Paris Agreement Article 6 (6.2 / 6.4) Regular Update / Article 6 Readiness Comparison by Country

This article is an automatically translated version of the original Japanese article. Please refer to the Japanese version for the most accurate information.

This is the newsletter from Deloitte Tohmatsu Sustainacraft, Inc. This article covers major carbon-related policy trends according to the following items:

• Policy Trends
  • Paris Agreement Article 6.2 (Bilateral Cooperation)
  • Paris Agreement Article 6.4 (Paris Agreement Crediting Mechanism)
  • National Carbon Policies
  • Non-state Actor Initiatives
  • UNFCCC Registry
• Discussion Article
  • The future of JCM based on a comparison of domestic systems (Article 6 Readiness) for Article 6 utilization

Keywords: Article 6, Bilateral Cooperation, PACM, JCM, Nature-based, COP30

1. Introduction

This month saw intensified activity regarding the operationalization of international carbon markets under Article 6 of the Paris Agreement, reforms of national Emissions Trading Systems (ETS), and movements to improve the integrity of the Voluntary Carbon Market (VCM). In particular, significant concrete progress was made under Article 6.2, including the commencement of project applications based on bilateral cooperation and the authorization of the first ITMOs (Internationally Transferred Mitigation Outcomes) trades. In the EU, discussions continued regarding suppressing ETS price fluctuations and the potential postponement of ETS2, while many other countries advanced the introduction or strengthening of carbon-related policies. Furthermore, non-state actor initiatives saw progress in the application of new guidelines and standards aimed at enhancing the integrity of the voluntary carbon market. Regarding the UNFCCC Registry, Georgia, a JCM partner country, reported its NDC and expressed its intention to utilize Article 6.

In the second half of this newsletter, we evaluate and compare the status of domestic system development (Article 6 Readiness) in Indonesia, Laos, and the Philippines, and discuss the future of the JCM. While Indonesia shows promise in its pathway for utilizing Article 6 systems, the future of JCM utilization still requires careful observation. In the Philippines, despite domestic laws still being at the bill stage, JCM project formation is currently progressing most concretely. In Laos, while both systems exist, their track records are yet to be established. In all these countries, the phase has moved beyond simply waiting for systems to be finalized; it is now a time for actively taking approaches suited to the current situation.

2. Policy Trends

Article 6.2

Article 6.2 of the Paris Agreement (bilateral and multilateral cooperative approaches) saw numerous developments across various countries this month as a framework for international carbon credit trading to achieve NDCs (Nationally Determined Contributions).

Project Authorizations

• Singapore and Thailand have launched applications for carbon credit projects under their bilateral Article 6.2 implementation agreement, bringing the agreement between the two countries into the operational phase (Source).
• In Malawi, a dairy biogas program aimed at reducing emissions from agriculture and household energy use was authorized under Article 6.2 as the country's first project to generate ITMOs (Internationally Transferred Mitigation Outcomes) (Source).
• Peru entered into and authorized its first bilateral trade of international carbon credits with Switzerland for cookstove-related activities under Article 6.2. Following Switzerland’s 2020 implementation agreement with Ghana, this trade with Peru marks another significant milestone (Source).
• Ghana and Switzerland also authorized another biogas project within Ghana under Article 6.2 (Source).

Other Developments and Institutional Setup

• In the bilateral partnership between Bhutan and Singapore, four new project proposals for carbon credit generation were submitted (Source).
• Under the JCM between Japan and Thailand, updated rules and guidelines were adopted to strengthen the project approval process and clarify the designation criteria for third-party entities (VVBs) (Source).

Article 6.4

Regarding Article 6.4 of the Paris Agreement (UN-led mechanism), the Supervisory Body continues to make progress in methodology development, laying the groundwork for the future operation of the PACM (Paris Agreement Crediting Mechanism). Challenges have also been noted in balancing the rapid implementation of the PACM with the strictness of credit quality.

Methodology Development and Public Consultation

• A specialized UN panel proposed various regional rates to calculate the carbon credit units that cookstove projects can generate under the PACM (Source).
• Stakeholders involved in the Paris Agreement Crediting Mechanism (PACM) have launched a public consultation on a draft methodology for grid-connected renewable electricity (Source). This effort aims to usher in a new era of rigorous carbon credit generation for clean energy projects.

National Carbon Policies

This month saw a wide range of policy trends, including EU ETS reform proposals, updates to emission reduction targets, and research on the effectiveness of carbon pricing.

ETS Reform and Market Stabilization

• EU leaders have called on the European Commission to present a review of the Emissions Trading System (ETS) "by July 2026 at the latest" and to complete the legislative process by the end of 2027. This aligns with movements seeking urgent measures to address high energy costs and maintain industrial competitiveness (Source).
• The possibility of introducing a "soft price cap" to the EU ETS has emerged, aimed at suppressing price volatility and ensuring market stability (Source).
• France is pushing to extend the EU ETS until 2050 and intends to continue the distribution of free allowances to industries covered by the CBAM beyond 2034 (Source).
• The EU officially adopted its 2040 climate target and postponed the start of ETS2 by one year to January 1, 2028. This provides member states with a longer preparation period (Source).

Discussions on CBAM and National Carbon Market Progress

• More than 12 EU member states have asked the European Commission to exempt fertilizers from the Carbon Border Adjustment Mechanism (CBAM) (Source).
• India is working to expedite the accreditation process for verifiers and improve the skills of approximately 20,000 energy auditors to prepare for its upcoming Emissions Trading System (Source).
• In the UK, plans to expand the government’s Emissions Trading System (ETS) to the shipping industry within this year were approved. This is seen as an important step in linking the UK and EU markets (Source).
• Washington State, California, and Quebec released a draft proposal to link their Emissions Trading Systems (ETS) and are seeking public comment (Source).

Non-state Actor Initiatives

This month was marked by the introduction of new tools and standards to ensure market integrity, as well as a clear quality-focused stance from financial institutions.

Release of Regulatory Sandboxes and Guidelines

The Clean Cooking Alliance (CCA) and the Voluntary Carbon Market Integrity Initiative (VCMI) released a global guide for testing carbon market innovations through a "Regulatory Sandbox to Support Carbon Markets." This guide demonstrates the potential for financial growth in carbon markets while highlighting challenges that hinder market integrity and investment flows. It aims to foster innovation by providing a practical framework for designing regulatory sandboxes tailored to various national contexts (Source).

ICVCM Initiatives and Market Transparency

The Integrity Council for the Voluntary Carbon Market (IC-VCM) called for the need for enhanced infrastructure to support the expansion, integrity, and efficiency of carbon markets. It indicated that while digital monitoring technology (digital MRV) has the potential to improve transparency and accuracy in the voluntary carbon market, it could also trigger new integrity risks without proper governance (Source).

SBTi Standard Revisions and Financial Institutions' Focus on Quality

• Companies are set to be formally recognized for using high-quality carbon credits to compensate for ongoing emissions under the Science Based Targets initiative (SBTi) "Corporate Net Zero Standard Version 2.0." The final publication is scheduled for June 2026 (Source).
• HSBC, the London-based global financial institution, announced that it will only provide financing to carbon projects that issue credits certified by the IC-VCM, clarifying its quality-focused stance in the voluntary carbon market (Source). The UK government is seeking views on a policy and governance framework to ensure the credit of voluntary carbon and nature markets, aiming to enhance market health and support the appropriate use of credits (Source).

UNFCCC Registry

In the UNFCCC Registry for March 2026, a total of 8 submissions were confirmed. Among JCM partner countries, Georgia submitted its new Nationally Determined Contribution (NDC), "NDC 3.0." Georgia signed a JCM agreement with Japan in 2020, and the mention of Article 6 of the Paris Agreement in its NDC suggests the potential for future JCM project formation.