Germany‘s carbon market cooperation with Ethiopia: Prospects for engaging with Article 6 of the Paris Agreement

This paper discusses the current readiness of Ethiopia to engage in carbon market options that may be presented under Article 6 of the Paris Agreement. Engagement readiness is discussed using three indicators: i) enabling conditions present in the country to participate in markets; ii) the feasibility of maintaining robust accounting and MRV standards to ensure both the quality of emission reductions and transparency of transfers; and iii) the compatibility of the country’s nationally determined contribution (NDC) to deliver the environmental integrity of Article 6 and strengthen the mitigation ambition of the Paris Agreement.

The paper argues that instruments that build on baseline and crediting approaches appear to be the most immediate carbon market entry-point for Ethiopia, considering its experience, capacities and interests. Such instruments may develop under Article 6.4 and/or come under the purview of Article 6.2’s cooperative approaches. These assertions are arrived at using empirical evidence from interviews, project workshops and literature review on the three indicators of readiness considered in this assessment. Based on the assessment, recommendations are made for Germany to further support Ethiopia to participate in Article 6.

Three support entry-points are recognised: first, furthering in-country MRV capacity for market mechanisms; second, providing focussed technical support on common elements/linkages between Article 6 and NDC implementation; and third, sharing own experiences and lessons learnt for instrument design and implementation. The case study further highlights the need for creating more interlinkages between markets and other relevant agenda items in the ongoing negotiations, especially with Article 13 on transparency issues and Article 9 on climate finance. Addressing these interlinked elements in a collective manner is critical for the effective implementation of the Paris Agreement

Main report and further case studies

• Germany’s international cooperation on carbon markets: Status and prospects in select partner countries

• Germany‘s carbon market cooperation with Ukraine: Prospects for engaging with Article 6 of the Paris Agreement

• Germany‘s carbon market cooperation with Viet Nam: Prospects for engaging with Article 6 of the Paris Agreement

• Quick Facts on Article 6 - Market Mechanisms