By Fenella Aouane, Managing Director and Head of Carbon Finance, GGGI

Cooperative approaches under Article 6 of the Paris Agreement have visibly matured as an institutional process. At the UNFCCC’s June intersessional talks in Bonn (SB64), the Article 6.2 Ambition Dialogue – a forum that has run since formal negotiations on Article 6 closed at the end of 2024 – outgrew its usual small meeting room and moved into the Plenary Hall to accommodate the number of Parties wanting to take part. Its second session of the year was extended from two hours to three, and even then, the EU and Switzerland noted publicly that the time allotted was not enough. A similar signal came a week later at London Climate Action Week, where climate finance actors across development finance institutions, guarantee providers, and capital markets increasingly asked how carbon income streams could be structured into investable deals – evidence that interest in Article 6 is no longer confined to the negotiation rooms.

Taken together, these are not small data points. They suggest that governments and financial institutions alike are moving from watching Article 6 design discussions to actively preparing to participate in it. The real test of Article 6’s next phase, then, is not whether countries and buyers show up. They already are. GGGI and its Carbon Transaction Facility (CTF) currently support readiness and implementation work across over 20 Member and Partner Countries, spanning both transaction facilitation and technical capacity building.

But this growing institutional appetite is on a collision course with a quieter, more urgent problem: not enough carbon projects currently exist that meet the capacity and business maturity bar that these markets require. GGGI sees a steady flow of project proposals from developers, but not all arrive with the same level of technical and business maturity. Some projects are simply not yet mature; others need support identifying the right source of finance for their stage of development.

There is also a second, related challenge: getting the finance community to understand the value of a carbon offtake agreement, and to become comfortable assuming the risk profile that carbon as a commodity carries. There is a big gap between a carbon project being technically sound and a project being investable –  a distinction that matters enormously to financiers but is often misunderstood by developers.

This was made clear during several sessions including a closed-door roundtable at London Climate Action Week, convened by the World Resources Institute under the P4G initiative, where participants worked to test a common terminology and rating system to help early-stage project companies communicate their maturity to prospective investors. One intervention from the floor captured the core issue precisely: many project developers mistakenly believe that after receiving grant funding, the next step is commercial finance. In reality, the pathway runs through a series of intermediate stages – grants, heavy concessional funding, lighter concessional funding, blended finance, and only then equity or commercial debt. Carbon project developers running new and unproven businesses are rarely equipped to navigate that sequence alone and rarely have someone translate their project into terms financiers recognise.

Closing that gap – between project and financier, and between readiness and results – is precisely why GGGI takes an end-to-end value chain approach to Article 6 support.

Rather than treating readiness and transaction support as separate tracks, GGGI works with its Member and Partner Countries across the full continuum: from institutional and regulatory readiness, through project origination and capacity building, to structuring transactions that meet market and integrity requirements. To date, much of the readiness work has focused on strengthening host countries’ Article 6 governance frameworks, including supporting Article 6 strategies. However, the CTF’s Global Incubator program is designed to help bridge the maturity gap identified above by supporting early-stage projects toward bankability rather than allowing them to stall between concept and finance. It recently launched its first pilot call for projects, focused on projects in the later stages of development that expect to deliver mitigation outcomes against eligibility criteria before 2030. This initial call saw over 200 proposal submissions from project developers around the world, reflecting strong demand for structured Article 6 pathways that connect mitigation activities with real cooperation opportunities.

The cooperative approach architecture behind Article 6 is catching up to the ambition that built it. The next phase of the market’s credibility will not be decided in plenary halls, but in whether enough well-prepared, investable projects that include a layer of carbon finance exist to meet the demand those halls now represent. Closing that gap will also require the financial sector to take further steps into the market, as capacity is built and the first transactions demonstrate what is possible.

Fenella Aouane is Managing Director and Head of Carbon Finance at GGGI.

Any opinions expressed in this commentary reflect the views of the authors and not of Carbon Pulse.

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