Will Carbon Offsets Under the Paris Agreement Be Different?
Carbon offsets must evolve to support the Paris Agreement’s climate goals, but institutional and political inertia puts progress at risk.
Soon I will travel to Bonn, Germany for the third meeting of a technical body that helps the United Nations write rules for the Paris Agreement Crediting Mechanism—better known in climate policy circles as the Article 6.4 carbon market.
As I get ready for my trip, I’ve been reflecting on the history of carbon offsets. And the question I keep coming back to is this: Will the Paris Agreement try to build something new—and hopefully better—or will the result look a lot like earlier United Nations offsetting programs?
Offsets played a major part in the 1997 Kyoto Protocol, which established the Clean Development Mechanism (CDM). Although low-income countries were not required to reduce their emissions under the Kyoto Protocol, the CDM allowed them to host offset projects and earn carbon credits. These credits, in turn, could be sold to governments that accepted binding emission reductions under Kyoto, or to private buyers in other markets.
Unfortunately, academic studies have shown that credits from most major CDM market segments suffer from serious quality concerns. From a climate mitigation perspective, the program has largely been a failure.
Nevertheless, the CDM lives on. Even though the Kyoto Protocol is no longer in force—its second commitment period expired in 2020, and it was effectively replaced by the 2015 Paris Agreement—the CDM continues to operate and exercise profound influence over carbon markets around the world. This is especially true in voluntary carbon markets, where CDM methodologies are often used to issue carbon credits.
The CDM also serves as a critical institutional precedent for the development of the Paris Agreement Crediting Mechanism (see Table 1). The two programs share a nearly identical governance structure that derives from the annual UNFCCC Conference of the Parties, which has distinct workstreams for the Kyoto Protocol (CMP) and the Paris Agreement (CMA). In both cases, a subordinate supervisory body was created to make policy and manage the operation of each carbon offsetting mechanism: the CDM has a 10-member Executive Board, while the Paris Agreement Crediting Mechanism has a 12-member Article 6.4 Supervisory Body.
The supervisory bodies are supported by parallel expert panels. The CDM Methodologies Panel and the Article 6.4 Methodological Expert Panel (on which I serve) are charged with providing technical assistance to set market standards and review carbon crediting methodologies, subject to guidance from the annual conference of the parties.
The similarities don’t end there. Both programs are supported by the same Secretariat office, and several individuals serve concurrently on the Article 6.4 Methodological Expert Panel and either the CDM Executive Board or the CDM Methodologies Panel.
| UNFCCC treaty / agreement | 1997 Kyoto Protocol | 2015 Paris Agreement |
|---|---|---|
| Carbon crediting program | Clean Development Mechanism | Paris Agreement Crediting Mechanism |
| Carbon credit name | Certified Emission Reduction (CER) | Article 6.4 Emission Reduction (A6.4ER) |
| Supreme body | Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol (CMP) | Conference of the Parties serving as the meeting of the Parties to the Paris Agreement (CMA) |
| Supervisory body | CDM Executive Board (CDM EB) | Article 6.4 Supervisory Body (SBM) |
| Support body | CDM Methodologies Panel (CDM MP) | Article 6.4 Methodological Expert Panel (A6.4 MEP) |
| Support body | UNFCCC Secretariat | UNFCCC Secretariat |
Beyond governance and personnel, the two programs also share many of the same carbon offset projects. About two thousand CDM projects have applied to transition to the Paris Agreement Crediting Mechanism, bringing with them a potential supply of almost a billion carbon credits. These projects are only temporarily eligible to earn Paris Agreement carbon credits using their original CDM methodologies. By 2026 at the latest they must adopt updated Paris-compliant methodologies, the development of which is just one of many tasks the Article 6.4 Supervisory Body assigned to the Methodological Expert Panel this year.
As the Panel’s work progresses and political negotiations build toward the upcoming COP 29 meeting in Baku, Azerbaijan, I’ll be thinking about what matters most. Will the new Paris Agreement carbon offsetting rules be different, or will they look a lot like what came before?
Danny Cullenward
Senior FellowDanny Cullenward is a Kleinman Center Senior Fellow. He is a climate economist and lawyer, a Research Fellow with the Institute for Carbon Removal Law and Policy, and the Vice Chair of California’s Independent Emissions Market Advisory Committee.
