Easing of Article 6.4 permanence rules sparks mixed reactions

The International Emissions Trading Association (IETA) has welcomed the UN's decision to ease the permanence rules under Article 6.4 of the Paris Agreement, but critics argue that that the compromise undermines scientific rigor.

This comes as the Article 6.4 Supervisory Body conditionally approved the draft permanence standard on Oct. 10 following a four-day meeting in Bonn, Germany.

The non-permanence and reversal standard is a key rule under the Paris Agreement Crediting Mechanism, known as PACM. It sets out rules that "deal with the risk that emission removals credited under the mechanism might later be reversed," according to the UNFCCC.

The finalized rules come amid diverging views from stakeholders. Some favor long-term monitoring periods and defined risk thresholds, while those opposing previous drafts of the mechanism stressed that indefinite liability would lead to a de facto ban on nature-based solutions.

Industry view

Several carbon market stakeholders embraced the decision, having previously criticized the body's initial approach. This approach sought to introduce indefinite monitoring obligations in line with technical recommendations that would impose challenges for land-based sectors.

"I'm encouraged by what happened last week. The political will seems to be that nature should be in, albeit with a lot of safeguards," Andrea Bonzanni, international policy director at IETA, told Platts.

The industry body saw the body's new approach as "more balanced and pragmatic", it said Oct. 15. "The decision preserves space for nature-based solutions while maintaining environmental integrity and scientific rigor," IETA said.

The new rules do not require indefinite post-credit monitoring and the fixed thresholds for negligible reversal risk have been removed. Instead, the Supervisory Body will take a methodological approach on a case-by-case basis.

"It's difficult to say [whether nature-based solutions methodologies will be approved in the future], but at least we didn't close the door on nature-based approaches," Bonzanni told Platts.

Supporting permanence

Meanwhile, critics argue that the compromise on permanence standards undermines the scientific technical recommendations made by the Methodological Expert Panel, a technical body within the Article 6.4 Supervisory Body, charged with making recommendations for the standards.

The MEP recommendations would have translated into restrictions on nature-based projects, such as afforestation or soil and mangrove sequestration.

"While such projects can have a positive impact on the climate and biodiversity, their impact is unlikely to be permanent," said non-profit organization Carbon Market Watch. "Claiming that they can cancel out the millennia-scale impact of fossil fuel emissions is unwise and unscientific," they said.

Those who support the MEP draft argue that the permanence of the PACM units should be equivalent to the emissions-heavy activities they compensate for.

Some see the relaxation as a compromise on stringency standards. This comes after a flurry of integrity concerns in the carbon market over previous years.

Most recently, a two-year inquiry from registry Verra revealed that the Zimbabwean Kariba REDD+ project issued an excess of 15.22 million carbon credits, as actual deforestation was lower than projected figures.

A middle ground

The new rules follow strong pushback from the industry during the open feedback round on the MEP recommendations.

"The decision reflects a pragmatic middle ground after an intensive week of debate," Fitri Wulandari, global carbon analyst at Veyt, told Platts. "I think the [body] ultimately opted for a flexible, risk-based approach: a bottom-up model that allows specific methodologies to propose monitoring periods and risk levels, with insurance or guarantees recognized as valid safeguards," she added.

Bonzanni echoed this sentiment, arguing that mechanisms such as buffer pools and third-party guarantees can help the mechanism move ahead.

"We can find ways to look at portfolio-level and probabilistic approaches with the use of buffer pools. We can deliver high integrity without excluding nature," he said.

Looking ahead, challenges remain, as the market awaits the adoption of methodologies under PACM.

"The challenge now is ensuring how the next phase, particularly the incoming risk assessment tool and buffer-pool accounting, translates this flexibility into consistent practice," said Wulandari.

The Supervisory Body will meet again Oct. 29-30 to discuss PACM methodologies. IETA said it expects the revised ACM0001 on flaring and landfill gas use to be the first approved methodology.

Article 6 of the Paris Agreement sets out the rules for global trade in greenhouse gas emissions reductions. It is seen as an essential enabler of international emissions trading, providing countries and businesses with a key pathway to meet and accelerate their climate goals.

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