The article discusses the anticipated launch of international carbon market deals under Article 6.4 of the Paris Agreement. It highlights the need for integrated approaches to tackle the climate, biodiversity, and freshwater crises simultaneously. Recent initiatives, such as the biodiversity finance target and new funding mechanisms, aim to support effective projects while addressing the challenges related to the credibility and additionality of carbon credits derived from ecosystems. Success will depend on attracting private sector investment and ensuring robust safeguards.
The initial international carbon market transactions under Article 6.4 of the Paris Agreement are anticipated to commence within this year. As the portfolio of Article 6.4 projects expands, it remains essential for advocates to enhance well-conceived nature-based climate solutions that provide synergies across related crises.
The rationale for integrating responses to climatic, biodiversity, freshwater, and associated environmental challenges has never been more compelling. This urgency is amplified by extreme climate events—such as severe flooding and extended droughts—that exacerbate the pressures on biodiversity across ecosystems.
In January 2025, Singapore’s President Tharman Shanmugaratnam called for heightened coordination between market-centric credit systems to effectively address the intertwined crises affecting freshwater, climate, and biodiversity, referencing insights from the 2024 Global Commission on the Economics of Water.
Significant progress has emerged in recent months. At the resumed COP 16 meeting in late February 2025, parties agreed upon a biodiversity financing target of USD 200 billion annually by 2030. This commitment is part of the new Kunming-Montreal Global Biodiversity Framework (GBF), which will be managed by the Global Environment Facility (GEF), supporting blended financing efforts that harmonize climate and nature initiatives.
Carbon credits serve as pivotal instruments linking sustainability goals across climate initiatives and biodiversity preservation. Between 2021 and 2023, voluntary carbon markets often incorporated targets related to nature; a notable new initiative, the Race to Belem fund, aims to issue USD 1.5 billion in carbon credits aimed at safeguarding Brazil’s Amazon forests.
Moreover, UNDP has increased funding for land restoration programs through its BIOFIN initiative, which merges ecological restoration with climate benefits through biodiversity financing. Verra, the leading carbon credit verifier, has introduced its Climate, Community and Biodiversity Standards to improve the alignment between carbon credits and biodiversity financing efforts.
The Paris Agreement emphasizes achieving a balance between emissions and carbon sinks, as articulated in Article 4, encouraging the use of result-based financial incentives for noteworthy projects like forest preservation. The newly adopted Article 6.4 regulations at COP 29 establish essential guidelines for operationalizing these carbon markets by promoting private investments.
Government interest in Article 6.4 has surged since the updated rules were finalized, with approximately 1,000 carbon credit proposals being processed recently. However, proposals utilizing nature-based offsets remain sparse, with only about 10% focusing on carbon removal through forest or ecosystem management.
Energy projects, particularly solar, wind, and electric transportation, dominate the current pipeline, which reflects the decarbonization trends in national commitments. While the affordability of these technologies has contributed to their quick adoption, it also raises concerns regarding additionality in carbon reductions, as these projects may not yield genuine net benefits compared to conventional methods.
Historical precedents, such as the Kyoto Protocol’s Clean Development Mechanism (CDM), underscore this critical concern; it was reported that only 2% of CDM projects successfully demonstrated additionality in their emissions reductions. Contemporary voluntary carbon markets have similarly struggled in financing meaningful energy projects.
Despite this, many Article 6.4 proponents hesitate to advocate for carbon credits derived from natural ecosystems due to concerns regarding reputational risks tied to potential greenwashing. For instance, the dangers posed by monoculture plantations, which negatively affect biodiversity and soil health, contrast with the proven efficacy of diverse forests in carbon sequestration.
With this backdrop, the Article 6.4 framework aims to promote high-integrity projects through its Sustainable Development Tool, which incorporates over 20 nature-centric standards. This tool mandates robust protections for land, soil, and water resources before any carbon credits can be issued.
The biodiversity safeguards mandated by Article 6.4 center on critical habitats and the preservation of endangered species and demand compliance with various human rights standards. Anticipation of risks from climate extremes adds further complexity, necessitating a new buffer pool to mitigate such threats within carbon credit scenarios.
The complexity and potential costs associated with these new regulations are clear, aiming to rectify the shortcomings of previous carbon projects that adversely impacted biodiversity. Furthermore, alternative frameworks, such as Brazil’s Tropical Forest Forever Fund, are emerging, focusing on simpler mechanisms for forest preservation without stringent additionality requirements.
The success of Article 6.4 will greatly depend on its ability to entice private investors into nature-positive financing arrangements. The ongoing depletion of carbon stocks due to climate change, coupled with dwindling public sector funding, underscores the need for effective carbon credit schemes that balance both climate resilience and biodiversity objectives.
The implementation of Article 6.4 of the Paris Agreement is set to influence carbon markets significantly in the coming year. By championing integrated approaches that link carbon credits with biodiversity and ecosystem health, there is potential for progress in combating the climate crisis. However, historical challenges related to the additionality of carbon projects and concerns about reputational risks may hinder broader adoption of nature-based solutions. Ultimately, the success of this framework will hinge on attracting new private investments through sustainable practices that protect both the climate and biodiversity.
Original Source: sdg.iisd.org
