Asia Pacific economy's Article 6 financing relies on domestic implementation, amid rising trade barriers, according to EcoSecurities.
## Boosting Carbon Markets in Asia: The Role of Article 6 in Regional Cooperation
Article 6 of the Paris Agreement, concluded at COP29 in Baku, Azerbaijan in November 2024, is set to transform the landscape of carbon markets in Asia. This clause encourages international cooperation, enabling countries to collaborate in reducing emissions and fostering more efficient carbon pricing mechanisms [1][5].
### Enhancing Carbon Market Efficiency
One of the key mechanisms of Article 6 is the establishment of international carbon markets. This allows countries to access a broader pool of carbon credits, potentially lowering the cost of achieving emissions reductions [5]. For instance, Indonesia, with its vast potential for nature-based carbon projects, is leveraging Article 6 to open its market to international participation while maintaining strict oversight to ensure domestic economic benefits [4].
### Fostering Regional Cooperation
In Asia, Article 6 can play a pivotal role in enhancing regional cooperation on carbon markets. By facilitating international carbon trading, Article 6 can encourage regional cooperation and innovation in carbon markets. This can be particularly beneficial for large carbon-intensive economies like China and India, allowing them to leverage international markets to meet their climate goals more effectively [1][2].
### Decarbonizing Hard-to-Abate Sectors
Article 6 can support the decarbonization of hard-to-abate sectors such as steel and cement by providing a framework for investments in high-integrity carbon projects. This can accelerate the transition to cleaner technologies and reduce emissions from these sectors [2].
### The Future of Article 6 in Asia
The Asian Development Bank (ADB) is actively supporting Asia Pacific through initiatives like the Climate Action Catalyst Fund to help national governments engage with Article 6. Countries like South Korea, Japan, and Singapore are already implementing relevant policies and strategies to enable cooperation under Article 6 [2][3].
Recently, Singapore pledged up to US$500 million in concessional funding to support the Financing Asia's Transition Partnership (FAST-P) [6]. Thailand conducted the world's first Article 6 ITMOs transfer in January 2024 to Switzerland, and Singapore's approach under Article 6.2 leverages voluntary carbon market infrastructure [7].
Pakistan recently announced its Carbon Market Policy Frameworks at COP29, and Sri Lanka has published its positive and negative list for project activities eligible to generate credits under Article 6 [8]. Japan is expected to build on its Joint Crediting Mechanism (JCM) to align with Article 6 requirements [3].
By 2030, carbon market activity in Southeast Asia could create some US$10 billion in economic opportunities annually [9]. With the implementation of Article 6, Asia is poised to lead the way in carbon market efficiency and regional cooperation, supporting both decarbonization efforts and economic growth.
[1] https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement-articles/article-6 [2] https://www.adb.org/news/article6-rulebook-set-boost-carbon-markets-asia-pacific [3] https://www.reuters.com/business/sustainable-business/japan-aims-align-joint-crediting-mechanism-article-6-paris-agreement-2021-10-06/ [4] https://www.cnbc.com/2021/11/12/indonesia-is-opening-its-carbon-market-to-international-participation.html [5] https://www.carbonbrief.org/explainer-what-is-article-6-of-the-paris-agreement [6] https://www.channelnewsasia.com/business/singapore-pledges-us500m-concessional-funding-to-support-fast-p-14995194 [7] https://www.channelnewsasia.com/business/singapore-thailand-switzerland-complete-worlds-first-article-6-itmos-transfer-14941512 [8] https://www.reuters.com/business/sustainable-business/sri-lanka-publishes-positive-and-negative-list-for-article-6-2021-11-08/ [9] https://www.channelnewsasia.com/business/southeast-asia-carbon-market-activity-could-create-us10-billion-economic-opportunities-annually-14995192
- The establishment of international carbon markets under Article 6 of the Paris Agreement could potentially lower the cost of achieving emissions reductions, as demonstrated by Indonesia's leveraging of Article 6 to invite international participation in its carbon market.
- Article 6 can facilitate regional cooperation and innovation in carbon markets, particularly within Asia, where large carbon-intensive economies like China and India could benefit from international carbon trading to more effectively meet their climate goals.
- Article 6 provides a framework for investments in high-integrity carbon projects, which can support the decarbonization of hard-to-abate sectors such as steel and cement, thereby speeding up the transition to cleaner technologies and reducing emissions.
- With the implementation of Article 6, Asia is positioned to lead the way in carbon market efficiency and regional cooperation, supporting both decarbonization efforts and economic growth, potentially creating US$10 billion in annual economic opportunities by 2030 in Southeast Asia alone.
