The following comments were submitted to the Article 6.4 Supervisory Body (SB) in response to a Call for Input on the “Ownership of account holdings in the A6.4 mechanism registry” on Mar. 22, 2025.
The Institute for Agriculture and Trade Policy (IATP)1, an accredited observer organization, appreciates the opportunity to respond to the Supervisory Body’s (SB) Call for Input on the “Ownership of account holdings in the A6.4 mechanism registry.”2 Our most recent communication to the SB is a September 30, 2024 letter concerning the draft Sustainable Development Tool.3 The SB, having begun to improve the quality of Emission Reduction (ER) credits in the Paris Agreement Crediting Mechanism (PACM), now begins to specify the legal parameters of the PACM registry that will hold the accounts of ER credits for buyers and sellers of the improved credit types.
A SB dilemma: how to persuade ER account holders that their ER credits are financially secure without registry confirmation of credit ownership
The secretariat has written to the SB, “it is important that the secretariat is protected from potential legal disputes resulting from any recognition of ownership” (paragraph 41)4 of ER credits in the PACM. These protections will be stipulated in proposed forthcoming “Terms and conditions for entity account holders” and the “Important information for Party account holders”. They will include requirements that any disputes be resolved directly between the parties involved in the transaction; designation of a dispute resolution process, including a recognized arbitrator which the registry administrator [i.e., the secretariat] would accept instruction from; and indemnification clauses to protect the secretariat from third-party liabilities, thereby limiting the secretariat’s legal exposure.” (paragraph 25) The secretariat proposes that although it will operate the PACM registry and keep a record of its transactions, disputes about the transactions should be settled between the parties to the transaction through an arbiter who will be able to instruct the secretariat about how to treat the ER credits according to the arbiter’s ruling.
The proposed protections, in isolation, may appear to be merely self-serving for the secretariat. But in the context of the broader purpose of Article 6.4—" To deliver an overall mitigation in global emissions [OMGE],” (subparagraph d) the control of ER credits by the account holders may deliver OMGE and other Article 6.4 objectives more rapidly and transparently, assuming that improvements to ER credit quality can be comprehensively agreed, implemented and enforced. The SB should frame its decision about whether to authorize the secretariat to develop control measures for account holders of ER credits in terms of whether such measures will optimize the realization of the OMGE and other Article 6.4 objectives.
The secretariat recommends that the SB “proceed with the development of the mechanism registry framing users’ rights with regard to control rather than seeking to confirm ownership of account holdings.” (paragraph 46) The secretariat’s “Information Note” provides examples of the terms and conditions of Verra and the Universal Carbon Registry for the control of credits. These terms and conditions exempt those private registries from liabilities and responsibilities resulting from disputes involving registry account holders. (paragraphs 13-16) As a result of the exemptions, credit holder account disputes are resolved in the jurisdictions of the ER credit holder or in the jurisdiction of the host Party of the projects of the account holders, depending on where an alleged violation occurs in the ER credit flow.
The exemptions do not mean that Verra or other credit registries can operate with impunity. For example, Verra was obliged to cooperate with U.S. authorities in both civil and criminal cases involving Verra’s methodologies for validating and verifying emissions reductions resulting from clean cookstove projects.5 However, Verra’s terms and conditions that exempt the registry from liabilities and responsibilities generally from an account holder violation of Verra standards allows the registry to continue to operate with its standards compliant account holders. Likewise, the secretariat could continue to operate the PACM registry without becoming the subject of litigation, even if there was a dispute between or among PACM account holders, e.g. concerning whether an emissions reversal affecting the price of a transaction price was avoidable or unavoidable.
To continue reading, download a PDF of our full submission here.
Footnotes
1 The Institute for Agriculture and Trade Policy is a non-governmental, non-profit organization headquartered in Minneapolis, Minnesota (United States of America) with offices in Washington, DC and Berlin, Germany. Our work on the United Nations Framework Convention on Climate Change is at https://www.iatp.org/unfccc-cops
2 https://unfccc.int/process-and-meetings/the-paris-agreement/paris-agreement-crediting-mechanism/a64-calls-for-input/call-for-input-2025-ownership-of-account-holdings-in-the-a64-mechanism-registry
3 https://www.iatp.org/comment-article-SDTool
4 “Analysis of pros and cons related to framing user’s rights with regard to control versus confirming ownership of account holdings,” Version 01.0. https://unfccc.int/sites/default/files/resource/A6.4-SBM015-AA-A11.pdf
5 Steve Suppan, “The UN carbon trading negotiations and carbon market fraud,” Institute for Agriculture and Trade Policy, October 8, 2024. https://www.iatp.org/un-carbon-trading-negotiations
