22.12.2023 | Event
An expert dialogue event on the carbon market mechanisms of the Paris Agreement shed light on how Finland could deliver its climate targets and increase its ambition to reduce greenhouse gas emissions through the mechanisms and how companies could benefit from and participate in carbon market cooperation.
The climate goals of the Paris Agreement will not be reached unless there is additional finance for cost-effective action, which requires mobilisation of private finance. The private sector has both the commitment and the capacity to participate in global climate action. Article 6 of the Paris Agreement aims to serve as the vehicle that engages the private sector in the Paris Agreement, mobilises finance and directs it to cost-effective activities.
However, Article 6 is neither well known nor ready, and negotiations will continue after the unfinished discussions at COP28 in Dubai in December 2023. Despite this, given the urgency of the climate goals, 82 countries and a growing number of private sector actors are already considering ways to implement it. The private sector in Finland is therefore keen to learn more and discuss ways to participate in the carbon markets and particularly Article 6 of the Paris Agreement.
Strong interest in the carbon market mechanisms
An insightful full-house dialogue hosted by the Finland Chamber of Commerce and Nefco gathered Finnish experts on 25 October 2023 to discuss the market mechanisms included in the Paris Agreement. In particular, the event aimed to shed light on the potential and implications of the carbon market mechanisms and how the private sector could participate in global climate action and utilise the carbon markets, both voluntary ones and those under the Paris Agreement. The event was a continuation of the previous expert dialogues hosted under the Nordic Initiative for Cooperative Approaches programme.
In their opening remarks, Pasi Rinne, representing Nefco, and Teppo Säkkinen, from the Finland Chamber of Commerce, emphasised the importance of international carbon market collaboration as part of the Paris Agreement. Given the potential, the Finnish private sector is interested in the implications of the market mechanisms, how the they could be utilised as part of climate actions and how an ambitious climate agenda would contribute to the competitiveness of the Finnish private sector.
Understanding the Paris Agreement and the Article 6 rules
Anna Laine from Gaia Consulting provided valuable insights into the Paris Agreement and the intricacies of Article 6, setting the foundation for subsequent discussions. Her presentation highlighted the important role of the carbon markets in achieving the goals of the Paris Agreement.
Given the urgency and scale of the climate goals, at the heart of the Paris Agreement lies the principle that action shall be taken where the best climate mitigation results can be achieved fast and cost-effectively. The Paris Agreement aims to enable global collaboration to combat the climate catastrophe. In particular, the Article 6 mechanisms allow countries to fulfil part of their climate commitments in cooperation with other countries, and to reduce emissions and increase carbon removals where it is most cost-effective.
Laine summarised that even if the precise procedures of the Article 6 mechanisms are yet to be finalised, activities can commence. In accordance with its main principles, the mechanisms will not allow double-counting, require net-positive climate benefits, generate additional financing for the Adaptation Fund, and the actions must contribute to other sustainability targets.
Laine also noted that, to date, 82 countries are taking part in the Article 6 piloting as part of their climate policies. Finland does not currently participate in the Article 6 piloting, nor has Finland expressed any interest in using the Article 6 mechanisms as part of its climate goals.
Synergy between voluntary carbon markets and the Paris Agreement
Hanna-Mari Ahonen of Perspectives Climate Group delved into the interplay between voluntary carbon markets and Article 6 of the Paris Agreement, offering a comprehensive view of the potential interlinkages. To reach the goals of the Paris agreement, private finance is needed to bridge both the ambition gap and the implementation gap. Towards this end, both adjusted carbon credits in accordance with Article 6.2 and unadjusted credits that contribute towards national targets have a role to play.
According to Ahonen’s expert view, Article 6 will be very useful for anchoring best practices that have been developed to facilitate the development and use of the market mechanisms, and it offers avenues to implement best practices also in the voluntary carbon markets.
Furthermore, Ahonen reported that Sweden is among the countries that is pioneering international collaboration on Article 6 and developing national Article 6 procedures. Even if internationally transferred mitigation outcomes (ITMOs) cannot be used to meet the EU’s current nationally determined contribution (NDC), Sweden may use them as a supplementary measure to achieve Sweden’s national target, which goes beyond the EU’s NDC. Sweden is supporting research and development on Article 6 procedures, using Article 6 to promote bioenergy with carbon capture and storage (BECCS) in the Nordic region.
Carbon markets and businesses – the Finnish perspective
Kirsi Tiusanen from St1 shared practical examples of businesses successfully navigating the complexities of carbon markets, showcasing how Finnish companies can play a role in emissions reduction efforts.
In her remarks, Tiusanen explained how Article 6 changes the international carbon markets. In particular, as the new rules are developed, the role of governments increases. Private sector solutions, technology and investments are crucial in the green transition and for climate action. However, since governments have an important role in setting the regulative environment, investments are likely to be diverted to such countries that enable collaboration under Article 6.
Tiusanen pointed out that, currently, Sweden and Switzerland are among the countries that are advancing Article 6 activities. The Swiss model is particularly interesting as it includes a clear framework and process for private sector engagement and supports participation with early-stage financing and expertise.
Key takeaway: Private sector engagement and participation is vital
Distinguished experts, including Janne Peljo from the Confederation of Finnish Industries (EK), Bernt Nordman from WWF Finland, Maija Saijonmaa from Nordic Offset, Laura Lundell from UPM, Karoliina Anttonen from the Ministry of the Environment of Finland, and Kari Hämekoski from Nefco, provided valuable commentary, enriching the conversation with diverse perspectives.
The event concluded with a dynamic discussion with these key takeaways:
- The private sector has a paramount need to be aware of Article 6 developments. It would be a mistake to leave the Finnish private sector outside of the opportunities that Article 6 could entail.
- There is vivid interest in participating in the carbon market mechanisms, in all roles, both in Finland and overseas.
- The meeting therefore noted the need to ensure active participation in the Article 6 negotiations, to keep private sector engaged in the discussions and to organise awareness-raising discussions, but it should already consider proactive scenarios of how the mechanisms could take form and initiate the active development of platforms and relevant frameworks that would aim to test, pilot and demonstrate mechanisms.
The event aimed to build on previous discussions and continue the dialogue by examining international carbon market cooperation, particularly from the perspective of domestic businesses and clean technologies. The event left participants with a deeper understanding of the potential opportunities and challenges that lie ahead for Finnish businesses in the evolving landscape of the international carbon markets – both voluntary ones and those regulated by the Paris Agreement. By fostering this dialogue, the Finland Chamber of Commerce and Nefco contributed to raising awareness and encouraging active participation in international efforts to combat climate change. The event will feed into ongoing processes on carbon market practices and regulations.
As Finnish businesses continue to navigate the complexities of the carbon markets, these and future discussions serve as a catalyst for innovative solutions and sustainable practices and also call for further collaboration with the state authorities providing the needed framework, particularly to use Article 6.
The Nordic countries have impetus in the international discussions. The Nordic private sector scores well on sustainability and has the capacity to provide solutions for climate mitigation. However, the Nordic countries currently have different levels of readiness for the carbon market mechanisms of the Paris Agreement. Nefco, as the coordinator of the Nordic Initiative for Cooperative Approaches (NICA) programme, has therefore organised activities to raise awareness of the topic and will continue to do so in collaboration with other stakeholders.
For more information, please contact:
Kari Hämekoski, Senior Programme Manager, Nefco +358 50 434 6447, kari.hamekoski@nefco.int
Teppo Säkkinen, Senior Advisor, Climate, Energy and Industries, Finland Chambre of Commerce, +358 50 516 2868, teppo.sakkinen@chamber.fi
About the Nordic Initiative for Cooperative Approaches
As part of the Nordic Initiative for Cooperative Approaches (NICA) programme, Nefco has hosted a series of expert discussions and workshops focusing on the market mechanisms of the Paris Agreement. The discussions with various stakeholders have aimed to explore how Nordic countries could actively promote the use of Article 6 market mechanisms in achieving ambitious and cost-effective greenhouse gas emissions reductions, with the emphasis on recognising the role of the private sector.
NICA aims to support the operationalisation of robust and sustainable carbon market cooperation under Article 6 of the Paris Agreement through capacity building via practical pilot activities. NICA has been developing a Nordic approach for carbon market cooperation that addresses the new participation requirements of the Paris Agreement designed to meet international criteria while promoting Nordic priorities.
For more information, please visit: Nordic Initiative for Cooperative Approaches
Fact sheet: Nordic approach for ambitious and inclusive carbon market cooperation
Summary report: Pilot activity development for the Nordic Initiative for Cooperative Approaches (NICA)
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