Paris Agreement carbon market edges closer to rollout as oversight body wraps up 15th meeting

The 15th meeting of the Article 6.4 Supervisory Body concluded last week in Bhutan, marking further progress on the remaining guidance needed to operationalise the Article 6.4 carbon market and finalising its work calendar for the year ahead.

The Supervisory Body (SB) is a 12-member United Nations body responsible for developing and overseeing guidance to operationalise the global carbon market established under Article 6.4 of the Paris Agreement.

This follows years of intense negotiations that culminated in the adoption of the long-awaited Article 6 rules at 29th Conference of Parties (COP29) to the UN Framework Convention on Climate Change (UNFCCC). Specifically, for the Article 6.4-based market — now known as the Paris Agreement Crediting Mechanism (PACM) — the conference approved key standards that had previously been significant bottlenecks in the market’s operationalisation.

Key agendas discussed at the meeting included draft methodological standards on baseline setting and additionality, the launch of the interim mechanism registry, revisions to the rules governing the transition of activities from the Clean Development Mechanism (CDM) to Article 6.4 and updates to activity cycle procedures — the structured framework for managing carbon offset projects under the mechanism.

One of the discussion agendas was the consideration of the draft standard on ‘setting the baseline for mechanism methodologies’. This pertains to the development of standardised guidelines for setting baselines in carbon reduction projects. A baseline refers to the projected emissions that would occur without the implementation of the project. 

Accurately establishing this baseline is important because it serves as a reference point to measure the actual emission reductions achieved by the project. An overestimated baseline could lead to inflated claims of emission reductions, while an underestimated one might undervalue the project’s impact.

Under this discussion, one of the points was whether to use ‘whitelists’ and ‘blacklists’ to determine which project types or technologies qualify for carbon credits. Some members argued that such lists should be the prerogative of the host country, while others contended that such categorisation was neither feasible nor appropriate for all regions. The Supervisory Body asked the Methodological Expert Panel (MEP), which drafts the standard, to discard this categorisation, suggesting that project eligibility is already assessed under the additionality test.

A second point of debate centred on ‘downward adjustments’ and their alignment with the temperature goals of the Paris Agreement. A downward adjustment lowers the baseline emissions by a certain factor over time, making emission reduction calculations more conservative. This accounts for various factors, including countries' Paris-aligned efforts, which are expected to reduce business-as-usual emissions over time.

Some members argued that it would be difficult to technically assess the alignment of each activity with temperature goals. The Supervisory Body recommended applying downward adjustments without directly tying them to national climate targets or the Paris Agreement’s temperature goals but called on the MEP to investigate how such alignment could be achieved.

Another draft standard under consideration related to the demonstration of additionality, which ensures that a project’s emission reductions would not have occurred without carbon credit incentives.

One of the discussions under additionality was the ‘regulatory test’ — a measure to verify whether a project exceeds existing legal requirements in a country, ensuring that emission reductions are not merely the result of compliance with regulations. A provision in the draft, which considered different levels of regulatory enforcement in countries other than ‘high-income countries’, was removed, along with references to the categorisation of countries.

The SB also discussed the lock-in risk—the possibility that projects could reinforce reliance on high-emission technologies. To mitigate this, the draft proposed that methodologies should ensure projects align with long-term low-emission strategies and use the least greenhouse gas-intensive technologies available. Some participants suggested that the provision should remain technology-neutral.

The MEP was mandated to further examine methodological requirements for large-scale projects, develop a tool for common practice analysis and prepare a note on whether projects receiving substantial public funding should still be considered additional. If a project is primarily funded by public money and relies minimally on carbon credits, questions arise about whether crediting is necessary.

Transition of CDM activities to PACM

As the successor to the CDM, the Article 6.4 mechanism is designed to integrate projects that were previously registered under the now-defunct CDM. The Supervisory Body had already agreed on the standards and procedures for transitioning CDM projects to the Article 6.4 mechanism. At COP29, the Body was instructed to update this process, including the transition of afforestation and reforestation projects under certain conditions.

As a result, revised rules for afforestation and reforestation activities transitioning from the CDM to the Article 6.4 mechanism were adopted. Additionally, the Body was directed to exempt A6.4 activities in Least Developed Countries and Small Island Developing States from the share of proceeds for adaptation. Consequently, the activity cycle procedure was also updated during the meeting.

Interim mechanisms registry

The SB also agreed to launch the interim Article 6.4 mechanism registry. This centralised system, established under Article 6.4 and managed by the UNFCCC, will track and manage carbon credits generated through emission reduction projects registered under the mechanism.

The meeting also saw the election of Martin Hession of Ireland as Chair and Maria AlJishi of Saudi Arabia as Vice-Chair for the year. In addition, co-chairs for the Accreditation Expert Panel and MEP were also elected.

Furthermore, the first Designated Operational Entity (DOE) — the auditor responsible for validating and verifying projects — was accredited. Carbon Check (India) Pvt Ltd became the first accredited DOE for a period of five years.

The 16th meeting of the Supervisory Body will be held in May in Bonn, where further discussions on methodological standards, the registry and other matters will continue.