Concept Paper ofthe Article 6 Implementation Partnership

Ministry of the Environment, Japan (MOEJ)

Nov 2022

ContentsI.

Potential of Article 6 ........................................................... 2II.

What is needed for Article 6 Implementation? ..................... 3III.

Example of experience in capacity building from the CDM... 6IV.

Existing Article 6 capacity building activities and their scope 7V.

Synergies and scale up ......................................................... 9VI.

Partnership scheme ........................................................... 111I. Potential of Article 61.
The Paris Agreement requires each Parties to prepare, communicate andmaintain successive Nationally Determined Contributions (NDCs) that it intends toachieve.
2.

In order to effectively proceed the mitigation of greenhouse gas emission

globally, the Paris Agreement further rules market mechanisms under the Article 6.
3.
At the COP26 in Glasgow, United Kingdom in 2021, rules of market
mechanisms were adopted including the guidance on cooperative approaches referred toin Article 6, paragraph 2, rules, modalities and procedures for the mechanism establishedby Article 6, paragraph 4, and work programme under the framework for non-market
approaches referred to in Article 6, paragraph 8, of the Paris Agreement, respectively.
4.

Expected impacts by the implementation of the Article 6 are:(a) Promotion of more efficient and additional emission reductions. Once the market

mechanism rules of Article 6 are fully implemented, reduction can be promoted
in a more effective manner. More than 100 countries have expressed theirwillingness to use Article 6 in their updated NDCs.

Source: Nationally determined contributions under the Paris Agreement. Synthesis reportby the secretariat, FCCC/PA/CMA/2021/8

Figure 1: Share of Parties indicating in NDCs the intention to use ofpossibility of using specific scopes of voluntary cooperation

2(b) Additional emission reductions.
Experts have estimated that theimplementation of Article 6 could lead to a reduction of an additional 4 - 12billion tCO2 emission per year by 2030 as below. This corresponds to 10% - 40%of global CO2 emissions in 2018;

Figure 2: Expected effects of Article 6(c) Stimulation of global carbon market as well as private investment. This cancontribute to global emission reduction and countries’ economic growthsimultaneously. The market has the potential to mobilize US$220 billion
annually by 2030 (WB, 2017); and(d) Utilization of the implementation rules for the voluntary reduction efforts byprivate sector. The rules are important as it not only enables to transfer credits
between countries but is also applied to private sector’s voluntary reduction
efforts, including in aviation sector.

II. What is needed for Article 6 Implementation?
International Conference for Implementing Article 6:
5.
Japan hosted an international conference for implementing Article 6 on 17
February (1st part) and 7 March 2022 (2nd part), with 3 main objectives; (1) foster acommon understanding of the decisions made on the Article 6 implementation guidelines
at COP26 and the Article 6 work programme for 2022; (2) Discuss the development ofinstitutional and governance frameworks as well as capacity-building needs based on theexperience of Article 6 negotiations and piloting; and (3) discover areas whereimplementation can be accelerated by collaborating with stakeholders.

36.

The overview and agenda of the conference were summarized below.

Figure 3: Overview of the International Conference

Figure 4: Agenda of the International Conference

7.
Identified points for successful implementation of Article 6 are summarized
below:(a) Importance of the Article 6 decisions and its relations to NDCs. There is a needto have a clear understanding to implement it;(b) A need to prepare institutional arrangement to participate in Article 6. National
coordination and institutional arrangement are required to carry out authorizationand corresponding adjustments. It is possible to learn from existing mechanisms;(c) Utilization of Article 6.4 mechanism. The mechanism is expected as a tool toenhance ambition;(d) Reporting of Article 6. There is a need to discuss what is necessary for reporting
Article 6, including in relation to data collection and corresponding adjustment;and(e) CORSIA and voluntary carbon markets. There are many experiences to learn
from CORSIA.

48.
Considering the points above, participants shared necessary elements forsynergies and scale-up, which are;(a) Coordination of efforts, including Regional Collaboration Centres (RCCs),
Parties, International Organizations, and private sector;(b) Sharing countries’ experience on institutional arrangement for authorization andcorresponding adjustments;(c) Support for pilot project and domestic tracking and recording infrastructure
including registry;(d) Article 6 mechanism baselines and tools (experience of CDM standardizedbaselines, hands-on support); and(e) Scaling up of capacity-building activities (reporting training, replication through
RCCs network for other regions)
Article 6 Implementation Partnership Preparatory Meeting:Japan held another Article 6 related event – “the Article 6 Implementation
Partnership Preparatory Meeting”, a preparatory meeting on a partnership for theimplementation of the Article 6 of the Paris Agreement, in September 2022, in Kamakura,
Japan. The Preparatory Meeting welcomed a total of 55 experts from 19 countries and 14
9.

organizations who shared capacity-building activities on Article 6 implementation anddiscussed future collaboration and contents of activities for the Article 6 Implementation
Partnership to be launched at COP 27.

Figure 5: Summary of the Preparatory Meeting5Key takeaways from the Preparatory Meeting:

10.

(a) There are three particular capacity building needs, agreed as important, forArticle 6 implementation: (1) promotion of understanding to participate in theArticle 6 implementation; (2) processes, such as corresponding adjustment,authorization, and reporting implemented under Article 6; and (iii) project
formulation specific for emission reduction under Article 6 .
(b) A survey conducted by MOE on the Article 6 implementation shows that there
are regional and country gaps between providing and receiving countries for
Article 6 capacity building support. Therefore, importance of collaboration
among organizations, countries, and regional alliances will grow further, so thatcapacity-building support reaches where needed efficiently, while avoiding
duplication and competition.
(c) Countries and organizations providing capacity building supports have lessons
learned, including both successes and failures, and those lessons should beshared among a wide range of stakeholders for better and effective capacity
building.
(d) Private sector is looking for investment opportunities in mitigation projects andis increasing its interest in becoming carbon neutral. The willingness toparticipate in Article 6, the authorization process, transparency, interoperability
with carbon markets, accountability, and capacity building are important toencourage companies’ investment.

III.

Example of experience in capacity building from the CDM

11.
Lessons learned from capacity building of the clean development mechanism(CDM) was addressed in the discussion paper “Capacity building for Article 6
cooperation: The way forward” prepared by Perspectives Climate Research (2022)
include:(a) Coordinating Capacity Building: Effective and sustainable capacity building
requires coordination within and across countries, ministries and public andprivate stakeholders.
(b) Customizing capacity building: To be effective, capacity building needs to becustomized for the countries and stakeholders in question (World Bank 2010).
Japan’s Joint Crediting Mechanism (JCM) provides country-focused capacity
building for small groups of host country stakeholders. In larger countries, a
dedicated JCM secretariat has been set up that engages in capacity building forprivate sector players (Hindarto 2015).
6

(c) Widening capacity building, through knowledge-sharing and peer-to-peer
learning: Once a critical number of stakeholders has developed practicalexpertise, they can share it with their international peers (World Bank 2010).
(d) Sustaining capacity building: Ensuring long-term outcomes of capacity
building requires shifting the focus from predominantly short-term actions suchas workshops to longer-term capacity building (Michaelowa 2005; Byigero et al.
2010; Christensen n.d.). Learning-by-doing through actual CDM projects is
effectively a form of long-term capacity building.
(e) Localizing capacity building: Effective and sustainable capacity building
requires developing and retaining capacity in the host countries, to reducereliance on external, ad hoc expertise. Local think tanks and public-private
partnerships can play a key role in training new generations of local carbon
pricing experts.

IV.

Existing Article 6 capacity building activities and their scope

12.
Based on the key findings from the conferences held in February and March in2022, Japan conducted a survey to map out existing capacity building activities of Article
6 performed by countries, international organizations, and so forth.
was summarized in the table below.

Shared information

Figure 6: Mapping of Article 6 capacity building activities (Based on the survey)

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*Countries indicated as “Yes” for using at least one type of market mechanism in the“IGES NDC Database Version 7.6 (October 2021)”.
**Data source: “A6 capacity building survey” results received by MOEJ between Mar.Sept. 2022.
***This analysis is subject to assessment.

Figure 7: Current coverage of global/regional Article 6 capacity building*Countries indicated as “Yes” for using at least one type of market mechanism in the “IGES NDC
Database Version 7.6 (October 2021)”.
**Data source: “A6 capacity building survey” results received by MOEJ between Mar.-Sept. 2022.
***This analysis is subject to assessment.

Figure 8: Survey results of existing Article 6 capacity building related activities

813.
The key finding from the survey includes the fact that various types of capacity
building projects and initiatives, which often have targeting countries and supports, arealready in place. For example;(a) Bilateral assistance is basically provided to countries with relations.
(b) While the Partnership for Market Implementation (PMI), a World Bank’s
program, supports partner countries in developing domestic strategies, UNDP’s
NDC Support Programme serve 41 countries directly.
(c) Research institutes provide services based on their specialties and accessibilities.
(d) RCCs, which are originally established to promote the CDM in underrepresented countries, provide assistance in reporting and baseline setting.
14.
Though there are many programs on Article 6 implementation provided byvarious entities, due to the lack of systematic coordination, only small number ofcountries have received the benefits even though there are more than 100 countries
willing to use Article 6 in their NDCs.

V. Synergies and scale up
15.
According to the decisions made at COPs, various activities with specifictimeframes are anticipated to be performed by Parties.
(a) Parties under the Paris Agreement are required to submit their first biennial
transparency report (BTR1) at the latest by 31 December 2024. After 2024,
Parties are required to submit their BTRs applying corresponding adjustment.
(b) Parties are requested to submit the next round of NDCs (new NDCs or updated
NDCs) by 2025 and every five years, meaning that the NDCs should besubmitted in 2025 and 2030.

9Figure 9: Article 6 Implementation Roadmap
16.
For swift and robust implementation of Article 6, there are some prerequisites toparticipate in Article 6 and its reporting. As in the Decision 2/CMA.3, “Each Party
participating in a cooperative approach that involves the use of ITMOs shall ensure thatits participation in the cooperative approach and the authorization, transfer and use ofITMOs is consistent with this guidance and relevant decisions of the CMA”. The
Decision 2/CMA.3 also mentions that “Each participating Party shall have, or have access
to, a registry for the purpose of tracking and shall ensure that such registry records,including through unique identifiers, as applicable, authorization, first transfer, transfer,acquisition, use towards NDCs, authorization for use towards other international
mitigation purposes, and voluntary cancellation (including for overall mitigation in global
emissions, if applicable), and shall have accounts as necessary.“
17.
Regarding corresponding adjustment, “Each participating Party shall applycorresponding adjustments in a manner that ensures transparency, accuracy, completeness,comparability and consistency.”18.
For better implementation of Article 6, following activities could be possiblyprovided.
(a) Organizing conferences and workshops and launching working groups tofacilitate understanding of Article 6 rules and linkage with NDCs(b) Sharing countries’ experience of institutional arrangements including
authorization and recording through website, workshops, and etc.
10(c) Providing technical support in 6.2 registry, international registry, andreporting(d) Organizing workshops for training and developing tools

VI.

Partnership scheme

Figure 10: Structure of the Article 6 Implementation Partnership
19.
Objectives of the Article 6 Implementation Partnership is to 1) promoteinternational coordination of Article 6 Capacity Building, 2) develop information
platform for Article 6 implementation, and 3) support piloting and knowledge products.
For these objectives, the Partnership provides a venue and opportunities to all theinterested countries and institutions to discuss the Article 6 Capacity Building.

11

20.

The area of work of the Partnership:(a) Facilitate understanding of A6 rules and linkage with NDCs(b) Sharing of good practices of institutional arrangements incl. authorizationand recording(c) Implement Mutual learning and training for A6 reporting and review(d) Support for baseline methodology (tool development, etc.)(e) Designing of high integrity carbon markets

21.
For better and smooth implementation of Article 6, activities are set as amilestone (Figure 11).
2023

2024

2024 and beyond• Start working groups on:
1. Authorization
2. Registry
3. Reporting (initial,annual information)• Support the submission ofregular information underthe 1st Biennial
Transparency Report(BTR)• Support project
development• Support the submission ofregular information under
BTR (includingcorresponding adjustments)

Figure 11: Timeline of activities of Article 6 Implementation Partnership

22.
Given that capacity building for participation in and reporting on Article 6 is apriority, the next step will be to establish a working group on institutional arrangement
for Article 6 participation and its reporting. According to Session E, Parties under theParis Agreement are required to submit their first biennial transparency report (BTR1) at
the latest by 31 December 2024. Support will be needed to create the report, especiallyfor developing countries. Also, the year 2024 and beyond, Parties are requested tosubmit the NDCs every five years, therefore, regular support for BTR submission isexpected.

12References:
Perspectives Climate Research gGmbH, Capacity building for Article 6 cooperation:
The way forward
Ministry of the Environment, Japan, http://carbon-markets.env.go.jp/eng/mktmech/climate/paris.html
UNDP, https://www.ndcs.undp.org/content/ndc-support-programme/en/home/ourwork.html
UNFCCC, https://unfccc.int/process-and-meetings/the-paris-agreement/nationallydetermined-contributions-ndcs/nationally-determined-contributions-ndcs
World Bank,
https://openknowledge.worldbank.org/bitstream/handle/10986/28510/wb_report_17102
7.pdf
World Bank, State and Trends of Carbon Pricing 2017 (2017)
World Bank, https://pmiclimate.org/about13