COP29 and the Role of Article 6.2 in Climate Finance
For Prelims
What:
COP29, held in Baku, Azerbaijan, has been recognized as the ‘Climate Finance COP’ due to its emphasis on mobilizing financial resources for climate action. A key outcome was the operationalization of Article 6 of the Paris Agreement, which facilitates international carbon trading and cooperative climate action.
Article 6.2 enables the transfer of Internationally Transferred Mitigation Outcomes (ITMOs) between countries, allowing developing nations to benefit from financial and technological support from developed nations while contributing to global emissions reductions.
Why:
- India can leverage Article 6.2 to attract climate finance, enhance technology transfers, and accelerate its low-carbon transition.
- ITMO transactions can aid India’s Nationally Determined Contributions (NDCs), including the target of reducing emissions intensity by 45% by 2030.
- The mechanism supports sustainable development, green jobs, and health benefits through reduced pollution.
Who:
- Government of India: Can integrate carbon markets into national policy to attract investments.
- Private Sector: Opportunity to engage in emissions trading and climate finance initiatives.
- Global Stakeholders: Developing countries can access climate finance, while developed nations can meet NDCs cost-effectively.
For Mains
GS III: Environment – Climate Change; Sustainable Development
Highlights of the Article
Operationalization of Article 6 at COP29
- COP29, held in Baku, Azerbaijan, has been aptly termed the ‘Climate Finance COP’ due to its focus on operationalizing key elements of Article 6 of the Paris Agreement (PA).
- The adoption of Article 6 at this summit represents a renewed commitment to market mechanisms that enable countries with financial and technological constraints to transition toward carbon neutrality.
- This mechanism, particularly through Article 6.2, allows for the transfer of Internationally Transferred Mitigation Outcomes (ITMOs) between host and partner countries, thereby enhancing cooperation and flexibility in achieving Nationally Determined Contributions (NDCs).
- The system promotes emissions reduction, capacity building, and technology sharing, contributing to a sustainable and low-carbon future
2.India’s Position and Climate Policy Alignment
As the world’s third-largest greenhouse gas (GHG) emitter in absolute terms, India faces a unique challenge in balancing developmental needs with climate commitments. Financial and technological support from developed nations remains a key demand, as reiterated by India’s call for a $1 trillion annual climate finance commitment before COP29.- Article 6.2 provides India with an opportunity to leverage its domestic Carbon Credit Trading Scheme (CCTS) launched in 2023.
- While not directly linked to Article 6.2, this framework strengthens India's ability to engage in international carbon markets through a transparent credit tracking system.
- Moreover, India’s prior experience with mechanisms such as the Clean Development Mechanism (CDM), voluntary carbon markets, and Renewable Energy Certificates (REC) enhances its readiness to participate in ITMO transactions.
3.Key Areas for International Collaboration
India has identified 14 priority sectors under Article 6.2, including renewable energy, energy storage, and Carbon Capture, Utilization, and Storage (CCUS).- These technologies, particularly green hydrogen and sustainable aviation fuel, require advanced expertise and substantial investment, which India seeks to acquire through partnerships with developed nations such as Japan, South Korea, and the European Union.
- By engaging in ITMO transactions, India can advance its Sustainable Development Goals (SDGs), improve public health, create green jobs, and promote environmental sustainability.
- Additionally, by fostering South-South cooperation, India can facilitate investments in renewable energy and sustainable infrastructure across developing nations.
4.Opportunities for India
The implementation of Article 6.2 provides India with a pathway to unlock large-scale climate finance. Countries facing stringent NDC targets can purchase ITMOs from India, generating financial resources for India’s renewable energy sector, which attracted over $10 billion in foreign direct investment in 2022.- Furthermore, the New Collective Quantified Goal (NCQG) encourages voluntary South-South cooperation, allowing India to play a leadership role in climate finance and technology transfer to other developing nations, particularly in Africa.
- India’s strategic collaborations with African nations present a unique opportunity to extend its expertise in renewable energy, sustainable agriculture, and digital tools.
- Prime Minister Narendra Modi’s 10 principles for India-Africa engagement emphasize economic cooperation and climate resilience.
- By investing in African infrastructure and clean energy projects, India can enhance its global standing while contributing to a more sustainable and equitable climate transition
5.Challenges and Risks
Despite its benefits, ITMO trading presents several challenges for India. There is a risk that developed nations may rely on low-cost emissions reductions from India instead of pursuing significant decarbonization efforts domestically. This could shift the mitigation burden onto India, limiting its ability to achieve its own climate targets.- Additionally, weak governance and transparency in ITMO mechanisms could lead to inefficiencies and inequities.
- Over-reliance on ITMO transfers may also hinder India’s long-term priorities, such as green technology deployment and sustainable economic growth.
- Therefore, India must ensure that ITMO agreements incorporate safeguards for equitable benefit-sharing, transparency, and alignment with national and global climate ambitions
6. Conclusion
COP29’s emphasis on climate finance and market mechanisms marks a pivotal moment for global climate policy. Article 6.2 provides India with an avenue to enhance its climate action through international cooperation, leveraging technology transfer and financial support. However, India must approach ITMO transactions strategically, ensuring that they complement its domestic climate goals while maintaining fairness and transparency in international agreements. By strengthening South-South cooperation and engaging with both developed and developing nations, India can position itself as a global leader in sustainable development and climate finance
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Mains Practice Questions
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