diff --git a/doc/rtd/explanation/failure_states.rst b/doc/rtd/explanation/failure_states.rst
new file mode 100644
index 000000000000..c2e1156eb76b
--- /dev/null
+++ b/doc/rtd/explanation/failure_states.rst
@@ -0,0 +1,138 @@
+.. _failure_states:
+
+Failure states: recoverable errors vs non-recoverable errors
+============================================================
+
+critical failure
+----------------
+If cloud-init is unable to complete, error messages will now
+additionally be visible in output of `cloud-init status --format json`
+within the 'error' key nested under the module-level keys: 'init-local',
+'init', 'modules-config', 'modules-final'.
+
+recoverable failure
+-------------------
+In the case that cloud-init is able to complete yet something goes awry,
+the service will now return with exit code 2, and error messages will be
+visible in the output of `cloud-init status --format` json under the top
+level 'recoverable_errors' key as well as within the 'error' key nested
+under the module-level keys: 'init-local', 'init', 'modules-config',
+'modules-final'.
+
+Implementation
+==============
+
+Cloud-init error codes
+----------------------
+ 0 - success
+ 1 - unrecoverable error
+ 2 - recoverable error
+
+If cloud-init exits with exit code 1, cloud-init experienced critical failure
+and was unable to recover. In this case, something is likely seriously
+wrong with the system, or cloud-init has experienced a serious bug.
+
+If cloud-init exits with exit code 2, cloud-init was able to complete
+gracefully, however something went wrong and the user should investigate.
+
+
+Reported state
+--------------
+Cloud-init can report its internal state via the `status --format json`
+subcommand undert the `'extended_status'` key.
+
+$ cloud-init status --format json | jq .extended_status
+"degraded done"
+
+See the list of all possible states:
+
+.. code-block: shell-session
+
+  "not running"
+  "running"
+  "done"
+  "error"
+  "degraded done"
+  "degraded running"
+  "disabled"
+
+
+Exported errors: Aggregated errors
+----------------------------------
+When a recoverable error occurs, the internal cloud-init state
+information is made visible under a top level aggregate key
+'recoverable_errors' with errors sorted by error level:
+
+.. code-block: shell-session
+
+    $ cloud-init status --format json | jq .recoverable_errors
+    {
+      "WARNING": [
+        "Failed at merging in cloud config part from p-01: empty cloud config",
+        "No template found in /etc/cloud/templates for template source.deb822",
+        "No template found in /etc/cloud/templates for template sources.list",
+        "No template found, not rendering /etc/apt/soures.list.d/ubuntu.source"
+      ]
+    }
+
+See :ref:`Appendix A<states_appendix_a>` for list of possible error levels.
+
+Exported errors: Per-stage errors
+---------------------------------
+The keys 'errors' and 'recoverable_errors' are also exported for each
+stage to allow attribution of recoverable and non-recoverable errors
+to their source.
+
+.. code-block: shell-session
+
+    $ cloud-init status --format json | jq .init.recoverable_errors
+    {
+      "WARNING": [
+        "Failed at merging in cloud config part from p-001: empty cloud config"
+      ]
+    }
+
+Note: Only cloud-init stages which have completed are listed in the
+output of `cloud-init status --format json`.
+
+See :ref:`Appendix B<states_appendix_b>` for list of cloud-init stages.
+
+Limitations of internal errors
+==============================
+- Exported recoverable errors represent logged messages, which are not
+  guaranteed to be stable between releases. The contents of the
+  'errors' and 'recoverable_errors' keys are not guaranteed to have
+  stable output!
+- Exported errors and recoverable errors may occur at different stages
+  since users may reorder configuration modules to run at different
+  stages via cloud.cfg.
+
+Appendices
+==========
+
+.. _states_appendix_a:
+
+Appendix A: Error levels
+------------------------
+Reported recoverable error messages are grouped by the level at which
+they are logged. Complete list of levels:
+
+.. code-block: shell-session
+
+  WARNING
+  DEPRECATED
+  ERROR
+  CRITICAL
+
+.. _states_appendix_b:
+
+Appendix B: Stages of cloud-init
+--------------------------------
+The json representation of cloud-init stages (in run order) is:
+
+.. code-block: shell-session
+
+  "init-local"
+  "init"
+  "modules-config"
+  "modules-final"
diff --git a/doc/rtd/explanation/index.rst b/doc/rtd/explanation/index.rst
index 754318c11dea..f1a10a43eb16 100644
--- a/doc/rtd/explanation/index.rst
+++ b/doc/rtd/explanation/index.rst
@@ -20,3 +20,4 @@ knowledge and become better at using and configuring ``cloud-init``.
    security.rst
    analyze.rst
    kernel-cmdline.rst
+   failure_states.rst