Inventives for private sectory participation in the article 6.4 mechanism : discussion paper

Article 6.4 of the Paris Agreement explicitly acknowledges the need to incentivize and facilitate the participation of private entities in the mitigation of greenhouse gas emissions. Under the Clean Development Mechanism (CDM), private sector actors had already the opportunity to participate in a new and fast-growing market. However, they faced numerous challenging investment barriers. The study provides an overview on key factors and barriers determining private sector participation in Article 6 mechanisms. It distinguishes between the three topics demand side factors, rules and standards for market mechanisms, and supply side factors and provides for each of them options to mitigate or overcome barriers. In a short analysis, it further explores three of the identified options: - Improving the design and support of national systems and capacities is an important pre-requisite for the private sector to be able to generate and sell ITMOs - The up-scaling of mitigation activities e. g. through (sub-) sector level crediting, and policy crediting helps private sector actors to benefit from economies of scale - Exploring the potential of digitization of measuring, reporting and verification (MRV), e. g. the use of sensors, internet of things, artificial intelligence and blockchain to make the project cycle more efficient and reduce transaction costs. Overall, the report stresses the importance of host country readiness to provide the private sector with a robust and trusted environment that allows for the adoption of Article 6 mechanisms.