1 Introduction

1Introduction

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Article 6.4 of the Paris Agreement establishes a mechanism to contribute to the mitigation of greenhouse gas (GHG) emissions and support sustainable development. The Article 6.4 mechanism will operate “under the authority and guidance of the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement (CMA)” (UNFCCC, 2015[9]). The rules, modalities and procedures (RMP) for Article 6 are yet to be agreed, as Parties did not manage to conclude their discussions on this topic at either the 24th or the 25th Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC). Decision 9/CMA.2 requested the Subsidiary Body for Scientific and Technological Advice (SBSTA) to recommend draft decision texts for consideration and adoption by the third session of the CMA at COP26 in November 2021, postponed by one year due to COVID-19. The Paris Agreement is silent on the issue of a possible transition of Kyoto Protocol (KP) mechanisms into the Article 6.4 mechanism. However, discussions under SBSTA to date have encompassed four elements of a possible transition: (i) transition of activities; (ii) transition of units; (iii) transition of methodologies; (iv) transition of infrastructure and institutional arrangements.4 This paper identifies and analyses options for the design of the Article 6.4 mechanism in two key areas. These are: (i) the possible transition to the Article 6.4 mechanism of eligible activities registered under the KP’s Clean Development Mechanism (CDM); and (ii) the registration of new activities under the Article 6.4 mechanism. 5 The paper outlines possible transition options for four issues. These are:  Options for the host Party assessment for approval of eligible activities;  Options for the design of the process for requesting and communicating the host Party approval;  Options for the use, review and potential revision of existing CDM baseline methodologies;  Options for the use, review and potential revision of the CDM accreditation procedures as they relate to transitioning activities. The paper assesses each of these options against a set of high-level criteria that could guide decisions on a possible transition, including resources and time needed to implement the possible transition. The paper also highlights what work and steps are needed to register new or transitioned activities under the Article 6.4 mechanism, how these tasks could be prioritised, and which tasks could be started even in advance of an agreement of RMP for Article 6. Discussions in this paper assume that RMP for Article 6 will be adopted and that a future CMA agreement on Article 6 will enable the possible transition of CDM activities, subject to certain conditions. This reflects

4 While focusing primarily on the issue of the potential transition of activities, this paper recognises that discussions around some of these elements cannot be treated in isolation (e.g. transition of activities, methodologies and infrastructure). Discussions on the potential transition of units are outside the scope of this paper. 5 The paper acknowledges that there is no consensus on any of these options, and options are presented without prejudice of the outcomes of negotiations at COP26.

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the fact that the options for the possible transition of CDM activities largely remained unchanged across the three draft Presidency texts from COP25 (UNFCCC, 2019[2]; UNFCCC, 2019[3]; UNFCCC, 2019[4]). 6 The paper also recognises the advantages of moving towards a rapid implementation of the Article 6.4 mechanism as soon as possible after the adoption of RMP for Article 6, while ensuring that such a transition is compatible with the relevant provisions of the Paris Agreement. However, decisions of the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol (CMP) on the CDM (including those that would be needed to facilitate the possible transition) are not in the scope of this paper. This paper is structured as follows. Section 2 provides an overview of the functions and relationships of actors involved in the possible transition of CDM activities to the Article 6.4 mechanism. Section 3 provides an overview of the issues related to the possible transition, and describes a set of high-level criteria to guide the possible transition. Section 4 outlines the options to operationalise the Article 6.4 mechanism, including options related to the possible transition. Section 4 also outlines options for participation and registration of new activities and for the sequencing of work needed by different actors that will be involved in the possible transition and in the implementation of the Article 6.4 mechanism. Section 5 presents conclusions.

6 The Presidency texts from COP25 included unbracketed text, e.g. on allowing the transition of eligible CDM activities wishing to transition that have received host Party approval and meet any Article 6.4 criteria of the RMP.