The developments from the February 2025 meeting of the UN’s Supervisory Body of the Article 6..4 mechanism (SBM) build on the momentum from COP29, by finalizing key aspects of the Paris Agreement Crediting Mechanism (PACM). Updates from the meeting to the PACM registry, Clean Development Mechanism (CDM) transitions, additionality standards, and activity cycle procedures are key to unlocking the supply of credits by this year, impacting both compliance and voluntary carbon markets (VCMs).
The PACM, established through Article 6.4 of the Paris Agreement, allows countries to generate and trade carbon credits called Article 6.4 emissions reductions (A6.4ERs). These credits can also be used for other purposes, such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), after undergoing corresponding adjustments and other requirements.
In Baku, Azerbaijan, COP29 led to significant progress in operationalizing the PACM. The adoption of standards removed the last legal barrier, paving the way for the SBM to finalize PACM details and spur credit issuances as early as this year. However, concerns remain about the inclusion of credits some perceive as lower quality, such as those transitioning from the CDM, which may impact the mechanism's credibility. Furthermore, COP29 also focused on climate finance, with a new goal to triple funding for developing countries by 2035. It’s also looking for transparent reporting and adaptation measures. Although the efforts, some of the outcomes were seen as insufficient to address the urgency of the climate crisis.
A key outcome of the meeting focused on the Article 6.4 mechanism registry design, where two main documents were launched: Modalities for operation of the Article 6.4 mechanism registry and the Procedure for Article 6.4 mechanism registry. Additionally, the Supervisory Body announced that the launch of the interim Article 6.4 mechanism registry was under consideration; however, they did not set any date. Until then, the Supervisory Body is evaluating the possibility of offering a temporary solution to involved parties to allow the issuance of A6.4ER until the mechanism's registry is operational.
The document, describes the operational framework and the procedures to be followed, as well as the management and opening of accounts, as these must be submitted through the specific United Nations Framework Convention on Climate Change (UNFCCC) interface. Likewise, transactions, including the issuance, distribution and transfer of units of A6.4ERs or Certified Emission Reductions (CERs) are also described. For example, A6.4ERs and CERs must have a unique identifier to prevent duplication and the transfer request needs to specify the type and amount of units for transfer, and their destination accounts.
Under Article 6.4, the Supervisory Body approved the first CDM transition request for a project in Myanmar by the Republic of Korea (PoA 10415) and the first Designated Operational Entity (DOE) was accredited. “Carbon Check (India) Private Limited” (CCIPL) was qualified for validation, verification, and transparency of Article 6 activities regarding sectoral scopes and emission reduction projects. CCIPL has implemented around 2000 projects across 100 countries concerning different sectors, such as Gas, Power, Transportation, and Forestry among others.
The Supervisory Body also continued to make progress on methodology standards as the strict additionality standard was approved. This specific standard represents a significant step to ensure the credibility of emission reduction projects. This standard was developed due to growing concerns about the integrity of additionality tests, which demonstrate whether a project is actually reducing GHG emissions compared to the number of emissions without the project. In order to demonstrate its additionality, more criteria were established. The Supervisory Body requested the Methodological Expert Panel (MEP) to work on a baseline standard, to be aligned with the Paris temperature goal and the best technologies. It includes a series of tests including, Investment Analysis, Barrier Analysis (as alternative tests) and Performance-Based Approaches (viable in specific circumstances).
Source: Slides from Article 6.4 Supervisory Body’s Fifteenth Meeting showing the new “Analysis of lock-in risk” and “Performance-based approaches”
In the fifteenth SBM, priorities for the year were agreed upon, as well as a 2025 work plan for the Supervisory Body, Accreditation Expert Panel (AEP), and the MEP. The focus for this year and upcoming meetings includes the complete development of the remaining elements of guidance, such as the Draft Standard Setting the Baseline in mechanism methodologies.
Lastly, the update of standards and procedures following COP29 outcomes regarding authorization and first transfer, ensuring transparency and accountability and aligning with the Paris Agreement’s goals. The Supervisory Body reviewed CDM activities transition standard and procedure to establish a framework for transitioning CDM Afforestation/Reforestation (A/R) projects, emphasizing that its full implementation will depend on the availability of each methodology. As a result, documents were released for two procedures: Article 6.4 activity cycle procedure for projects and Article 6.4 activity cycle procedure for programmes of activities.
The developments from last month’s SBM could provide positive signals to the market, considering the progress the Supervisory Body has made relative to the years it took to operationalize the PACM. However, these trends could lead to concerns from some participants that the speed of regulatory development could come at the cost of integrity, which has been a key issue in the VCM. Overall, 2025 is set to be a pivotal period as the VCM undergoes evolution and major mechanisms like Article 6 push the broader market towards increasing activity and scale.