Article 6.4 of the Paris Agreement is poised to facilitate international carbon market deals, highlighting the need for well-designed nature-based climate solutions. The urgency of integrating responses to climate and biodiversity crises has prompted proposals for aligned credit systems. Currently, a majority of Article 6.4 submissions favor energy projects over nature-based initiatives. Enhanced standards aim to ensure project integrity while new funding mechanisms may spur investment in nature-positive outcomes.
International carbon market deals under Article 6.4 of the Paris Agreement are anticipated within the year. The development of a robust project pipeline for these deals necessitates an increase in well-structured nature-based climate solutions as recommended by environmental proponents.
The urgency for an integrated approach to addressing interconnected environmental crises, including climate change and biodiversity loss, has intensified. For instance, Singapore’s President Tharman Shanmugaratnam has proposed aligning market-based credit systems to effectively tackle these entwined crises, utilizing insights from the 2024 Global Commission on the Economics of Water.
Recent advancements reflect this urgency. In February 2025, COP 16 to the Convention on Biological Diversity established a biodiversity finance target of USD 200 billion annually by 2030, bolstered by a new financing mechanism under the Global Environment Facility (GEF). This funding is pivotal for enhancing blended finance programs that link climate initiatives with biodiversity.
Carbon credits present a vital intersection between climate action and biodiversity goals. Between 2021 and 2023, approximately 80% of voluntary carbon market initiatives included nature-based targets. The newly launched Race to Belem fund aims to issue USD 1.5 billion in carbon credits to support the conservation of Brazil’s Amazon forests, promoting broader biodiversity goals through financial mechanisms.
Verra, the leading carbon credit verifier, unveiled new standards designed to align carbon credit systems with biodiversity finance. Simultaneously, NatureFinance is generating essential technical analysis to enhance private sector financing for nature projects that address climate and freshwater challenges. These endeavors align with the Paris Agreement’s objectives aimed at balancing anthropogenic emissions and carbon sequestration.
The demand for Article 6.4 carbon credits has escalated since the adoption of its rules in late 2024, with roughly 1,000 proposed carbon credit deals already submitted. However, a significant portion of these proposals remains focused on energy-related projects, with only 10% pertaining to nature-based carbon offsets linked to forestry — a trend particularly noted in India, the largest proponent of such markets.
While energy projects dominate the Article 6.4 landscape, the reliance on cheaper low-carbon technologies must be assessed critically to ensure those projects contribute meaningfully to greenhouse gas reductions. Historical evaluations of the Kyoto Protocol’s Clean Development Mechanism reveal a troubling trend where minimal projects genuinely achieved additional carbon reductions.
Many proponents remain hesitant to pursue nature-based carbon sequestration projects, primarily due to reputational risks from past failures tied to carbon credit schemes, which have often neglected genuine biodiversity enhancement. Research suggests that diverse forests effectively sequester higher amounts of carbon than monocultures, emphasizing the need for supporting native ecosystems in carbon credit schemes.
To address these concerns, Article 6.4’s Sustainable Development Tool introduces stringent standards for project integrity, demanding ecological protections before credits can be issued, thus ensuring critical habitats and biodiversity are safeguarded. These standards encompass various considerations, including human rights and environmental risks stemming from extreme events.
An alternative to the complex standards established by Article 6.4 is Brazil’s Tropical Forest Forever Fund (TFFF), promoting a streamlined approach to forest conservation without intricate additionality requirements. The success of Article 6.4 will largely depend on its ability to foster private sector investment into credit schemes that support positive environmental outcomes.
In conclusion, the anticipated international carbon market deals under Article 6.4 of the Paris Agreement can potentially deepen the connection between carbon credits, climate action, and biodiversity. However, successful implementation hinges on fostering greater participation in nature-based credits while overcoming historical limitations associated with carbon markets. With substantial financial targets and innovative frameworks like the TFFF, the opportunity exists to enhance investment in carbon credit schemes that yield beneficial environmental outcomes.
Original Source: sdg.iisd.org
