June 2020 - While the Paris Agreement has already kicked-in with the beginning of 2020, carbon markets are still in limbo. At the Conference to the Parties (COP25) in Madrid, Parties again failed to agree on a rulebook for Article 6, increasing the uncertainty among Parties intending to use market-based cooperation more broadly and the Article 6.4 mechanism more specifically. While the most public attention is on exploring the thorny issues that prevent Parties from reaching an agreement, the future operationalization of the mechanism has only received little attention.
This new paper aims at filling this void by exploring ways how to kick start the Article 6.4 mechanism. For this purpose, the paper first develops a prototypical activity cycle and identifies key elements needed at the national and international level to make the Article 6.4 mechanism operational. Subsequently, it develops a process for the operationalisation of Article 6.4 by sequencing the installation of the policy, technical, regulatory, and institutional elements needed. The paper finds that host country readiness will become even more relevant under the Paris Agreement and that it will have to evolve in parallel to the emergence of the Article 6.4 provisions at the international level.