Advancements Under Article 6.4: Integrating Carbon Markets and Biodiversity

The first international carbon market deals are expected under Article 6.4 of the Paris Agreement, promoting nature-based climate solutions. Key developments include a USD 200 billion biodiversity finance target established at COP 16 and the launch of the Race to Belem fund to conserve the Amazon. However, only a small portion of proposals involve nature-based carbon offsets. Article 6.4 emphasizes sustainability and seeks to mitigate past criticisms of carbon credit systems to enhance environmental integrity.

The issuance of the first international carbon market deals under Article 6.4 of the Paris Agreement is anticipated within the year. As the Article 6.4 project pipeline expands, it is crucial for advocates to enhance well-crafted nature-based climate solutions that address multiple environmental crises, particularly given the intensifying impacts of climate change.

The need for an integrated response to climate and biodiversity challenges is increasingly urgent. Issues like extreme flooding and extended droughts have amplified the strain on biodiversity. Singapore’s President Tharman Shanmugaratnam proposed in January 2025 a closer alignment of market-based credit systems to address these interconnected environmental challenges, informed by insights from the Global Commission on the Economics of Water.

Recent advancements include the agreement made at the resumed COP 16 session in February 2025, where a biodiversity finance target of USD 200 billion per year by 2030 was established. The new Kunming-Montreal Global Biodiversity Framework financing mechanism, managed by the Global Environment Facility, aims to connect climate initiatives with biodiversity improvement, thus enabling the growth of biodiversity-positive carbon credits.

Carbon credits serve as a potential bridge linking climate action, biodiversity, and various objectives. Notably, approximately 80% of voluntary carbon markets created between 2021 and 2023 focused on nature-based targets. As part of an initiative to fund biodiversity goals through carbon credits, a new Race to Belem fund was launched in early 2025 with plans to issue USD 1.5 billion in carbon credits designated for the conservation of the Amazon rainforest.

The largest carbon credit verifier, Verra, has introduced its Climate, Community, and Biodiversity Standards, aligning carbon and biodiversity financing. Moreover, NatureFinance is engaged in valuable technical analysis to enhance private sector investment in nature-based projects that incorporate climate and freshwater objectives. This comprehensive approach aligns with the Paris Agreement’s intention of balancing emissions and removals as outlined in Article 4.

Recent data show a notable surge in demand for Article 6.4 credits, with over 1,000 proposed carbon credit deals identified since the new rules were enacted late in 2024. However, proposals focusing on nature-based carbon offsets remain scarce, comprising only about 10% of current submissions, with India leading in forestry-linked carbon credit initiatives.

The dominance of energy projects in the Article 6.4 pipeline is understandable as many countries’ nationally determined contributions prioritize decarbonization through the energy sector. However, the trend towards affordable low-carbon technologies raises concerns about the additional impact of these projects on carbon reduction.

The credibility of past carbon credit programs has been undermined by inadequate additionality. An analysis of the Kyoto Protocol’s Clean Development Mechanism revealed that just 2% of projects accurately documented greenhouse gas reductions. The reluctance to propose credits based on carbon sequestration from diverse ecosystems continues among some Article 6.4 proponents, due to reputational risks linked to greenwashing and the detrimental effects of monoculture practices on biodiversity.

To mitigate these issues, Article 6.4 employs a Sustainable Development Tool comprising over twenty nature-focused standards. These standards ensure environmental protections are in place before carbon credits are issued. They emphasize the need to manage habitats crucial to biodiversity and demand a comprehensive evaluation of potential impacts on ecosystems and human rights.

As discussions progress, the complexity and potential costs of the new Article 6.4 rules are evident, even as they aim to prevent past missteps that negatively impacted biodiversity. Stakeholders are considering alternative strategies, such as Brazil’s Tropical Forest Forever Fund, which intends to simplify carbon credit evaluation by focusing on the preservation of intact forests.

The successful implementation of Article 6.4 hinges on its capacity to attract new private sector investments in carbon credit schemes that yield positive outcomes for nature. With the detrimental effects of climate change on carbon stocks, and diminishing public sector funding, there lies an opportunity for innovative financing mechanisms to play a pivotal role in promoting sustainable environmental strategies.

The anticipated issuance of carbon market deals under Article 6.4 marks a significant advancement in the integration of climate and biodiversity efforts. As stakeholders navigate the complexities of these new rules, there is a profound need for well-designed nature-based solutions that align with environmental safeguarding protocols. The success of these initiatives will depend largely on private investment in nature-positive carbon credit schemes, which can drive progress in combating climate change and preserving biodiversity.

Original Source: sdg.iisd.org