CARBON CREDITS
The first appearance of the concept traces back nearly four decades to 1987, in the first efforts to confront the escalating environmental challenges.
Evolving over the years, the concept culminated in a globally recognized framework known as the Paris Agreement. Collectively, Nations agreed to meet greenhouse gas emission reduction targets, through NDCs or Nationally Determined Contributions.
Article 6.2 sets a new precedent, introducing international collaboration mechanisms through Internationally Transferred Mitigation Outcomes. Find some of them below:
MECHANISMS
JCM - Joint Crediting Mechanism
As a precursor to Article 6 of the Paris Agreement, the Joint Crediting Mechanism is a bilateral carbon offset mechanism established to facilitate the achievement of greenhouse gas (GHG) emission reductions through partnerships between Japan and developing countries.
It functions under the principles of mutual recognition of emission reductions, where both contributing and recipient countries count the achieved reductions and split them towards their own Nationally Determined Contributions (NDCs), avoiding double counting.
Since its inception (2013), the JCM has fostered over 240 projects across various sectors such as renewable energy, energy efficiency, and waste management. This mechanism is the setting stone for international collaboration under Article 6.2.
Source: Klik Foundation
This is a simplification of the actual process
SCP - Switzerland Climate Program
The Swiss Climate Program will procure Switzerland with approximately 20 million tonnes of eligible emission reductions in the form of Internationally Transferred Mitigation Outcomes (ITMOs) by 2030.
Aligned with Article 6.2 of the Paris Agreement, with the focus on reducing CO2 through international collaboration, this mechanism supports the conceptual development of mitigation activity programs and finances the resulting emission reductions, promoting the implementation of green technologies and climate mitigation programs in the so far 13 partner countries.
The official process is yet to be determined
SA6C - Singapore’s Article 6 Cooperation
With 1 International Agreement and over 16 Memorandums of Understanding signed, Singapore is progressing its climate ambitions through Internationally Transferred Mitigation Outcomes (ITMOs) under Article 6.2 of the Paris Agreement.
These “Implementation Agreements” with partner countries emphasize sustainable development and environmental integrity. They include mechanisms for financial contributions to adaptation or mitigation projects. Singapore's strategy aims to overcome its physical constraints, thus renewable energy limitations, by becoming a carbon services and trading hub, unlocking green growth opportunities both locally and internationally.
Voluntary Carbon Markets
Voluntary carbon markets enable companies, organizations, and individuals to purchase carbon credits to offset their greenhouse gas emissions on a voluntary basis. These markets are not regulated by governments but are driven by the commitment of participants to reduce their carbon footprint and contribute to global climate goals. Carbon credits in these markets are typically generated through verified projects such as reforestation, renewable energy installations, and energy efficiency improvements.
Emission Trading Systems (ETS)
Emission Trading Systems (ETS), also known as cap-and-trade systems, are regulatory frameworks established by governments to control and reduce greenhouse gas emissions. Under an ETS, a cap is set on the total amount of emissions that can be emitted by covered entities, such as power plants and industrial facilities. Companies receive or purchase emission allowances, which they can trade with one another. This creates a financial incentive for companies to reduce their emissions, as those that emit less can sell their excess allowances to those that need more. ETSs are designed to achieve emissions reductions in a cost-effective manner while ensuring compliance with national and international climate targets.