Article 6 of Paris Climate Agreement ( UPSC Prelims)

News Context

The MoEFCC declared the establishment of the NDA (National Designated Authority) to oversee the execution of Article 6 of the Paris Agreement (2015), in accordance with the Environment (Protection) Act, 1986.

About NDA

Functions of NDA: Propose a list of suitable activities/projects for emission reduction trading and approve projects under Article 6.4.
India’s identified activities/projects under Article 6.4: Activities for GHG mitigation such as renewable energy and green hydrogen, alternative materials like Green Ammonia, and Removal Activities including Carbon Capture, Utilization, and Storage.
Composition: A committee of 21 members, led by the Secretary of the Environment Ministry.

Article 6 of Paris Agreement

Article 6 allows nations to achieve their climate objectives through voluntary cooperation by creating international carbon compliance markets for the exchange of carbon credits. During COP29 in Baku, Azerbaijan, the UNFCCC (United Nations Framework Convention on Climate Change) finalized the rules for Article 6.2 (cooperative approaches) and Article 6.4 (the Paris Agreement Crediting Mechanism).

Mechanisms under Article 6

Market-based approaches
Article 6.2: This involves a decentralized approach for bilateral cooperation.
      ○ Involves the trading of International Transferred Mitigation Outcomes (ITMOS), which are emissions reductions resulting from mitigation actions.
      ○ Requires a corresponding adjustment in nationally determined contributions (NDCs) when ITMOS are traded.
Article 6.4: This is a centralized approach known as the Paris Agreement Crediting Mechanism (PACM).
      ○ Establishes a global carbon market.
      ○ Utilizes a baseline-and-crediting mechanism.
      ○ Acts as a successor to the Kyoto Protocol's Clean Development Mechanism (CDM).
Non-Market based approach
Article 6.8: Introduces non-market approaches to support mitigation and adaptation.
      ○ Does not involve the trading of emission reductions.

Difference between Carbon trading of Kyoto Protocol and Paris Agreement

Here is a paraphrased version of the content with important terms highlighted in bold:

Aspect Kyoto Protocol Paris Agreement (Article 6)
Scope of Participation Participation was restricted to developed countries (Annex I), with projects hosted by developing countries. Inclusive of all countries.
Adaptation Funding A portion of proceeds from CDM projects was allocated to the Adaptation Fund. 5% of proceeds from Article 6.4 transactions are directed to the Global Adaptation Fund.
Market Scope Emphasized project-based mechanisms such as the Clean Development Mechanism (CDM) and Joint Implementation (JI). Integrates both market-based and non-market-based approaches.
Legacy Credits Permitted the use of older credits from inactive projects, leading to concerns about oversupply. Limits the use of legacy credits; only credits from post-2013 are allowed.

Aspect	Kyoto Protocol	Paris Agreement (Article 6)
Scope of Participation	Participation was restricted to developed countries (Annex I), with projects hosted by developing countries.	Inclusive of all countries.
Adaptation Funding	A portion of proceeds from CDM projects was allocated to the Adaptation Fund.	5% of proceeds from Article 6.4 transactions are directed to the Global Adaptation Fund.
Market Scope	Emphasized project-based mechanisms such as the Clean Development Mechanism (CDM) and Joint Implementation (JI).	Integrates both market-based and non-market-based approaches.
Legacy Credits	Permitted the use of older credits from inactive projects, leading to concerns about oversupply.	Limits the use of legacy credits; only credits from post-2013 are allowed.