Photo: UN Climate Change - Kamran Guliyev

What happened

On November 11th, day 1 of the 29th Conference of the Parties to the Paris Agreement on Climate Change (COP29), the Conference Presidency announced the Parties (CMA) had come to an agreement around Paris Agreement Article 6.4 after three years of negotiations. Article 6.4 establishes the Paris Agreement Crediting Mechanism (PACM), an essential piece of the United Nations carbon market allowing companies to trade carbon credits between member states. These trades count towards countries’ Paris Agreement commitments, or Nationally Determined Contributions (NDCs), facilitating the transfer of climate finance from wealthy nations to those with fewer resources to enact climate mitigation measures.

What changed

The swift consensus built around Article 6.4 was based on standards finalized by the Article 6 Supervisory Board (SBM) in October. During the October meeting, the SBM decided on methodology requirements for developing and assessing carbon credit eligibility and chose requirements for carbon dioxide removal (CDR) projects.

The rules, modalities and procedures (RMP) for Article 6.4 were first put forth at COP26. New rules adopted by the CMA build on the original RMPs and fall under two standards:

• Application of the requirements of Chapter V.B (Methodologies) for the development and assessment of Article 6.4 mechanism methodologies
• Requirements for activities involving removals under the Article 6.4 mechanism

The standards are chock-full of changes that will take time to suss out, but early highlights include:

Methodology Assessment

• Methodologies shall encourage ambition over time. Accounting for host party circumstances, Article 6.4 methodologies should facilitate technological innovation and deployment to help meet increasingly ambitious baselines.
• Encouraging broad participation has been clarified. Methodologies shall both uphold stringency and encourage broad participation through accuracy, simplicity and clarity. A Party’s scientific infrastructure, financial and national circumstances should not interfere with participation in PACM.
• Additionality requirements can be simplified. Financial or performance-based additionality assessments may be used, though methodologies should consider projects’ social, economic and technological circumstances.
• Reversals remain murky. Methodologies shall follow the standard consistent with existing Article 6.4 requirements and the new standards provide little in the way of further guidance.

CDRs

• Monitoring retains flexibility. Emission removals calculations may be derived from default values so long as they result in conservative estimates and account for associated uncertainties.
• Monitoring periods continue post-crediting period, unless… Monitoring shall continue after the last active crediting period of the project activity, though project activity participants may request that the Supervisory Body waive this requirement if they can demonstrate negligible reversal risk or that future potential reversals are properly remediated.
• Reversal risk remediation. The standard establishes a reversal risk buffer pool under the control of the Article 6.4 registry administrator. Reversal risk buffer pool information shall be published annually.
• CDR leakage refers back to the methodology assessment standard above.

What they’re saying

Article 6.4 standards were nearly finalized at COPs 27 and 28, but negotiations eventually failed. At that time, SBM arrived at each COP with a set of recommendations around which negotiations were structured. At this year’s COP29, standards documents were presented as ready for approval, leading to a much-anticipated win for the COP Presidency. The unusually swift Article 6.4 consensus announcement was met with mixed reactions by CMA members and market watchdogs.

Some see the SBM’s action on Article 6.4 as a much-needed step towards deploying up to $250B of climate finance. Others remain wary that the SBM’s strategy of setting standards with no room for debate before COP29 proceedings sets a dangerous precedent for future negotiations. In particular, lack of clarity around reversal risk and how methodologies might treat CDRs like carbon capture worry some observers.

What’s next

The final text of the Article 6.4 decision makes it clear that the SBM remains accountable to the CMA. As such, the next two weeks of COP29 negotiations leave room for further guidance on how the new standards are operationalized. Project methodologies developed under Article 6.4 are expected to be ready to begin registering carbon projects in the second half of next year. For now, follow us on LinkedIn to stay up to date as more COP29 carbon markets news drops daily.

To learn more about Article 6, read “What is Article 6? An overview and implications for VCM quality.”