Although Article 6.7 stipulates that the annual COP adopts rules, modalities and procedures for the carbon market in accordance with Article 6.4, there is disagreement over the extent of national control over its activities and the UN supervisory body signs each draft or methodology. “The rules are crucial. If poorly written, instead of facilitating additional emission reductions, they risk thwarting the satisfaction of current contributions and undermining progress. On the contrary, according to IETA Forrister, the existence of Article 6 trade mechanisms could indeed help developing countries to broaden the scope of their NDCs. IETA`s starting position is that all NDCs should be macroeconomic as soon as possible, says Forrister. Finally, Article 6.9 sets out a “framework” – a work programme under way under the COP – that will “encourage” the non-market-oriented approaches set out in Article 6.8. In light of the ongoing discussions on how best to reach OMGE, Dufrasne says that “unfortunately” automatic termination is not currently supported by many countries, and he says “there are a lot of misunderstandings about what the bases are going to do”. The policy paper refers to the “best science available,” which reinforces demands for “maximum ambition” to achieve the goals of the Paris Agreement. The mandates of the A6.2 and A6.4 focus on the main objective of the mechanisms: to achieve a cost-effective reduction in greenhouse gas emissions rather than creating carbon markets for themselves.
One of the risks is that market mechanisms can easily become withdrawal mechanisms, or worse, poor design can create ways to avoid measures and increase total emissions that go beyond what would otherwise have been done without the mechanism. This new market is sometimes referred to as the “sustainable development mechanism” (SDM). It would replace the Clean Development Mechanism (CDM) that operated under the previous protocol of the Paris Agreement, the Kyoto Protocol, and which gave industrialized countries legally binding emission targets that were set from early 2008 to 2012. On the other hand, it was argued that, at best, the CDM had transferred a “zero amount” to reduce CO2 reductions between countries. In the worst-case scenario, the CDM is accused of actively undermining targets that could have been achieved by “hot air” credits that did not actually reduce CO2 emissions. This shows that, in an Article 6-inspired carbon market, countries in Europe, North America and other regions (shades of blue in the graph below) would achieve some of their climate goals by purchasing credits from developing countries in Asia, particularly India (orange) and Pakistan (orange). Another unique aspect of the mechanism is its objective of mobilizing the private sector through appropriate incentives to contribute to climate change mitigation.