Side event at SB58

Update on progress and the way forward for the Paris Agreement Article 6
Implementation Partnership and Market InfrastructureJune 9, 2023, 10:15–11:30 CEST

Venue: Meeting room Berlin

Organizers: Ministry of the Environment of Japan (MOEJ), World Bank (WB), Overseas
Environmental Cooperation Center (OECC)

Speakers: Kazuhisa Koakutsu (MOEJ), Kazuhiko Takemoto (OECC), Sadamitsu Sakoguchi(MOEJ), Gemma Torras Vives (WB), Yuvaraj Dinesh Babu (Climate Action Data Trust),
Andrew Howard (Verra), Cristina Figueroa Vargas (Ministry of Environment, Chile), David

Newell (Swedish Energy Agency), Leticia Guimaraes (UNDP), Rui Yun Gan (National
Climate Change Secretariat, Government of Singapore), Makoto Kato (OECC), Chandra

Shekhar Sinha (WB)

Audiences: Over 100 at the venue and over 50 on online

Summary:This event highlighted the progress and plans of two initiatives, which promote theimplementation of Article 6 of the Paris Agreement, and discussed the efforts andchallenges faced by stakeholders involved in carbon markets.

In the opening remarks, the MOEJ first introduced the "Paris Agreement Article 6

Implementation Partnership (A6IP)", which was established at COP27 at the initiative of

the MOEJ, and the endorsement of the "Principles of High Integrity Carbon Markets" at

the G7 Sapporo Ministerial Meeting.

He then expressed that this event would

contribute to a comprehensive discussion on carbon markets. Next, the OECC mentioned

the need to accelerate the implementation of Article 6, its challenges and support, andpointed out the need for collaboration among the various stakeholders of the initiative.

Session 1 introduced the A6IP and its activities to build a high-quality carbon market,

including discussions in three Working Groups (WGs): (1) Authorization WG, (2)Reporting WG, and (3) Tracking WG, and the establishment of the A6IP Center.

Session 2 shared the progress and outlook of the Climate Warehouse, the World

Bank's carbon market infrastructure development and capacity building program, andthe Climate Action Data Trust (CADT), a metadata platform connecting various registries.

The CADT is expected to release a data dashboard in July 2023 that will allow users toview data from various registries.

In the 3rd Session, panelists from Verra, the Ministry of Environment of Chile, theSwedish Energy Agency, the Ministry of the Environment of Japan, and UNDP discussed1(1) linkages between Article 6 of the Paris Agreement and voluntary carbon markets, (2)the role of infrastructure for integrity of the carbon markets, (3) institutional arrangement

needs to scale-up carbon markets, and (4) the focus of capacity building support. During

the discussion, it was pointed out that when considering infrastructure development andinstitutional arrangements in each country as well as the capacity building support
needed for such measures, it is necessary to understand the situation and make strategic
efforts, as readiness and strategies vary from country to country.

In the closing remarks, the World Bank emphasized the need for coordination andcooperation among the many initiatives underway and the urgent need to move into theimplementation phase.
Opening Remarks, Kazuhisa Koakutsu, MOEJ

This event is a venue to share the progress of the Paris Agreement Article 6
Implementation Partnership (A6IP). Currently, 68 countries and 32 organizations are
participating in the A6IP, with more partners expected to join.



The A6IP Center has recently been established. IGES serving as the secretariat will workwith the UNFCCC Secretariat, the World Bank, and other partners.
Japan holds the G7 Presidency this year, and the G7 Ministers’ Meeting on Climate,
Energy and Environment adopted the "Principles of High Integrity Carbon Markets" anddiscussed supply-side, demand-side and market integrity in the carbon market.

With the growing interest in Article 6 and carbon markets, we need to look at thesituation in a comprehensive manner.
Opening Remarks, Kazuhiko Takemoto, OECC

Many countries have noted the importance of Article 6 of the Paris Agreement to achieve
their NDC targets and have accelerated their actions by agreeing bilateral cooperation.

On the other hand, they also face the following challenges for a smooth and efficient

implementation of Article 6: (1) institutional arrangements and capacity building incountries, (2) ensuring transparency in the transfer of ITMOs (internationally transferredmitigation outcomes) and avoiding double counting, and (3) collaboration and capacity

building with stakeholders, including the private sector and local communities.



Stakeholders from different backgrounds can work together on these issues with mutual
understanding.

This event will showcase the efforts of stakeholder collaboration in the A6IP led by MOEJ
and in the Climate Warehouse implemented by the World Bank.



Progress of the Article 6 Implementation Partnership, Sadamitsu Sakoguchi, MOEJ2The A6IP was established at COP 27 in 2022 to promote capacity building on Article 6
through international collaboration. Interactions among stakeholders are important for

the implementation of the A6IP.


The A6IP currently has 68 countries and 32 international organizations as partners. The

partner countries are located in different regions of the world.



The A6IP has established thematic working groups (WGs) on (1) authorization, (2)reporting, and (3) tracking, provides technical assistance such as hands-on training andmutual learning, and disseminates information through its information platform. In
addition, capacity-building activities for the private sector are planned in collaboration
with IETA.



As for the activities in 2023, the first meeting of each WG has already been held and thesecond meeting is scheduled for the fall. Meetings will be held online this year, but inperson meetings will be considered in the future.


The Authorization WG will promote the development of capacity building tools for

institutional arrangement and authorization and will develop an "A6IP Capacity Building
Package" for the whole process.



The Reporting WG will provide capacity building support for the preparation of three
types of reports (initial reports, annual information, and regular information) to besubmitted by Article 6 implementing countries.



The Tracking WG will organize and share information on the various tracking tools
available to assist Article 6 implementing countries in selecting appropriate tools.



The A6IP Center has been established to promote A6IP activities, with IGES serving as
the secretariat.

Climate Warehouse [Gemma Torras Vives, World Bank]

The activities of the Climate Warehouse program consist of two pillars: 1) piloting anddeveloping open-source digital infrastructure, and 2) building capacity for digital
infrastructure.



For Pillar 1, the development of digital MRV, registries, tokenization, trading platforms
and metadata layers (Climate Action Data Trust: CADT) for the entire carbon credit
lifecycle infrastructure is underway.



Pillar 2 supports digital infrastructure development strategies and the identification ofneeds and challenges.


Through the activities of Pillar 1 and 2, the Climate Warehouse aims to digitize the entire

infrastructure of each step of the carbon market. The first step is the physical layer,
including data collection through sensors and satellites; the second step is the databaselayer at the country level; the third step is the registry and transaction layer; and the3fourth step is CADT as the metadata layer, which is the mechanism supporting the digital
infrastructure ecosystem.

Over the past year, the World Bank has been working on various areas of infrastructuredevelopment, but in order to avoid duplication of efforts and to promote collaborationand coordination with other organizations, the World Bank has established the Digital 4
Climate (D4C) Working Group and is collaborating with the UNFCCC, EBRD, UNDP, IETA,

and the European Space Agency.
Climate Action Data Trust(CADT)]

[Yuvaraj Dinesh Babu, Climate Action Data Trust

Challenges in carbon market infrastructure include fragmentation of multiple systems,
decentralization of registries, lack of data transparency and interconnectivity, and limited
visibility into project lifecycles.

To address these challenges and strengthen the transparency, reliability, and integrity of

the carbon market, a common data system, which collects and builds upon existing data,is needed.

The Climate Action Data Trust (CADT) was launched in December 2022 by IETA, theGovernment of Singapore, and the World Bank. It is envisioned that users will use CADT

to easily understand data, make investment and operational decisions, and create bestpractices and benchmarks.

Features of CADT include its open-source nature, management discretion on eachsystem and registry to control what data is public or private, and its blockchain
technology.



The value of CADT is that it can facilitate dialogue on supply-side IC-VCM considerations
for high-quality credit and on demand-side VCMI considerations for credit use.



CADT addresses the following points;

harmonize data from different registries through a common data taxonomy
Make the entire lifecycle of carbon credits available for review
Extract publicly available information on mitigation outcomes

Strengthen transparency and trust among market participants, enable tracking of
mitigation outcomes, and reduce the risk of double counting.



National registries and governments interested in connecting to CADT can inquire via acontact form on the CADT website. Connection methods for registries include manual
upload, API integration on a batch basis, and API integration for real-time data exchange.


CADT's governance structure includes a Council, followed by a Board of Directors,
a Technical Committee and a User Forum, with overall support provided by the
Secretariat. The timeline for 2023 is as follows;4

December 2022: Establishment of the Initiative and holding of the first Council
meeting

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January 2023: Establishment of the Technical Committee

March 2023: Development of Data Dashboard
May 2023: Establishment of the User Forum

April-July 2023: Acceptance of applications from various registries
July 2023: Publication of the Data Dashboard

Q4 2023 - 2024: Authorization by independent crediting systems and national
registriesPanel Discussion[Moderator: Rui Yun Gan, National Climate Change Secretariat, Government ofSingapore][Andrew Howard, Verra]（Q. Linkages between Article 6 of the Paris Agreement and voluntary carbon markets）


Verified Carbon Standard (VCS) credits can be used in both compliance and voluntary

markets and are distinguished by whether the funding source or motivation is regulatory
or voluntary.

Both require a common source.

Many companies are ready to invest in carbon projects and are looking for opportunities

to help host countries implement NDCs. Similar to compliance carbon markets andcountry-level programs, voluntary carbon markets can contribute to conditional NDCs
for which host countries seek international funding.

Interaction between the host country side and the private sector side is important. Hostcountries need to demonstrate that they are attractive enough to invest throughinstitutional development and clarification of eligible projects. The private sector sideneeds to find incentives and rewards for going beyond regulations.
Companies have used credits to offset their own emissions, but the role of offsetting
could be limited in the future, and ideas such as contribution claims may expand.



The voluntary carbon market is an open forum where different forms of investment,
projects, and incentives can coexist.

[Cristina Figueroa Vargas, Ministry of Environment, Chile]（Q. Linkages between Article 6 of the Paris Agreement and voluntary carbon markets）
Currently, Chile is trying to establish three market mechanisms: (1) an energy standard
compensation system, (2) a national voluntary certification system, and (3) a green tax
compensation system.

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It is necessary to link these domestic markets and infrastructure with international
markets, such as Article 6, and the agriculture, forestry, and other land use (AFOLU)

sector to ensure integrity and transparency and to understand the impact of mitigation
efforts.

（Q. The role of infrastructure for integrity of the carbon markets）


Looking ahead to future infrastructure development, it is important to strengthen

capacity and secure human resources related to infrastructure development using IT andother technologies.

（Q. Institutional arrangement needs to scale-up carbon markets）
Transparency is priority to carbon markets. Chile has submitted Biennial Update Report(BUR) five times and has developed a national inventory system and a mechanism for
multi-sector data integration and sectoral MRV.
This mechanism allows for the preparation of NDCs through sectoral collaboration andinteragency consultations in the Interagency Task Force on Article 6.

（Q. The focus of capacity building support）


Capacity building is needed to establish a transparency framework, and based on thisthe use of Article 6 can become possible.



Since there are only one or two Article 6 officers within the Chilean government, a format

for Article 6 reporting would be useful. There is also a need for capacity building on
registries and the use of the International Registry to easily track ITMOs.



Currently, Chile is struggling to ensure environmental integrity in implementing Article
6, to ensure permanence, and to figure out how to assess the requirements for risk
minimization.

On the part of the transferring country of ITMOs, it is necessary toguarantee the working environment, natural environment, society, benefits, indigenous

peoples, etc.

[David Newell, Swedish Energy Agency]（Q. The focus of capacity building support）
We must recognize that depending on the intended use of ITMOs, Article 6 has different
requirements to be met. Depending on the development of infrastructure and access to
the International Registry, the supports needed to participate in Article 6 will also varyfrom country to country.


Much of the Article 6 capacity building support 6 is technical, with less capacity building
support for strategic decisions. Using a car as an example, if you want to drive from Bonn

to Bangkok, you can build a great car, but you cannot get to Bangkok without a map.

Similarly, while technological capacity building is important, we should also focus on thestrategic aspects of our own environmental and climate policies in order to participate
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in Article 6.


Sweden's experience has shown that while countries are willing to participate in Article
6, many are not sure why they should participate. Inflow of funds is one factor, but
strategic decisions need to be made.

[Kazuhisa Koakutsu, MOEJ]（Q. Linkages between Article 6 of the Paris Agreement and voluntary carbon markets）


When considering the linkage between Article 6 and the voluntary carbon market, it isnecessary to consider the relevance of the voluntary carbon market to theimplementation of NDCs and to recognize that domestic policies such as carbon taxes

and offsetting schemes are in place in each country.

To this end, it is important to understand the status of the domestic voluntary carbon

markets, for example, what types of projects are being implemented in the country. From
this perspective, ensuring transparency is important and information should be provided
through CADT and other means.

（Q. The focus of capacity building support）


Many developing countries lack the resources to implement Article 6, and it is necessary

to consider what tools would be useful for them. While some types of system may be

useful, many countries have developed their own registries, and appropriate registries

should be considered based on each country’s situation. If multiple bilateral cooperation

is implemented, multiple registries must be addressed, and understanding the current
situation in each country should be prioritized.

[Leticia Guimaraes, UNDP]（Q. The focus of capacity building support）


UNDP offers a comprehensive carbon market support package based on three pillars: 1)
technical assistance and capacity building, 2) digital solutions, and 3) direct financing of
mitigation outcomes.



Under (1) technical assistance and capacity building, based on the regulatory,

institutional, and technological gaps in the target countries, a carbon market accessstrategy is first considered. A comprehensive regulatory framework should then be

developed to serve them as the basis for various initiatives and carbon market
implementation. This framework includes governance and institutional arrangements for

decision-making on carbon markets. This support has been completed in Ghana andVanuatu and is being implemented in Georgia, Cote d'Ivoire, Ukraine, Uruguay, Malawi,

Morocco, and Rwanda.

An online course has also been developed with UNFCCC, Switzerland, Sweden, IGES,
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Gold Standard, and SustainCERT to address Article 6 capacity building needs. To date,
3,500 people have registered. French and Spanish versions will be available in July.



In (2) digital solutions, the Digital 4 Climate (D4C) Working Group has been establishedin collaboration with UNFCCC, EBRD, UNDP, and IETA, and we have worked on

developing pilot modules, promoting capacity building, and developing technicalinfrastructure. In this context, UNDP has established the Carbon Cooperation Platform
to simplify carbon project workflows for project developers and to streamline theauthorization process for governments.

In (3) direct financing of mitigation outcomes, UNDP will make payments for credits tobe generated up to 6 million tons in the period 2023-2030. We support public-private

partnerships between project developers and governments and cover credits issued
throughthird-party verification. For

example, UNDP supports public-private

partnerships between R Corp, a composting company in Ghana, and the government of

Ghana and between UNELCO, a utility company in Vanuatu, and the government of
Vanuatu.

Closing remarks [Chandra Shekhar Sinha, World Bank]

This side event was merged from two different applications, and by holding them
together made it clearer that there are multiple initiatives underway, and thatcooperation is needed to coordinate and complement each other's efforts.

Support is now needed from the design phase to the implementation phase of Article 6

and carbon markets. Learning by doing was the mantra of the World Bank's efforts
during the Kyoto mechanisms era, and it is necessary to move into such phase.
Compared to 20 years ago, technological advances allow for faster iteration and mutual

learning, and support programs and country initiatives should be quickly implemented
through the Partnerships.

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