The report highlights the current state and progress of implementing Article 6 cooperative approaches in the region and identifies key regional needs and priorities.
WASHINGTON, D.C. – Latin American countries are increasingly at the forefront of the climate crisis in a world facing severe environmental degradation. Developing nations, including those in Latin America, will need nearly $1.1 trillion in climate finance annually starting in 2025 and $1.8 trillion by 2030 to meet their Sustainable Development Goals (SDGs) and mitigate the worst impacts of climate change. The region is becoming more vulnerable to droughts, flooding, wildfires, biodiversity loss and intensified storms. This funding gap is also hindering the ability for countries to raise the ambition of their climate targets in the next round of national climate plans, due in 2025.
Under Article 6 of the Paris Agreement, countries can find new and innovative ways to push their climate actions forward through three different mechanisms. The first two, cooperative approaches (Article 6.2) and the Paris Agreement Crediting Mechanism (PACM) (Article 6.4), are market-based and establish a framework to trade carbon credits generated by greenhouse gas reductions to help countries achieve their climate goals.
On the other hand, Article 6.8 is a non-market-based cooperation that focuses on areas like capacity building, adaptation, finance and technology transfer. As a result, implementing Article 6 presents significant opportunities for global climate action while promoting sustainable development. Latin American countries are increasingly exploring this opportunity, given the potential for both economic growth and emissions reductions. However, several challenges remain, including:
Lack of regulation and institutional arrangements for Article 6 implementation
Lack of trained personnel within government institutions
Articulation with existing carbon pricing mechanisms, e.g., carbon tax or the VCM
Understanding the practical implications of Article 6 at national and regional levels
The development and implementation of MRV systems
Incorporating criteria on the regulation on safeguards and benefit sharing
At the same time, Latin American countries have gathered valuable experiences with carbon pricing instruments, often adapted to local contexts. These experiences provide a solid foundation for developing cooperative approaches under Article 6.
Our new report, Progress Report on the Operationalization of Article 6 in Latin America, highlights the current state and progress of implementing Article 6 cooperative approaches in the region and identifies key regional needs and priorities. The research, based on extensive interviews with national leaders from seven countries tasked with Article 6 implementation, was conducted in partnership with CCAP and the UN Climate Change Regional Collaboration Centre for Latin America (RCC Latin America). It will be presented at COP29 in Baku, Azerbaijan, during a side event on November 13 (19:00-20:00 Baku time).
“An important first step in promoting the implementation of Article 6 is to gather clear information on the progress and needs of countries, including both technical and institutional requirements,” said CCAP Climate Finance Director Sebastián Lema, who will deliver a keynote address at the COP29 side event, discussing key trends and insights from the report.
This research is part of a two-phase project designed to assess the progress on operationalizing Article 6 across 17 Latin American countries. The first phase presented in this report includes seven countries: Ecuador, Guatemala, Honduras, Panama, Paraguay, Peru, and Uruguay. A second phase will cover the remaining 10 countries in the region. The report is currently available in Spanish, with an English version expected to be published in the coming months.
Key Takeaways from the Report:
Twelve out of the seventeen Latin American countries have expressed interest in participating in the mechanisms of Article 6 of the Paris Agreement to implement their Nationally Determined Contributions (NDCs). While some countries, such as Argentina and Paraguay, reserve their position until the negotiations conclude, others, like Chile, Colombia and Peru, are advancing in implementation. Brazil and Costa Rica prioritize national efforts but do not rule out the use of Internationally Transferred Mitigation Outcomes (ITMOs). Regarding interest in Article 6 approaches, countries like Panama highlight their interest in using all three mechanisms. Bolivia, meanwhile, focuses exclusively on non-market approaches under Article 6.8.
Latin American countries are integrating carbon pricing instruments and Article 6 mechanisms into various regulatory frameworks and other policy documents, such as laws, decrees, strategies, ministerial agreements and national policies. For instance, Ecuador is developing a national framework for ITMOs, while Panama is creating a roadmap to implement its carbon market. Paraguay is working on capacity building for corresponding adjustment methodologies and authorizations, and Peru is updating its decree for the Mitigation Measures National Registry (RENAMI). Chile and Argentina have developed strategies to implement carbon pricing instruments and manage cooperative approaches.
In the region, countries are making progress in preparing to implement the cooperative approaches of Articles 6.2 and 6.4. Regarding Article 6.2 (cooperative approaches), progress is seen in the development of regulatory frameworks and authorization processes. Additionally, 11 out of 17 countries have a registry of planned or developed projects that could serve as a basis for tracking ITMOs in conjunction with the international registry. Regarding Article 6.4 (Paris Agreement Crediting Mechanism - PACM), 15 of 17 countries have designated and communicated their Designated National Authority to the UNFCCC Secretariat. However, countries are still developing criteria for the activities to be approved under the mechanism and their contribution to the NDCs.
Several Latin American countries have established bilateral agreements under Article 6.2, with Chile, Colombia, Costa Rica, Paraguay, Peru and Mexico as host countries and buyers such as the United Arab Emirates, Japan, Singapore and Switzerland. These agreements vary in formality from a memorandum of understanding, which establishes a preliminary collaboration base, to formal bilateral agreements that define eligibility and accounting criteria for ITMOs. Some also include implementation agreements that detail the technical and operational procedures necessary for project execution, including monitoring and verification mechanisms, ensuring compliance with the NDCs.
A total of 287 projects in Latin America have applied to transition to the Paris Agreement Crediting Mechanism (PACM), which will allow the continuation of emission reduction projects in sectors like renewable energy and energy efficiency. Brazil leads this transition, with 43% of applications submitted by the publication of this report.
Cooperation initiatives in the region, specifically for market-based approaches, focus on building capacity to overcome barriers to participating in carbon markets. These vary according to each country's progress, needs and priorities. In Latin America, 58% of the support focuses on South America, with Peru, Panama and Chile receiving the most support, contrasting with El Salvador, Nicaragua and Uruguay, which participate only in one cooperation initiative. Bolivia and Venezuela are not included in the initiatives, possibly due to their low current interest in market approaches.
Latin American countries face challenges in implementing the cooperative approaches of Article 6, such as limitations in their institutional and technical capacities, lack of inter-institutional cooperation and insufficient trained personnel. The need to improve the private sector's understanding of mitigation project eligibility is also highlighted. There is a need for precise regulations, access to financing to align national offset schemes with international mechanisms and technological tools that enable market monitoring and provide updated information to decision-makers.
Attend our COP29 Side Event:
The Regional Collaboration Centre for Latin America (RCC Latin America), in coordination with CCAP and the United Nations Environment Programme (UNEP), will host a COP29 side event on November 13 to provide a platform for Latin American countries to share experiences, discuss best practices and identify challenges and opportunities related to the implementation of Article 6.
This side event will showcase the progress of operationalizing Article 6 in the Latin American region, its connection to NDCs and how it is also related to national carbon pricing mechanisms.
The event will promote a dialogue that offers an updated perspective on how countries are positioning themselves to engage in Article 6, leveraging both existing carbon pricing infrastructure and new opportunities for cooperation.
Additionally, the event will present key findings from the report on the progress of the operationalization of Article 6 in Latin America, coordinated between CCAP and RCC Latin America, which evaluates the region’s progress, challenges and priorities in implementing Article 6.
Furthermore, the event will serve as the official launch for the Carbon Markets Observatory Initiative financed by the European Union through Euroclima and supported by UNEP and RCC Latin America.
About CCAP’s Carbon Markets Program:
CCAP advocates for the implementation of Article 6 in Latin American countries while fostering social integrity through carbon market initiatives.
This involves:
Taking a comprehensive approach to understanding the advancements and obstacles related to the implementation of the article in these nations.
Raising awareness and offering support to Latin American countries in their efforts to operationalize Article 6.
Enhancing the social integrity of carbon markets by adopting environmental and social safeguards, as well as ensuring fair and equitable benefit-sharing with indigenous peoples and local communities.
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CCAP’s mission is to support every step of climate action, from ambition to implementation. A recognized world leader in climate policy and action, CCAP creates innovative, replicable climate solutions, strengthens capacities, and promotes best practices across the local, national, and international levels to accelerate the transition to a net-zero, climate resilient future. CCAP was founded in 1985 and is based in Washington, DC.
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