The initial international carbon market deals under Article 6.4 of the Paris Agreement are anticipated to be issued soon. The integration of climate goals with biodiversity preservation is pressing, as evidenced by recent financial commitments and proposed mechanisms. Despite an emerging demand for carbon credits, the focus has largely been on energy projects rather than nature-based solutions. This article emphasizes the importance of nature-focused initiatives in achieving sustainable climate and biodiversity outcomes.
The anticipated issuance of the first international carbon market deals under Article 6.4 of the Paris Agreement is on the horizon for this year. As the associated project pipeline expands, advocates must prioritize well-designed, nature-based climate solutions to effectively address environmental challenges.
The urgency for integrated responses to climate, biodiversity, and freshwater issues is underscored by the escalating impacts of climate change, such as severe flooding and prolonged drought, which threaten biodiversity. In January 2025, Singapore’s President Tharman Shanmugaratnam proposed enhanced coordination among market-based systems to confront these interconnected crises, supported by insights from the 2024 Global Commission on the Economics of Water.
Significant progress was made in February 2025 at COP 16 to the Convention on Biological Diversity, where a landmark biodiversity finance target of USD 200 billion per year by 2030 was established. A new financing mechanism, the Kunming-Montreal Global Biodiversity Framework, will be managed by the Global Environment Facility (GEF), enhancing finance programs that connect climate initiatives with nature conservation.
Carbon credits have emerged as a vital intersection for aligning climate goals with biodiversity. Notably, 80% of voluntary carbon markets launched between 2021 and 2023 have incorporated nature-based targets. Furthermore, the introduction of the Race to Belem fund aims to generate USD 1.5 billion in carbon credits to facilitate the conservation of the Amazon rainforest, recognizing the necessity of funding biodiversity objectives through carbon credit initiatives.
To improve alignment between carbon and biodiversity financing, Verra, the leading carbon credit verifier, unveiled its Climate, Community and Biodiversity Standards. Concurrently, initiatives, such as NatureFinance, aim to elevate private sector engagement in financing nature-focused projects that also address climate and freshwater goals. These integrated efforts embody the Paris Agreement’s ambition to balance emissions and carbon sink enhancements.
The demand for projects compliant with Article 6.4 has sharply risen since its rules were enacted in late 2024, with approximately 1,000 proposed carbon credit deals submitted for prior consideration. However, proposals centering on nature-based carbon offsets constitute only about 10% of submissions, with the majority skewed toward energy-related initiatives.
While a strong emphasis on energy projects, particularly renewables, is understandable due to their cost-effectiveness relative to traditional technologies, the narrow focus risks undermining the exploration of nature-based solutions, such as afforestation or sustainable land management. Historical data indicate a troubling trend of limited additionality in previous carbon markets, with previous mechanisms yielding minimal genuine greenhouse gas reduction.
Article 6.4 rules are designed to mandate the integrity of projects by adhering to sustainability standards, which encompass over 20 nature-centric criteria. Ensuring the protection of vital ecosystems before carbon credits can be granted is paramount, alongside safeguards addressing human rights, cultural heritage, and biodiversity conservation. New carbon removal standards also mandate risk assessment for extreme events that may jeopardize project viability.
An emerging consideration is the potential attraction of investors to streamlined alternatives like Brazil’s Tropical Forest Forever Fund (TFFF), which seeks to protect forested environments without complex additionality rules. The success of Article 6.4 will depend on its ability to generate private sector financing aimed at promoting nature-positive outcomes, amidst shrinking public climate budgets and climate-related financing in developing regions.
The first Article 6.4 carbon credits are anticipated soon, with significant emphasis on merging climate action with biodiversity preservation. Despite current trends prioritizing energy-focused projects, effective integration of nature-based solutions is crucial for long-term sustainability. By adhering to rigorous sustainability standards, Article 6.4 aims to restore integrity to carbon offset initiatives while attracting essential private sector investments. The future success of these mechanisms will hinge on their ability to meet the dual goals of climate mitigation and enhanced biodiversity.
Original Source: sdg.iisd.org
