ANALYSIS: Article 6 agreements accelerate post Baku
Quantum Commodity Intelligence - Earlier this month, Singapore and Rwanda inked a bilateral deal, known as an 'Implementation Agreement' (IA), under Article 6 of the Paris Agreement on climate change. The IA is Singapore's sixth, and the fourth this year, showing an increasing appetite for Article 6 following the conclusion of general rules for the mechanisms at the Baku COP29 climate talks last November.
Singapore is one of a handful of countries that have formally announced they plan to buy Article 6-eligible carbon credits. Other nations include Japan, Norway, South Korea, Sweden and Switzerland, as well as interest shown by Kuwait, Monaco, Liechtenstein and United Arab Emirates (UAE).
Singapore has struck IAs this year with Bhutan, Chile and Peru, as well as with Ghana last year and Papua New Guinea (PNG) in 2023. Singapore has set out general eligibility criteria for projects since October 2023, but, at the time of writing, only specific details have been published for schemes in PNG and Ghana.
In addition to the IAs, the city island state has also signed deals that could to lead to more agreements. These include Cambodia, Colombia, Costa Rica, Dominican Republic, Fiji, Kenya, Laos, Mongolia, Morocco, Paraguay, Philippines, Senegal, Sri Lanka, Thailand, and Vietnam, as well as agreements with Brunei and Indonesia to cooperate on "broader" carbon market initiatives. Singapore has said it is also talking to Brazil on Article 6.
Singapore is not the country with the most Article 6 agreements in place or potentially in place. That accolade falls on Japan; albeit a legacy of the country's bilateral deals under its Joint Crediting Mechanism (JCM), which has been in operation since 2013.
In the first week of April, Japan said that JCM is aligned as a so-called "cooperative approach" under the Paris Agreement on climate change's Article 6.2 country-to-country mechanism. Japan aims to secure international carbon credits equivalent to approximately 100 million tonnes of CO2 equivalent (tCO2e) through the mechanism by 2030 and 200 million tCO2e by 2040 to meet its climate goals under the Paris Agreement.
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The countries Japan has JCM deals with are Mongolia, Bangladesh, Ethiopia, Kenya, Maldives, Vietnam, Laos, Indonesia, Costa Rica, Palau, Cambodia, Mexico, Saudi Arabia, Chile, Myanmar, Thailand, Philippines, Senegal, Tunisia, Azerbaijan, Moldova, Georgia, Sri Lanka, Uzbekistan, Papua New Guinea, UAE, Kyrgyzstan, Kazakhstan and Ukraine. It is also in discussions with other countries, including India.
Another Asian country, South Korea, is targeting Article 6 credits totalling 37.5 million tCO2e by the end of the decade to help meet its climate goals. Various deals are in place with Gabon, Ghana, Uzbekistan, Kazakhstan, Mongolia, Cambodia, Indonesia, Malaysia, Laos and Vietnam.
The country has said previously that other potential Article 6 deals could be struck with Bangladesh, Brazil, Chile, Colombia, Costa Rica, Georgia, India, Kyrgyzstan, Myanmar, Nepal, Pakistan, Philippines, Saudi Arabia, Sri Lanka, Thailand, and Uganda.
Switzerland has also been an early mover in Article 6, with the KliK Foundation working on behalf of the Swiss government on agreements and projects for several years. The European country has 14 agreements in place with Chile, Dominica, Georgia, Ghana, Kenya, Malawi, Morocco, Peru, Senegal, Thailand, Tunisia, Ukraine, Uruguay, and Vanuatu. Switzerland also has agreements in place with Iceland, Norway and Sweden that could lead to pilot transfers of CO2 removals under Article 6.
Sweden, through the Swedish Energy Agency, has bilateral agreements in place with Ghana, Nepal and Zambia on Article 6.2, as well as memoranda of understanding (MoU) that could lead to IAs with the Dominican Republic and Rwanda.
Another Nordic country, Norway, announced a NOK8.2 billion ($785 million) initiative in Baku to buy carbon credits under Article 6 from partner countries. Norway also unveiled new agreements with Benin, Jordan, Senegal and Zambia, adding to previously announced partnerships with Morocco and Indonesia.
The tiny principality of Liechtenstein in Europe has an agreement with Ghana, while another small European country, Monaco, is working with Tunisia to explore Article 6 opportunities. In the Middle East, the UAE has an MoU with Paraguay to cooperate on Article 6, and Kuwait, has had a cooperation agreement with Rwanda since November 2023.
