How to assess activities and cooperative approaches?

International carbon market rules (Decision 3/CMA.3) require that mitigation activities under Article 6 of the Paris Agreement must go beyond a country’s existing policies to be considered additional. However, achieving NDC targets may require new actions beyond current measures. Therefore, it is important for developers and host countries to assess whether a mitigation activity goes beyond what is needed to meet an unconditional NDC target. If the activity is likely part of the country’s plan to meet its NDC, even if it’s additional, the country might hesitate to approve the transfer of its mitigation outcomes. Activity developers should consider if the activity could be seen as part of the country’s expected efforts, even if not yet mandated by regulations.

Determining the additionality of Article 6 activities and ensuring that the associated requirements are met is critical. This information note begins by outlining the formal requirements for demonstrating additionality in methodologies developed for Article 6.4 activities under the Paris Agreement Crediting Mechanism (PACM), in accordance with the adopted Demonstration of Additionality Standard.

It then provides a checklist with clear steps and guidelines for effectively demonstrating and assessing additionality, ensuring compliance with the established procedures and best practices. Host countries and project developers are encouraged to familiarise themselves with this rigorous approach, as it will support their Article 6 cooperation (PACM and Article 6.2) and ensure alignment with national requirements.

To engage in Article 6 activities, Parties have the flexibility to establish various types of contracts that outline the rights and obligations of the involved parties. The content of these contracts depends on their specific purpose and the preferences of the Parties, and should be customised to reflect the unique circumstances and legal requirements of those involved.

Bilateral agreements can take many different forms. This segment presents three downloadable case studies, providing insights into the various types of bilateral cooperation a country can pursue as part of its Article 6 engagement.

ITMOs are typically traded at a premium compared to mitigation outcomes (MOs) not authorised for international transfer. This premium reflects the higher level of assurance and environmental integrity (e.g. corresponding adjustments) associated with compliance under Article 6 of the Paris Agreement. However, such MOs can still be traded on the VCM and may also achieve high prices, depending on their perceived quality, co-benefits, and demand.
In general, multiple factors influence price generation, such as market dynamics, environmental integrity, co-benefits (e.g. SDGs), transaction costs as well as policies and regulations.
In order to establish fair, transparent, and comparable pricing frameworks, governments should work together rather than compete on (IT)MO pricing. Coordinated efforts can help ensure that prices accurately reflect the real costs of mitigation, maintain environmental integrity, and provide consistent market signals for investors. Such collaboration supports the development of a credible and efficient international carbon market, reinforcing trust and enabling the effective implementation of climate goals under the Paris Agreement.