Sliced: Article 6.4 - Moving and Shaking
Gordian Knot Strategies
We are Igniting Climate Solutions: Mobilizing $1 Billion Per Year in Impact Investment by 2030!
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The Article 6.4 Supervisory Body has been making serious moves this month!
For those who are not familiar with the Article 6.4 Supervisory Body (SBM), it is a group of 12 members that oversee the implementation of the Sustainable Development Mechanism (also known as the?Paris Agreement Crediting Mechanism). This new United Nations-managed market is part of Article 6.4 of the Paris Agreement and establishes a mechanism for international carbon markets.
The SBM is responsible for developing and managing the processes required to implement the SDM. This includes developing or approving methodologies, registering activities, accrediting third-party verification entities, managing the Article 6.4 Registry, and building safeguards to maintain the integrity of the SDM. One of their primary objectives is to make sure emissions reduction projects meet environmental and social standards.?
In a welcome surprise to market participants, the SBM recently announced significant achievements that are bringing the new market closer to becoming operational, potentially during COP29 in November.
The first major announcement centers around the adoption of mandatory environmental and human rights safeguards. Last week, the SBM approved these safeguards, requiring project developers to identify, address, assess, avoid, minimize, and mitigate potential environmental and social risks through a detailed assessment. They must also demonstrate how their projects contribute to sustainable development goals, such as poverty reduction and improved health, in addition to reducing greenhouse gas emissions. These measures will be enforced through a mandatory Sustainable Development Tool, which will evaluate and monitor project impacts throughout their duration. The approval of the new tool concludes a two-year process to finalize the rules, which will operate alongside an appeals and grievance procedure approved earlier this year.
The second major announcement pertains to the finalization of standards for removals and methodologies. The SBM completed and adopted two critical standards – a methodologies standard and a removals standard. These standards are key to making the mechanism fully functional and mark a massive step toward operationalizing the SDM.?
The standard on methodology requirements sets the criteria for developing and assessing projects under the SDM.
The standard on activities involving removals outlines the requirements for projects that remove greenhouse gases from the atmosphere.?
Now that both texts are official documents, the standards can be updated to adapt to market developments. Importantly, these standards will help project developers create and submit methodologies that will enable them to register their projects under the SDM.?
The recent announcements signal that the long-awaited UN-international carbon market is nearing reality. With the adoption of robust environmental and human rights safeguards and the finalization of key standards for removals and methodologies, the foundation appears to be building for a more transparent, accountable, and impactful market. As we approach COP29, all eyes will be on how these developments influence global carbon trading and attract climate finance to address climate change. For new and old market actors, these advancements present exciting opportunities to innovate and drive meaningful change in the global push toward net zero.?
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The U.S. Endowment for Forestry and Communities is set to issue its second call for the submission of impact investing opportunities for the winter of 2024/2025. If you would like to be on the distribution list fort his announcement on the upcoming round of funding and informational webinars, please register your interest here: https://gordianknotstrategies.com/impactinvestingprogram/
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