In this joint briefing paper with the World Economic Forum (WEF), we provide a high-level overview and perspective on how the implementation of Article 6 is improving global carbon markets, what this means for businesses as potential participants, and steps companies can take to increase awareness and assess options to get involved.
The Paris Agreement helps address the complexity and legitimacy of carbon credits used to offset residual emissions through Article 6, which creates a new market one that is only now coming into being, with operations expected to start in 2024. The new marketplace is a compliance market, which means it is designed to help companies (and countries) meet their obligations to reduce emissions.
Challenges facing today’s carbon markets
Global compliance markets are worth more than €865 billion per year. They are a crucial part of many companies’ net-zero plans. Yet they have some significant drawbacks:
- Lack of market participation and growth
- Difficulty in trading credits between different carbon markets
- Lack of certainty that credits represent genuine emissions reductions
- The potential for double-counting
- Investors’ difficulty in recognising carbon credit value
Article 6: An answer to carbon market concerns?
Article 6 of the Paris Agreement sets out the framework for a robust and internationally supported carbon market. Although it is too early to know if the implementation will be successful, the mechanisms under Article 6 have the potential to overcome many of the drawbacks of existing carbon markets.
This robust framework should not only establish greater trust, transparency and credibility in the carbon markets it supports, but it may also encourage international cooperation and open up the markets to greater participation and funding. This will provide business leaders with more options to meet their carbon reduction commitments in a cost effective way, enabling them to use trusted credits that protect their reputations while achieving their emissions reduction goals.
For business leaders, Article 6 opens up a whole new set of possibilities for investing in emissions reduction projects, accessing project funding and participating in trade all within a high-quality, rules-based market.
Next steps
The Article 6 market is not yet up and running, but it is expected to begin operation in 2024, by which time the relevant Articles are due to be approved and supporting infrastructure should be better developed.
WEF and PwC are seeking to bring together businesses and governments to drive the development of regional carbon markets based on Article 6. As a business leader there are three key ways you can help to drive this progress:
Build your knowledge of Article 6 markets and support their development (for example through participating in national and international consultations).
Engage your national government to press for the implementation of institutions needed to support Article 6 transactions.
Understand how using carbon credits can enhance your company’s net-zero journey not just in terms of lowering cost but in creating a community to help advance global efforts to achieve carbon reduction and other environmental benefits.
Is Article 6 an answer to carbon market concerns?
Learn more about how Article 6 will help implement the Paris Agreement and what next steps business leaders can take.
Making the transition to net zero
At PwC, we’ve supercharged our commitment and our approach to driving your net zero transformation.
Contact us
Partner, Global Sustainability Leader, PwC United Kingdom
Tel: +44 (0)7710 157908
Partner, Global Sustainability Markets Leader, PwC Netherlands
Tel: +31 (0)62 248 81 40
Partner, Investor Reporting and Sustainability Platform Leader, PwC Switzerland
Tel: +41 58 792 25 37
Partner, Net Zero Transformation Leader, PwC United Kingdom
Tel: +44 (0)7715 704870
Partner, Trust Solutions Sustainability Leader, PwC United States
Tel: +1 617 901 6373
Fang Eu-Lin
Partner, Sustainability and Climate Change Practice Leader, PwC Singapore
Tel: +65 9817 8213
