UN carbon body launches consultation on mechanism methodologies

The UN body tasked with finalizing guidelines for a global carbon market under Article 6.4 of the Paris Agreement opened a consultation Aug. 3 on the development and assessment of mechanism methodologies.

This comes as the Article 6.4 Supervisory Body looks to finalize the criteria on which carbon projects will qualify under this trading mechanism.

Under Article 6.4, a company in one country can reduce emissions domestically and have those reductions credited so that it can sell them to a different company in another country.

But the rules underpinning Article 6.4 are still to be approved and the UN has designated a 12-member body to oversee the mechanism. Critical details on what can be traded under this mechanism, particularly on what methodologies and activities can be included, are still to be decided.

The body said it is seeking input on "baseline, additionality and leakage assessment requirements" as it looks to resolve the rules around Article 6.4.

The public consultation process is open for a two-week period from Aug. 3-16.

Proposals and options to operationalize baseline contraction factors, avoid lock-in levels of emissions and address leakage have been key issues that the body is hoping to agree on.

Market awaits clarity

The decision on Article 6.4 is crucial for the voluntary carbon market because it effectively creates a new compliance market, opening up fresh demand for credits, with the UN deciding the rules on eligibility.

Until these rules are clarified, there is uncertainty among buyers and carbon project developers regarding which projects will see increased demand and potentially higher prices.

Article 6.4 is seen as a replacement for the UN's Clean Development Mechanism, which allowed emissions reduction projects in developing countries to generate carbon credits under the Kyoto Protocol.

The Article 6.4 Supervisory Body will hold its seventh meeting over Sept. 10-15 in Singapore, just under three months before the UN Climate Change Conference takes place in Dubai, UAE.

Discussions at the previous meetings in Bonn focused on the issue of emissions avoidance and credits associated with not carrying out, thereby avoiding, an emitting activity, and also on the incorporation of carbon removals.

"Several parties opposed the inclusion of emission avoidance, with some underscoring that avoidance would be highly hypothetical, especially in the forestry sector. Opposition was captured in an informal note," analysts at S&P Global Commodity Insights said in a recent note.

Platts, part of S&P Global Commodity Insights, assesses a wide range of high-quality voluntary carbon credits that fund projects that demonstrate additionality, permanence, exclusive claim and co-benefits.

The value of these credits can vary from CORSIA-eligible offsets (Platts CEC, $1.05/mtCO2e) to household device offsets ($5.90/mtCO2e) and tech carbon capture offsets ($131/mtCO2, all Aug. 3 assessments).