EDITORIAL: Further progress on the Paris Agreement's Article 6 in the first months of 2025

Quantum Commodity Intelligence - Moving on from the operationalisation of the Paris Agreement on climate change's Article 6 mechanisms at COP29 in Baku last November, the first project under Article 6.4 has all but been approved.

The Article 6.4 Supervisory Body (SBM) at its first meeting of the year earlier this month gave the green light to a request from a ''programme of activities' (PoA) developed originally for the Kyoto Protocol's Clean Development Mechanism to transition to the Article 6.4 market, which is also known as the Paris Agreement Crediting Mechanism (PACM).

The PoA (10415) is officially titled 'Clean Energy Program Supported by Republic of Korea'. It is located in Myanmar and involves the "dissemination of fuelwood burning improved cookstoves", according to the project design document.

That this is a cleaner cookstoves project should not come as too much of a surprise, given that many host countries have given tentative approval to similar projects through so-called 'Letter of Approval (LoA) - or whichever designation is used for such letters in a particular country.

The SBM also gave approval to the first independent auditor tasked with validating and verifying projects, known in UN jargon as a Designated Operational Entity. Carbon Check (India) was granted this approval, allowing it to validate, verify, and certify Article 6.4 activities across a range of sectors for an initial five-year period.

The meeting also agreed on an interim registry and the associated procedure, among other things, with two calls for stakeholder inputs to be made this year, which will feed into the process for ultimately setting up the mechanism's registry.

But there is still much work to be done by the SBM on PACM. One of the most difficult phases is now underway, getting methodologies and other rules approved for reduction and removals projects. Without approved methodologies, issuances cannot be made to projects, although many developers are already acting in parallel to make progress on financial and technical aspects in the expectation of final rules being agreed.

Credits offered

Having said that, Article 6 credits are already being offered to market. South Korea-based project developer Ecolinks is offering 20,000 tonnes of CO2 equivalent (tCO2e) from a solar-powered water project in Rwanda at $14/tCO2e, it said on February 21. The credits will be eligible under Article 6 pending the issuance of an LoA.

Ecolinks said 85% of the project has already been financed by an unnamed German bank, with the deal reliant on a carbon credit 'pre-sale' with a buyer.

Carbon Insights has previously covered the potential demand for Article 6 credits, and since that analysis the market has been given a boost by Japan. The Asian country submitted its new Nationally Determined Contribution (NDC) to the UN, updating its climate goals under Paris. The NDC confirmed a target to reduce its greenhouse gas (GHG) emissions by 60% in fiscal year (FY) 2035 and by 73% in FY2040, respectively, from FY2013 levels.

Japan's previous NDC had targeted a 46% reduction in GHG emissions by 2030 from the 2013 baseline. The updated targets would cut Japan's GHG emissions to about 570 million tCO2e by the middle of the next decade, and 380 million tCO2e by FY2040, compared with 1.407 billion tCO2e in FY2013.

In order to help meet these revised goals, the NDC also reiterated the country's aims to secure accumulated emission reductions and removals under its Joint Crediting Mechanism (JCM) at the level of approximately 100 million tCO2e by FY2030 but also for approximately 200 million tCO2e by FY 2040.

An official from Japan's Ministry of Environment told Quantum that work is ongoing to align rules of the JCM, which has been around since 2013, with Article 6.

This means that the country has doubled its expectations for carbon credits under the mechanism - albeit over another 10 years - to help meet its climate goals. This can only be good news for the UN carbon trading mechanism and marks a significant turnaround from 12 months ago following the lack of progress at COP28 in Dubai in late 2023.