Demand: SBTi Updates and Article 6.4 Insights

Author: Fundi Maphanga

In this edition of our newsletter, we focus on the pivotal role of demand in scaling voluntary carbon markets. Despite increasing supply and stagnant prices, robust demand is essential for effective crediting mechanisms. We examine key drivers shaping future demand, including updates to the SBTi Corporate Net-Zero Standard and decisions from the recent Article 6.4 Supervisory Body meeting.

SBTi's Corporate Net-Zero Standard Revision gives CDR market a boost

On February 10, 2025, the SBTi provided an update on the revision of the Corporate Net-Zero Standard, with the aim of enhancing the approach to addressing residual emissions at net-zero through interim carbon dioxide removal (CDR) targets. "The updated Standard’s interim CDR targets could drive demand for removals, which grew from 3% to 13% of voluntary carbon market transaction volumes between 2018 and 2024, according to our 2024 VCM recap & 2025 Outlook report (AlliedOffsets, 2025).?

SBTi plans to convene five Expert Working Groups, each comprising up to 20 experts, focusing on: Scope 2 emissions, Scope 3 emissions, Carbon removals, Ongoing emissions and Beyond Value Chain Mitigation, and Data quality, data assurance, and claims. The application deadline is 11:59 PM PT on February 28.(Source: Carbon Herald).

The first draft of the revised standard is expected no earlier than March 2025, followed by feedback from Expert Working Groups, a 60-day public consultation, pilot testing, and a second consultation before finalization.

Why this matters

The SBTi Corporate Net-Zero Standard offers companies and financial institutions a credible, science-based framework for setting GHG reduction targets aligned with the Paris Agreement's goal of limiting global warming to 1.5°C.*

SBTi's Stance on Carbon Offsets for Scope 3 Emissions

SBTi requires companies to reduce emissions within their value chains and prohibits using offsets to meet Scope 3 reduction targets. However, it encourages Beyond Value Chain Mitigation (BVCM), allowing support for climate action beyond value chains without substituting supply chain decarbonization.*

In April 2024, the SBTi Board of Trustees suggested allowing Environmental Attribute Certificates (EACs), including carbon offsets, for addressing Scope 3 emissions (Source: SBTi). However, as of February 2025, SBTi maintains its restriction on using carbon credits to offset Scope 3 emissions, emphasizing deep supply chain decarbonization. Notably, over 10,000 companies globally have set science-based emission reduction targets.

SBM15 - Article 6.4 Supervisory Body update

The 15th meeting of the Article 6.4 Supervisory Body took place in Thimphu, Bhutan, from February 10-14, 2025, focusing on governance updates, workplan finalizations, CDM activity transitions, registry development, and methodology progress.For frequent and helpful updates, refer to Samarth Barve 's summary which can be found here.

What is the Article 6.4 Mechanism, and what is the Article 6.4 Supervisory Body?

The Article 6.4 mechanism, established under the Paris Agreement, is a UN-supervised carbon crediting system designed to facilitate international cooperation in reducing greenhouse gas emissions. Overseen by the Article 6.4 Supervisory Body, this mechanism ensures that emission reduction activities are verified and contribute to sustainable development.?

Outcomes so far

• ???????????????????? ???? ?????? ????????????????? - Deadlines are established for transitioning afforestation and reforestation (ARR) projects to the Article 6.4 mechanism. Projects must submit transition requests by December 31, 2025, and comply with the requirements for activities involving removals under Article 6.4.

• A???????????????????????? ????????????????????????? - Countries must submit authorization statements for transitioning CDM projects by December 31 or before the first issuance of credits.

• Appeals and Grievances - Revised procedures on appeals and grievances extend response timelines to enhance clarity and engagement.

• Additionality - The draft standard introduces additionality tests for all Article 6.4 project activities, including regulatory analysis, lock-in risk assessments, and investment analysis. Unresolved issues arise when combining public funding with credit revenues, such as determining whether A6.4ER revenues are essential for project viability, the limited scope of emission reductions without A6.4ERs, potential double-counting if official development assistance (ODA) is used to purchase A6.4ERs, and market distortions where public funding lowers the costs of A6.4ERs.

• Timing, Content and Post-Issuance Authorization guidelines -? The Supervisory Body clarified that authorizations can occur anytime between approval and before the first issuance of A6.4ERs. They plan to create a template to standardize authorization content, address post-issuance changes, and set deadlines for changes to post-issuance authorization by December 31 of the year before the Biennial Transparency Report submission.?

• Advancements on procedures regarding the ?????????????? ??.?? ?????????????????? ???????????????? - Progress was made on operationalizing the A6.4 registry, including rules on account suspension, reactivation, termination, public transparency of account holdings, and clarity on unit types (A6.4ERs and Mitigation Contribution Units). Proposed fees are $500 for account opening and $400 for annual maintenance, with ownership rights and terms for account holders still under consideration.

The postponement of the deadline for Nationally Determined Contributions (NDCs) submission to the UNFCCC this week to September 2025 increases the uncertainty over future supply and demand of units generated under the Paris Agreement Crediting Mechanism (PACM). Without clear insights into the primary demand and supply centers under Article 6, market participants face challenges in formulating effective long-term strategies.

Follow our Policy Currents newsletter to stay up to date with carbon policy updates!?