The Carbon Transaction Facility (CTF) is GGGI’s solution to the challenges that face countries seeking to participate in cooperative approaches under Article 6, and to scaling up international carbon trading. The CTF, launched in October 2024, aims to accelerate global GHG emission reductions by catalyzing carbon trading under Article 6. The CTF structure has two main pillars: the Article 6 Readiness Facility on one side, and a number of multiple ITMO-purchasing carbon funds on the other. The Article 6 Readiness Facility is a multi-donor fund improving host country readiness through technical assistance and capacity building. The Carbon Funds, on the other hand, are a series of individual funds for initiating Article 6 carbon transactions and purchasing Article 6 carbon credits (ITMOs).

International carbon trading under Article 6 of the Paris Agreement can play a crucial role in achieving the long-term temperature goal adopted by Parties at COP21 in 2015. Article 6 allows countries to cooperate voluntarily in the implementation of their nationally determined contributions (NDCs) through the international transfer of greenhouse gas (GHG) emissions reduction units (or mitigation outcomes), with the mitigation outcomes achieved in one country counted towards the NDC targets of another in exchange for payment. Article 6 cooperative approaches therefore provide a way in which international finance can be channeled to mitigation activities that face barriers to implementation, such as lack of finance or lack of access to technologies.

Article 6 Readiness Facility Committee

The Article 6 Readiness Facility Committee serves as the governing body of the Readiness Facility within the CTF. All Readiness Facility contributors are de facto members of the Readiness Committee.

The Readiness Facility Committee convenes periodically to deliberate on key matters such as initiating readiness support in new countries, providing strategic oversight of the CTF, and reviewing its monitoring and evaluation framework, work plan, and budget, etc. GGGI is accountable to the Readiness Facility Committee for activities under the Readiness Facility, ensuring alignment with the CTF’s governing principles.

The Article 6 Readiness Facility is a multi-donor fund designed to improve the capacity of host countries to participate in international carbon trading. The Readiness Facility provides support in four key areas:

– Strengthening Capacity: Enhancing awareness and confidence in Article 6 activities among seller governments.

– Improving Governance Frameworks: Establishing robust institutional arrangements for engaging in Article 6.

– Mitigation Activity Development: Originating high-quality, high-integrity mitigation activities aligned with both climate and development goals.

– Knowledge Sharing: Facilitating exchange of knowledge and experience between buyer and seller countries.

The Readiness Facility is now active in six GGGI Member States and partner countries: Jordan, Kenya, Paraguay, Rwanda, Sri Lanka, and Togo

The contributors to the Readiness Facility are:
– New Zealand, Ministry of Foreign Affairs and Trade
– Norway, Norwegian Ministry of Climate and Environment
– Sweden, Swedish Energy Agency
– United Kingdom, Department of Energy Security and Net Zero

The CTF’s carbon funds purchase internationally transferred mitigation outcomes (ITMOs) from host countries on behalf of sovereign buyers. In addition to buying ITMOs, these funds provide technical assistance to facilitate the transaction process, aiming to minimize transaction costs, reduce lead times, and safeguard environmental integrity. Carbon funds provide support in four key areas:

– Technical Support: Assisting with the design, validation, and verification of mitigation activities.

– Transaction Preparation: Preparing required documentation, including Mitigation Outcome Purchase Agreements (MOPAs).

– Transaction Facilitation: Supporting negotiations between governments and mitigation activity proponents.

Fund Management: Acting as trustee, GGGI monitors the delivery of ITMOs and prepares relevant reports.

Article 6 Climate Cooperation Fund (ACCTIF)

– Participant: Sweden, Swedish Energy Agency
– Opening date: September 12^th, 2024
– Description:  The Swedish Energy Agency is the first Carbon Transaction Facility’s participant to open a carbon fund. The Article 6 Climate Cooperation fund or ACCTIF aims to promote cooperation under Article 6 of the Paris Agreement to raise climate ambition; generate greenhouse gas emissions reductions that are real, verifiable and additional; contribute to sustainable development progress globally; and support the development of well-functioning international carbon markets under Article 6 of the Paris Agreement.

Norwegian Article 6 Climate Action Fund (NACA)
– Participant: Norway, Ministry of Climate and Environment
– Opening date: November 16^th, 2024
– Description:  The Norwegian Article 6 Climate Action Fund (NACA) is part of the Norwegian Global Emission Reduction Initiative and aims to facilitate carbon transactions under Article 6 of the Paris Agreement, promote global climate action and best practices, and foster a level playing field in the global carbon markets.

The CTF and all GGGI’s carbon pricing activities are guided by a set of Governance Principles designed to ensure fairness, transparency, and alignment with the Paris Agreement. These principles foster trust, stability, and effective collaboration, supporting GGGI’s Member States and partner countries to engage in Article 6 carbon transactions to achieve their climate goals.

– Promoting Achievements of the Paris Agreement
Ensures all CTF activities contribute to global emissions reductions with a high level of environmental integrity while aligning with the long-term objectives of the Paris Agreement.

– Respecting National Circumstances
Recognizes and accommodates the unique priorities and sovereignty of each participating country to foster mutual trust.

– Empowering Stakeholders
Provides capacity-building support to enable all participants, particularly developing nations, to gain confidence to fully engage in Article 6 transactions.

– Fostering Predictability and Stability
Reduces risks and ensures a reliable framework for carbon trading through robust governance and market mechanisms.

– Upholding Fairness and Impartiality
Maintains neutrality to provide equal opportunities for all participants and ensures equitable decision-making.

– Promoting Transparency
Balances the need for openness with the protection of sensitive and confidential information to build trust among stakeholders.

– Ensuring Integrity and Accountability
Adheres to high standards of ethical conduct and manages potential conflicts of interest to safeguard the credibility of the CTF.

By adhering to these principles, the CTF and GGGI aims to establish a fair, transparent, and effective international carbon market that advances international cooperation, enabling countries to scale up climate action, while enabling green growth and sustainable development.