Article 6: What is it and why is it important?

Increased ambition to curb greenhouse gas (GHG) emissions was at the heart of June’s United Nations Climate Change Conference in Bonn, Germany.

Under the Paris Agreement, the 194 Parties to the United Nations Framework Convention on Climate Change (UNFCCC) committed to shifting the world’s course towards sustainable development and “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels.”

In order to achieve this goal, all participating countries are required to set national GHG emissions reductions targets – nationally determined contributions (NDCs). The next review of the NDCs will take place in 2020 and it will be necessary for countries to increase ambition in order to meet the goals of the Paris Agreement, recognising that this would significantly reduce the risks and impacts of climate change.

One of the keys to this increased ambition lies in the implementation of Article 6 of the Paris Agreement. While at COP24, in Katowice, Poland last December, participating countries reached an agreement on the implementation of the Paris Agreement – the so called Paris Rulebook – but could not reach an agreement on the implementation of Article 6. This is why Article 6 of the Paris Agreement was the focus of much attention at the United Nations Climate Change Conference in Bonn, which marked the first formal meeting of governments to advance negotiations on outstanding Paris Rulebook items.

In its capacity as the UNFCCC Focal Point for Business and Industry, the International Chamber of Commerce was on hand to represent global business during the conference.

Article 6 of the Paris Agreement and carbon pricing

Article 6 of the Paris Agreement aims at promoting integrated, holistic and balanced approaches that will assist governments in implementing their NDCs through voluntary international cooperation. This cooperation mechanism, if properly designed, should make it easier to achieve reduction targets and raise ambition. In particular, Article 6 could also establish a policy foundation for an emissions trading system, which could help lead to a global price on carbon.

Under this mechanism, countries with low emissions would be allowed to sell their exceeding allowance to larger emitters, with an overall cap of greenhouse gas (GHG) emissions, ensuring their net reduction. Supply and demand for emissions allowances would lead to the establishment of a global carbon price that would tie the negative externalities of GHG emissions to polluters. In other words, by paying a price on carbon, states exceeding their NDCs would bear the costs of global warming.

Through this flexible approach, GHG emissions would undergo a strong decline, coupled with stimulation for innovative and cleaner technologies and an overall transition towards a low-carbon economy.

In addition to being a driver for carbon pricing, the successful implementation of Article 6 could create new channels for climate finance and lead to technology transfer and capacity-building.

Business views and recommendations on the implementation of Article 6 of the Paris Agreement

In its efforts to make action on climate everyone’s business, ICC – on behalf of 45 million enterprises in over 100 countries – is urging Parties to reach a conclusion on the effective and transparent implementation of Article 6 at COP25 climate negotiations in December 2019. This will help to achieve our ambitious climate goals and secure an inclusive and sustainable low-carbon future.

For more on Article 6 of the Paris Agreement:

Watch the Climate Action Studio interview with Majda Dabaghi, Director of Inclusive and Green Growth.

Read our joint press release with the International Emissions Trading Association released ahead of the Bonn Climate Change Conference.

You can also read more about ICC’s Business Views on Market Mechanisms and ICC’s Carbon Pricing Principles.