Private Sector and Organizational Perspectives on Challenges and Support for Article 6 Implementation
Article 6 of the Paris Agreement channels private investments to contribute to the achievements of countries’ NDCs while creating opportunities to increase ambition of NDCs for private-sector participation. While navigating this early stage of Article 6 implementation, the private-sector stakeholders may face certain challenges, including uncertainty on the authorization, technical complexity, and aligning activities with host country NDCs. For investors, the limited harmonized information as well as unclear signals around demand and credit quality and approaches to market transparency could hamper efforts. Together, these barriers could slow the mobilization of private capital and delay project initiation, representing various areas of support that could be focused to foster an enabling environment for the private sector’s involvement.
In response to these implementation challenges, the A6ISR conducted a new edition survey of A6IP partner organizations to gather firsthand perspectives from a diverse range of market stakeholders. The aim of the survey was to better understand the most pressing challenges and barriers facing actors engaging with Article 6, the types of support that stakeholders find most useful in advancing implementation, and the current level of awareness and engagement among A6IP Center partner organizations.
In gathering these perspectives directly from A6IP Center partner organizations that are active in or considering Article 6 engagement, the survey aims to help to inform targeted efforts to facilitate project implementation, enhance institutional preparedness and support the establishment of high-integrity international carbon markets.
Challenges and Barriers Associated with Article 6 Implementation
Survey responses revealed a diverse set of barriers and challenges for Article 6 implementation, as shown in Figure 22. Among the respondents, the most highlighted challenge was identified as the lack of clear legal rules or frameworks from governments, with 58% rating it as very challenging and an additional 42% as moderately challenging. Similarly, uncertainty around the future prices and demand of carbon credits and difficulties in negotiating with host governments to secure corresponding adjustments were both rated as very challenging by 54% of respondents, highlighting acute concerns about market stability and government engagement. Lack of clarity regarding corresponding adjustments and insurance mechanisms also ranked highly, with 50% describing this issue as very challenging.
Some categories were generally viewed as comparatively less challenging. Less than 25% of respondents find the general lack of understanding about Article 6 (21%) and the understanding of the Article 6 governance structures posed major difficulties (21%). Restrictive positive lists from host countries (17%) and lack of transparency in how transactions are reported (8%) were among the least pressing major challenges, although over half of the participants still regard these areas as moderately challenging.
Overall, Article 6 implementation faces notably challenges and barriers in four main areas including legal structure development, government negotiations, market price uncertainty and clarity on corresponding adjustments, which stand out as consistent challenges and barriers to effective Article 6 implementation. These results suggest that targeted efforts to provide policy clarity, enhance government engagement, and stabilize market mechanisms would address the most critical concerns identified by private stakeholders.
Types of Support Most Useful to Facilitate Article 6 Implementation
Figure 23 indicates the type of support that private-sector actors and organizations find most useful to facilitate implementation of Article 6.The overwhelming majority of responses were placed in the Very Helpful or Moderately Helpful categories, reflecting strong demand for the various support mechanisms in each category. A very small proportion of the responses were recorded as not helpful.
The category that received the highest support was clear legal rules or frameworks provided by governments, with 83% of the responses placed in the Very Helpful category and the remaining 17% in the Moderately Helpful category. Additional demand from governments to buy or use ITMOs also received a high rating, with 75% of the responses in the Very Helpful category and 25% in the Moderately Helpful category. Government incentives to support Article 6 projects and growth and increased activity in global carbon markets each received a 67% Very Helpful rating, with the remaining 33% in the Moderately Helpful category.
Additional support categories earned relatively high ratings. For instance, 46% of training and events for private companies were ranked as very helpful, 38% as moderately helpful, and 17% as not helpful. Some 42% of online knowledge tools and educational materials were rated as very helpful, 46% as moderately helpful, and 13% as not helpful. Twenty-nine percent of respondents rated financing/grant options for feasibility studies as very helpful, while 54% find it moderately helpful and 17% not helpful. Forty-two percent of respondents rated support for negotiations with host countries as very helpful, 50% rated it as moderately helpful, and only 8% rated it not helpful.
Transparency on how transactions are processed, positive lists from host countries with flexibility for additionality types, and events to support public–private dialogue and networking were more commonly seen as moderately helpful by a majority of respondents, but still received substantial ratings of very helpful.
Overall, the responses demonstrate that every type of support among the 16 was deemed helpful to some extent although the degree of helpfulness varied. At one end of the spectrum were legal clarity, government engagement, and market-support measures, which were strong priorities for the majority of respondents. At the other end were knowledge tools, training and events, and facilitation options, which were less of a priority, but most respondents still found them to be at least moderately helpful. This suggests that stakeholders not only expect governments to provide enabling conditions, but also value a range of additional support options that can provide greater confidence and reduce participation hurdles in Article 6 markets.
Together, these results highlight the concentrated nature of private-sector priorities, and suggest that while respondents expect governments to provide enabling conditions for private-sector engagement by providing legal clarity, incentives, and consultation, they also place a high value on technical clarity and financing mechanisms which lower the barriers to participation. The results confirm that targeted support in these five areas would be most effective for enhancing private-sector engagement with Article 6 implementation.
Additional Challenges and Areas for Improvement Identified by Organizations Implementing Article 6
In the Free Response portion of the survey, respondents highlighted the following key additional challenges:
- Fragmentation across different Article 6 implementation approaches, including the different recognition of methodologies applicable to each bilateral arrangement
- Clarity on the interplay between Article 6.4 mechanism and Article 6.2 guidance, and the interconnection between international compliance and voluntary markets
- Alignment with other international frameworks, particularly with CORSIA
- Limited understanding on the application of corresponding adjustments
- Concerns around transparency on the allocation of mitigation outcomes from Article 6 projects
- Transparent and timely disclosures of information from the registry system
- Capacity constraints within governments that lead to delayed consideration and approvals processes
- Weak demand signals and lack of visibility of Article 6 projects
To address these challenges, respondents recommended potential areas for improvements, which include:
- Promotion of harmonized, consistent, and interoperated Article 6 implementation across various approaches
- Leverage the carbon trading platforms to improve demand signal and engagement with investors
- Collaborative training programs through various partner organizations, with suggestions for targeted workshops, project clinics and hands-on technical assistance for developers and acquirers
- Promotion of enabling finance, recognizing the importance of ex-ante finance to support readiness activities and institutional capacity and structures
- Application of risk-reduction instruments, performance insurance products, and formalized dispute resolution mechanisms to strengthen investment confidence and trust
Overall, respondents highlighted harmonization of standards, capacity building, readiness finance, risk-mitigation instruments and greater transparency as the most helpful forms of support that could catalyze demand and supply-side engagement. Bridging these gaps are seen as critical to scale participation, strengthen demand signals and build trust in Article 6 as a high-integrity framework for international carbon markets.