On 8 January 2024, Switzerland’s KliK Foundation announced it had concluded a deal with a Thai company, Energy Absolute.
This deal constitutes the first every conclusion of a bilateral agreement under Article 6.2 of the Paris Agreement. Under this Article, governments and companies are allowed to offset their greenhouse gas emissions by investing in the reduction of emissions elsewhere.
The KliK Foundation, representing Swiss fuel importers, purchased 1,916 carbon credits, from Thailand’s Energy Absolute. Energy Absolute is using the financing for the implementation of 4,000 electric buses in Bangkok. This Bangkok E-Bus programme was the first programme in Asia designed in accordance with Article 6.2 of the Paris Agreement.
The two countries had signed the carbon credit purchase agreement on 24 June 2022. The exact value of the deal is not known, but Energy Absolute’s executive, Chatrapon Sripratum said that more than $30 per credit was paid.
In a statement, Sripratum said: “Our successful programme implementation is contributing towards a decarbonised economy and may inspire other private sector actors in Thailand and worldwide to scale up their action”.
Data from S&P Global Commodity Insights and the United Nations Environment Programme suggests that so far, 69 bilateral deals have been signed under Article 6.2 of the Paris Agreement.
The purchase of carbon credits under Article 6.2 of the Paris Agreement proves to be a lengthy process, despite the Agreement’s attempt at simplifying this process. One of the requirements for deals under Article 6.2 is that the country selling carbon credits has to deduct these from its own greenhouse gas inventory. This is to avoid double counting of the emissions reductions.
In a joint statement, KliK Foundation and Energy Absolute said that “Thailand has committed to adjust its greenhouse gas inventory by the amount of mitigation outcomes transferred to Switzerland”.
With Article 6.2’s wording being vague and open to abuse, it is difficult to determine the strength of the Swiss-Thai deal, the exact terms of which were not disclosed. But seeing as Article 6.2 remains under consultation by climate negotiators, it will be interesting to see how this deal will be affected in the future.
Strengthening guidance on Article 6.2 deals is needed, as the credibility of carbon credits remains, with those purchased by Disney, Gucci, and Shell referred to as “largely worthless”. So far, carbon credits have failed to fight off the greenwashing allegations.
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