The current set-up of trading emissions reductions on a bilateral basis under Article 6.2 of the Paris Agreement risks fragmenting carbon markets, South Korea warned during a dialogue at the UN Cop 30 climate conference in Belem, Brazil, indicating that it is exploring options for wider collaboration.
South Korea intends to develop a "plurilateral cooperation model" for Article 6.2, which would use common authorisation processes and methodologies. The approach would reduce the cost, time and administrative burden involved in engaging with the mechanism, the country said. It is inviting parties to the agreement to collaborate on the model.
Article 6.2 allows countries to trade so-called internationally traded mitigation outcomes (Itmos) that can be counted towards their nationally determined contributions (NDCs) to the Paris agreement. NDCs are climate plans submitted by countries or jurisdictions such as the EU.
South Korea, which has signed more than 10 bilateral cooperation agreements under Article 6.2 since 2023, said earlier this week that it is yet to see practical results from the mechanism.
Concerns were raised at the dialogue around the adequacy of the mechanism's rulebook. EU international carbon markets negotiator Michel Ardohain said that the framework as it stands today "in our view will not guarantee quality on its own. It is not enough".
If the bloc opts to engage in the mechanism at a later date, it will use other tools and methodologies to ensure high integrity, Ardohain said.
The European Parliament has approved a 90pc reduction in the EU's greenhouse gas emissions by 2040 compared with 1990 levels, of which up to 5pc could be met from 2036 onwards using international carbon credits.
But even if it does not permit the use of credits until 2036, the EU will look to start building partnerships sooner rather than later, Ardohain said.
Federica Dossi of non-governmental organisation (NGO) Carbon Market Watch also warned at the dialogue of the "inadequacy" of the Article 6.2 rulebook, which she said cannot guarantee the trade of high quality Itmos.
Article 6.2 should "orient" itself on Article 6.4 and not the voluntary carbon market (VCM), said Axel Michaelowa, representing the Research and Independent NGOs (Ringo) group, otherwise it risks reputational damage which could in turn lead to low demand and low Itmo prices.
Article 6.4 of the Paris deal — which sets out the framework for the Paris Agreement Crediting Mechanism (Pacm) — has laid strong foundational rules, Michaelowa said.
The VCM has been dogged in recent years by concerns about the environmental integrity of its credits.
Lack of standardisation is contributing to short supply in the Article 6.2 market, according to Frederic Gagnon-Lebrun, senior director of policy and strategy at project developer South Pole.
"At this point every transaction is a bespoke transaction," which makes it hard to scale up the market, he told delegates at a Cop 30 side event.
But Gagnon-Lebrun said he expects that to change over time, which will help increase credit supply.
A lack of resources for some countries is also making it difficult for some to deal with the various project standards, and understand how to ensure project and social integrity. The use of international standards could help, while working with other countries can help close the knowledge gap, said Cristina Figueroa, Article 6 and carbon pricing coordinator in Chile's environment ministry.
"It's a learning by doing process," she said.
