Advancing Corporate Climate Action via Article 6: The EU’s Regulatory and Institutional Readiness

This paper will explore the linkages between the EU carbon market and the cooperative mechanisms established under Article 6 of the Paris Agreement, with a focus on EU legislation governing emissions offsets. The full operationalization of Article 6 has paved the way for the development of the international carbon market. However, uncertainty remains regarding the participation of EU companies in carbon offsetting practices under Article 6. In light of economic and geopolitical challenges, the EU may reconsider its position on international credit-based cooperation, opening its compliance market to international carbon credits. The research question is: To what extent does the current EU legal and institutional framework support effective linkages between private climate action and the credit-based cooperative mechanisms under Article 6? To answer this question, the research will first employ doctrinal legal methods to identify existing gaps in EU legislation hindering the Union’s engagement in cross-border credit transfers. Second, based on literature review and a study of existing partnerships between non-EU countries (e.g. Switzerland), it will conduct a normative analysis to develop a set of principles and criteria for future Article 6.2 bilateral agreements of the EU to ensure integrity and respect of human rights. The key building blocks for the EU’s preparedness for Article 6 cooperation would include strategic considerations regarding the limitations on emissions offsetting; legal foundations to enable the participation of EU companies in Article 6 carbon trading; and institutional arrangements for the authorisation, tracking and reporting of credits.