In a Nutshell
Article 6.4 of the Paris Agreement establishes the Article 6.4 mechanism, a market-based instrument that countries can voluntarily use to trade credits from emission reduction and removal projects. Under the mechanism, reducing emission levels in one country can be used by another country to fulfill its climate target, Nationally Determined Contribution (NDC).
Often seen as a tool to help countries achieve their climate targets cost-effectively, its real goal is to bring about higher ambition – enabling countries to do more than they could without using it. It’s built to incentivise and facilitate the participation of authorised public and private entities by crediting their emission reduction and removal activities. The projects need to deliver an overall mitigation in global emissions.
It’s a centralised UN crediting mechanism governed by Article 6.4 Supervisory Body. Being a successor of the Clean Development Mechanism (CDM) under the Kyoto Protocol, it will operate under the Paris Agreement, where all countries have climate targets. This means that the host countries need to know that they can still meet their climate targets when selling credits via the Article 6.4 mechanism, and double counting of the same emission reductions or removals must be avoided through the double-entry bookkeeping for emissions accounting (“corresponding adjustments”).
Among its other work in setting up the instrument, the Supervisory Body is preparing the foundation for how the Article 6.4 mechanism will apply to removals. There is a growing ecosystem of novel removal methods, and many of these are poised to be used by countries in their climate targets. Given the lack of broadly accepted international accounting rules for a range of removal methods, the decisions taken under Article 6.4, and the methodologies approved under it, are bound to have an outsized impact on carbon markets globally.
What's on the Horizon?
- The Article 6.4 Supervisory Body has prepared recommendations on methodologies and removals. These recommendations have been sent for approval and were reviewed at the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement (CMA5 – during COP28). If the recommendations are approved, Article 6.4 will become operational in principle. More recommendations from the SB will be needed to make Article 6.4 fully operational.
- The Subsidiary Body for Scientific and Technological Advice (SBSTA) is preparing recommendations on including emission avoidance and conservation enhancement activities in the scope of Article 6.4 mechanism, authorisation of credits, and connection between registries for adoption at CMA5 (during COP28).
Getting the Article 6.4 mechanism up and running will take a few years.
How will it work?
The Article 6.4 Supervisory Body is responsible for establishing guidance and procedures, approving methodologies, registering projects, issuing credits, and more.
Methodologies may be developed by project participants, host countries, stakeholders, or the Supervisory Body.
The credits are called the Article 6.4 Emission Reductions (A6.4ERs). These are used for both emission reductions and carbon removal. The host country will have to authorise A6.4ERs and account for these by applying corresponding adjustments unless the A6.4 ERs contribute to the national target in the host country (mitigation contribution A6.4ERs).
Removal activities get a maximum of 15-year crediting periods, renewable twice. The mechanism credits emission reductions and removals by public and private sector actors.
2% of Article 6.4 credits are subject to cancellation (“Overall Mitigation in Global Emissions” clause), 5% of credits are dedicated to the Adaptation Fund (“Share of Proceeds for Adaptation”) and other fees for registration, inclusion, issuance, renewal, and post-registration apply as well (“Share of Proceeds for Administrative Expenses”).
Many other details are yet to be ironed out, listed in the “Open elements” section below.
How will removals be covered?
Whilst the mechanism covers emission reductions and removals, it will likely focus on emission reductions in the coming decade, with interest in removals growing as climate targets get closer to net zero and beyond.
The Supervisory Body has been tasked with preparing a general framework for including the full spectrum of carbon removal methods under Article 6.4, called “recommendations”, to be approved at CMA5 during COP28.
For the first time, novel carbon removal methods will be tackled under the Paris Agreement, and the recommendations will set a precedent by establishing broad removals-specific rules under the UN crediting mechanism.
Two separate ongoing work streams are ironing out the details of the mechanism – (1) the Supervisory Body and (2) the Subsidiary Body for Scientific and Technological Advice (SBSTA) where international climate negotiations under the Paris Agreement are ongoing on the technical elements.
The Supervisory Body has a busy work program for 2023 and has been tasked to prepare several deliverables for adoption for CMA5 (during COP28). This includes recommendations on methodologies (baseline, monitoring methodologies, methodology development process, review), recommendations on activities involving removals (monitoring, reporting, accounting for removals and crediting periods, addressing reversals, avoidance of leakage), transitioning the Clean Development Mechanism into the Article 6.4 mechanism, developing accreditation standard, and designing project activity cycle.
SBSTA is negotiating recommendations on including emission avoidance1 and conservation enhancement activities in the scope of Article 6.4 mechanism, authorisation of credits by host countries, and work on the registry. These discussions are very technical, have continued throughout the Bonn Climate Conference in June 2023, and will be submitted for adoption at CMA5 during COP28.
1 Emission avoidance in this context mainly refers narrowly to reducing emissions from deforestation and forest degradation (REDD+ projects), not to be confused with how the term “emission avoidance” is used in the voluntary carbon markets where some stakeholders use it as a blanket term for emission reductions and avoidance.
How can stakeholders engage with the Article 6.4 process?
Documents for stakeholder input will be published at least a week before each Supervisory Body meeting. Any organisation can provide written input before meetings, but only UNFCCC-accredited observer organisations can attend the Supervisory Body meetings. Everyone can follow the live stream and watch recordings of past sessions.
|Deadline for registering as an observer
|Deadline for submitting public comments on the meeting agenda
|10-13 July 2023
|11-14 September 2023
|10 October to 2 November 2023
In June 2023, the UNFCCC launched a dedicated Article 6.4 newsletter covering the latest news, calls for inputs and other announcements from the Supervisory Body.
The negotiations under SBSTA take place in 2-week sessions twice a year during the Bonn Climate Conference and COP.
The Paris Agreement is adopted
The Paris Agreement enters into force
CMA3/COP26 Glasgow – Adoption of the rules, modalities and procedures for Article 6.4 mechanism
Adoption of guidance on Article 6.4, elaborating on key processes and principles, providing SBSTA to work on remaining elements, and mandating the Supervisory Body to operationalise the mechanism
Request for submissions by Parties and admitted observer organisations to submit their views on activities involving removals via the submission portal
Article 6.4 Supervisory Body stakeholder webinar
Public consultation on the three SBSTA working areas on Article 6.4 (inclusion of emission avoidance and conservation enhancement, registries, authorisation of credits)
Technical expert dialogue on the three SBSTA working areas on Article 6.4 (inclusion of emission avoidance and conservation enhancement, registries, authorisation of credits)
The SB has approved the long-awaited recommendations on activities involving carbon dioxide removal and Article 6.4 mechanism methodologies.
CMA5/COP28 in Dubai. The Article 6.4 Supervisory Body’s recommendations on removals and methodologies have been sent for approval to CMA5.
Article 6.4 Mechanism
- Achieving Overall Mitigation of Global Emissions under the Paris Article 6.4 Mechanism (2019), by Wuppertal Institute
- Designing the Article 6.4 mechanism: assessing selected baseline approaches and their implications (2019), by OECD and IEA
- Best available technology and benchmark baseline setting under the Article 6.4 mechanism (2021), by Perspective Climate Group
- Private sector engagement in Article 6- A post-COP27 analysis (December 2022) by Philip Lee LLP
- Cooperative approaches or Article 6.4 mechanism: which of the Article 6 market mechanism will win the race to engage the private sector? (February 2023) by Holman Fenwick Willan LLP
- UN standard-setters turn their attention to carbon removal (Oct 2022), by Eve Tamme and Paul Zakkour
- COP27: Paving the way for the “removals COP” (Nov 2022), by Eve Tamme and Paul Zakkour
- EU and UN Kickstart Their Work on Carbon Removal for 2023 (March 2023), by Eve Tamme
- Challenges for Carbon Removal under the UN Standard (May 2023), by Eve Tamme
Mechanism established by Article 6, paragraph 4, of the Paris Agreement
Key Institutional Stakeholders
Additional StakeholdersThe Article 6.4 Supervisory Body Parties to the Paris Agreement The UNFCCC Secretariat, Mitigation Division Observer organisations in the UNFCCC
In a Nutshell
The Directive for the Substantiation of Explicit Environmental Claims (Green Claims Directive) is a legislative proposal that aims to address and reduce greenwashing in consumer-facing commercial practices. It establishes minimum requirements on the substantiation and communication of voluntary environmental claims and labels that are not otherwise banned under the Directive on Empowering Consumers for the Green Transition.
To make green claims (including climate-related claims) about the environmental footprint of their products, services, and operations, companies will need to comprehensively demonstrate environmental impact and performance by submitting recognised scientific evidence and the latest technical knowledge. The Directive establishes specific requirements for distinguishing claims on environmental performance from common practice, legal obligations, and from other traders or products.
Environmental claims and labelling schemes will be verified by independent accredited bodies before being put on the market. Member states will nominate a competent national authority to supervise this process, monitor and verify the claims and substantiations on a regular basis. This monitoring will help the Commission evaluate where more specific requirements are needed and implement delegated acts accordingly.
Climate-related claims such as net zero or carbon neutrality claims based on carbon credits use, including carbon removal, fall under the remit of this Directive. To substantiate such claims companies must report offsetting and emissions data separately, specify whether offsetting relates to emissions reductions or carbon removals, and explain accurately the accounting methodology applied. Once approved and when communicating to consumers, climate-related claims must be accompanied by additional information detailing the extent of reliance on offsetting and whether it is based on emissions reductions or removals.
What's on the Horizon?
The Green Claims proposal by the European Commission is currently being discussed within the European Parliament and the Council, with the aim to come to an agreement on their positions as part of the ordinary legislative procedure, before entering interinstitutional negotiations.
2023-2024: The European Parliament and the Council will develop their positions separately.
- The Council adopted its negotiating mandate regarding the ECGT Directive on 3 May. The mandate outlines the Council’s position on this directive which would lay the foundation for the Green Claims Directive.
- The European Parliament on adopted its position on 11 May 2023, setting stricter conditions than the Commission proposal.
- On 19 September 2023, the Council and the Parliament reached a provisional agreement on the ECGT Directive, banning carbon neutrality claims for products and services based on carbon offsetting, and setting stricter requirements for organisations to make claims based on future environmental performance. Complementing the Directive on Empowering Consumers, the Green Claims Directive will provide further guidance on the conditions to make substantiated environmental claims.
- On 17 January 2024, the European Parliament adopted the provisional agreement on the ECGT Directive. After the Council adopts the final text, the directive will be published in the Official Journal of the EU, and member states will have 24 months to transpose it into national law.
Green Claims Directive (GCD):
- The ENVI and IMCO Committee (joint committees responsible) adopted their report on 14 February 2024, with a view for the Parliament to adopt the report during the March 2024 plenary.
- The Council aims to adopt this file’s general approach on 17 June 2024.
- 2024- 2025: Following trilogues between EU institutions, the Directive is expected to be formally adopted and transposed by member states.
The Green Claims Directive complements the Empowering Consumers Directive published by the European Commission on 30 March 2022 within the EU. Together, they aim to improve the circularity of the EU’s economy and achieve climate neutrality. They set requirements to substantiate environmental claims made to consumers and other commercial practices.
Apart from the French ministerial decree n°2022-538, the Green Claims Directive is a first of its kind in the specificity with which it regulates environmental claims and addresses climate-neutrality claims. The French decree regulates advertising claims based on emission compensation projects. It has different requirements surrounding emissions reporting, compensation data, and net zero plans.
The Green Claims Directive proposal addresses the issue of greenwashing, increasingly prevalent in recent years. It seeks to standardise environmental claims and labels to improve transparency and credibility for consumers. The proposal aims to use delegated and implementing acts in the future to address substantiation methodologies for specific product groups and evolving commercial practices.
The preamble of the proposal states that climate-related claims are prone to being unclear and misleading, as they are often based on offsetting greenhouse gas (GHG) emissions through carbon credits of low environmental integrity and credibility, generated outside the company’s value chain and calculated based on methodologies that vary widely in transparency, accuracy, and consistency. Offsetting can also deter traders from reducing emissions in their own operations and value chains.
However, credible net zero claims have the potential to incentivise and drive the development of safe, just and sustainable carbon removals to transition towards real climate neutrality. Claims based on offsetting must be regulated through a robust and science-based system to prevent greenwashing.
Room for improvement
Unfortunately, the Green Claims Directive as it currently stands does not establish the necessary measures to do so:
- The Directive does not align with scientific consensus as it allows offsetting through emissions reductions and avoidance to substantiate carbon neutrality claims. The IPCC’s definition of net zero is clear: balancing emissions with physical removals. Accordingly, offsetting projects that avoid emissions, but do not physically remove and store carbon, must be barred from use in substantiating claims about net climate impacts.
- The proposal rightly requires companies to report GHG emissions separately from offsetting data, to disclose the share of their total emissions that are addressed through offsetting and whether these come from emission reductions or removals. This isn’t enough to monitor whether the claimed climate impacts are real. There is a need for more extensive disclosure on the types of carbon credits companies are purchasing (avoidance, reduction, removals), which emissions they are claiming compensation for, and the methodologies used to ensure integrity and correct accounting.
- The proposal allows all types of offsetting without any clear criteria for which emissions they can compensate for, nor which climate claims they can substantiate. However, not all carbon storage is equal in terms of capacity, duration or reversal risk. This means that long-lived fossil fuel emissions otherwise impossible to abate can only be balanced by removals with high-durability storage in the geosphere where the carbon came from. Lower-durability removal and storage of carbon into the biosphere must be accelerated for its own sake, to halt and reverse the loss of ecosystems and natural carbon stocks but cannot be eligible to compensate for fossil fuel emissions. Failing to enshrine this non-fungibility principle in EU law would allow companies to continue offsetting their long-lived emissions through shorter-term carbon storage with higher risks of reversal.
- Although the Directive encourages companies to use offsetting only for residual emissions, it provides no robust definition for what constitutes these residual or ‘hard-to-abate’ emissions. Without a sector-specific and measurable definition, companies can weaken emissions cutting efforts by manipulating the boundary between ‘emissions that must be reduced’ and ‘emissions that physical removals can offset’. The EU will need to establish a transparent process for classifying emissions as difficult-to-decarbonise.
- The proposal excludes from its scope environmental claims and labels substantiated by rules in the Carbon Removal Certification Framework (CRCF). However, the proposal for the CRCF has no rules for claim substantiation. Instead, the Green Claims Directive could establish guardrails for legitimate net zero claims, which could be substantiated through the purchase of high-quality carbon removal credits certified under the CRCF.
The EU Circular Economy Action Plan sets out the plan to support the EU’s transition to a circular economy, including by protecting consumers
Impact assessment and public consultation on substantiating green claims
European Parliament resolution ‘Towards a more sustainable single market for business and consumers’
European Commission publishes the proposal for a Directive on Empowering Consumers for the Green Transition (ECGT)
European Commission publishes the proposal for Green Claims Directive (GCD)
European Parliament adopts its position on the ECGT Directive
Deadline to provide feedback to the Commission on the GCD legislative proposal
The Council and the Parliament reached a provisional agreement on the ECGT Directive
The EU Parliament adopted the ECGT Directive
Joint report of the lead ENVI and IMCO Committees on the GCD adopted
European Parliament plenary vote on the GCD joint report
Council to adopt its general approach on GCD
- Climate claims: what’s the latest in EU policy? – Carbon Gap
- Carbon credits and compensation claims: the state of the VCM – Carbon Gap
- The EU Circular Economy Action Plan, European Commission
- Annual ‘sweep’: Screening of websites for ‘greenwashing’, European Commission
- Impact Assessment Report on Empowering Consumers, European Commission
- Recommendation on the use of the Environmental Footprint method, European Commission
- Strengthening climate-related claims: Carbon Gap response to the Green Claims proposal
- Corporate Climate Responsibility Monitor 2022, NewClimate Institute and Carbon Market Watch
- Greenwashing Factsheet, BEUC
- Sustainable consumption briefing, EPRS
Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on substantiation and communication of explicit environmental claims (Green Claims Directive)