DNAs to fully operationalize the Article 6.4 mechanism
4.2.3 Prior Consideration Notifications for an A6.4 Mechanism
A total of 719 prior consideration notifications have been submitted. Regionally, South Asia leads with 493 activities. Latin America and the Caribbean follow with 64 notifications, while East and Southern Africa have 63 notifications. Central Asia has recorded the fewest notifications, with only eight submissions. The notification of prior consideration plays a pivotal role, demonstrating that the Article 6.4 mechanism benefits were deemed necessary to implement the project. The notification ensures that Article 6.4 mechanism enhances global climate ambition.
4.3 Transition of the Clean Development Mechanism (CDM) Activities to Article 6.4 Mechanism (PACM)
The transition of Clean Development Mechanism (CDM) activities to the Article 6.4 mechanism under the Paris Agreement ensures a conversion to the new framework under the Paris Agreement and promotes early climate action. The Article 6.4 mechanism was established to promote transparency and cooperation for achieving NDCs. Activities registered under the CDM may transition to the Article 6.4 mechanism, provided they fulfill all necessary requirements. Conditions include an active crediting period as of 1 January 2021, compliance with the Rules, Modalities, and Procedures (RMPs) as outlined by the Supervisory Body, and adherence to any methodological requirements set forth by the host Parties. Project participants must have submitted the transition request to the secretariat by 31 December 2023, and host Party approval must be finalized by 31 December 2025.
4.3.1 CDM activities requesting and approved for transition
About 1400 CDM activities requested transition to Article 6.4 mechanism, and these consist of 92% Project Activities (PAs) and 8% Programme of Activities (PoAs) (Figure 8) The number of activities reflects the continued demand for carbon markets and the commitment of Host Parties to align with the updated requirements of Article 6.4 mechanism. The actual number of projects that will transition depends on the approval by the Host Parties and the Article 6.4 mechanism supervisory body. Of the approximately 1400 activities requested for transition, less than 10 activities have been approved by the Host Party for transition to Article 6.4 mechanism.
4.3.2 CDM activities requesting and approved for transition per region
The distribution of CDM activities seeking transition to the Article 6 framework is concentrated in Asia, with over 1000 projects. Latin America and the Caribbean, as well as South Asia, have a total of three activities each approved by Host Parties for transition to Article 6.4. Within Asia, the East and South sub-regions account for the majority of transition requests, reflecting both the region's historical engagement with the CDM and its ongoing commitment to participating in carbon markets. The Middle East and North Africa, West and Central Africa, Europe, Oceania, Western Europe, North America and Other States show lower levels of transition activity, each has fewer than 60 projects requesting transition. This may be due to variations in market readiness, policy support, and the prevalence of emission reduction opportunities in these regions
4.3.3 Top countries by number of CDM activities requesting transition
China and India represent the largest share of CDM activities requesting transition. China has requested the transition of 500 activities, while India has requested 458.This highlights the strong participation by both nations in the carbon market and their proactive steps to align a significant portion of their projects with the evolving regulatory framework.
4.3.4 CDM Activity Types Requesting Transition and approved for transition
The CDM activity types requested for transition are predominantly concentrated in the renewable energy sector, with East and South Asia leading. This region has substantial energy needs due to large populations and rapidly growing infrastructure, resulting in high GHG emissions. The CDM provided a mechanism for emerging economies to finance clean energy initiatives and other mitigation projects, drawing in foreign investment and supporting sustainable development. The transportation and agriculture sectors have the fewest projects registered under the CDM. This is primarily due to the difficulties in accurately measuring and verifying emissions reductions in these sectors.
4.3.5 Key insights and trends of CDM activities requested for transition
The transition of CDM activities to the Article 6.4 mechanism marks a pivotal step in maintaining the continuity of carbon market initiatives under the Paris Agreement. The transition process reflects the global effort to integrate past mechanisms into the new climate framework while upholding environmental integrity and aligning with the goals of the Agreement.
Many developing Parties are keen to ensure that their registered projects continue under Article 6.4 mechanism, with sectors such as renewable energy, waste management, and forestry showing strong representation. However, the success of this transition depends on a clear process for approvals, compliance with new standards, and the ability to avoid double counting.
The transition process has a deadline of December 2025. Only nine activities have been approved for transition, raising concerns about the feasibility of approving all eligible activities in time. Addressing these challenges will be essential to unlocking the full potential of the Article 6.4 mechanism, ensuring it contributes effectively to sustainable emissions reductions and supports the goals of the Paris Agreement.
Many developing Parties are keen to ensure that their registered projects continue under Article 6.4 mechanism, with sectors such as renewable energy, waste management, and forestry showing strong representation. However, the success of this transition depends on a clear process for approvals, compliance with new standards, and the ability to avoid double counting.
The transition process has a deadline of December 2025. Only nine activities have been approved for transition, raising concerns about the feasibility of approving all eligible activities in time. Addressing these challenges will be essential to unlocking the full potential of the Article 6.4 mechanism, ensuring it contributes effectively to sustainable emissions reductions and supports the goals of the Paris Agreement.
