May 2025 VCM Updates Section B
This article is an automatically translated version of the original Japanese article. Please refer to the Japanese version for the most accurate information.
sustainacraft Inc. newsletter. This article is Section B (Trends in Major International Regulations) of VCM Updates (Voluntary Carbon Market Updates). For inquiries, please contact us here.
This article reports on major carbon-related policy developments announced from April to May 2025, following these categories:
- Paris Agreement Article 6.2 (Bilateral Cooperation including JCM)
- Paris Agreement Article 6.4 (Paris Agreement Credit Mechanism)
- National Carbon-Related Policies
- Developments in Non-State Actor Initiatives
Keywords: Article 6.2, JCM, Article 6.4 Mechanism, VCMI, IC-VCM
Introduction
Steady progress has been observed regarding bilateral frameworks under Paris Agreement Article 6.2. For JCM, domestic system development has advanced, and there are moves towards expanding JCM partner countries. Regarding other bilateral cooperation, Singapore is actively expanding its bilateral frameworks with Latin American countries such as Peru and Chile, while African countries like Rwanda, Uganda, and Kenya are also intensifying efforts to conclude bilateral agreements. When considering the formation of JCM projects, it is crucial to monitor the trends in bilateral agreement conclusions with other countries, which could be considered JCM's competitors.
Furthermore, regarding the Paris Agreement Credit Mechanism under Article 6.4, the Supervisory Body Meeting (SB16) was held in May 2025, and criteria for baseline setting and leakage responses were adopted. These will be covered in detail in the methodology section of the newsletter, so please refer to that as well.
Regarding national carbon-related policies, we will introduce the EU 2040 target, the French government's announcement of a Carbon Credit Charter, the UK government's public consultation on improving the integrity of Voluntary Carbon Markets and nature markets, the Brazilian government's establishment of a Forest Carbon Working Group, and Indonesia's moves towards concluding a Mutual Recognition Agreement (MRA) with international carbon standards. It is noteworthy that policies on the use of Carbon Credits from the French and UK governments, respectively, are emerging in line with the principles of voluntary initiatives such as VCMI and IC-VCM.
Finally, regarding developments in non-state actor initiatives, we will also mention VCMI's announcement of the Scope 3 Action Code of Practice. This provides guidance for the complementary use of high-quality Carbon Credits for Scope 3, which is a very challenging issue for many companies.
Paris Agreement Article 6.2 (Bilateral Cooperation including JCM)
Bilateral cooperation under Paris Agreement Article 6.2 is a framework for international Carbon Credit trading aimed at achieving each country's Nationally Determined Contribution (NDC), and significant progress towards its concretization was seen in April 2025.
Holding of the 3rd JCM Promotion and Utilization Meeting and Comprehensive Approval of JCM as a Cooperative Approach based on Paris Agreement Article 6
At the 3rd JCM Promotion and Utilization Meeting held on March 31, 2025 (announced on April 4), the framework of the Joint Crediting Mechanism (JCM) itself was comprehensively approved as a cooperative approach under Paris Agreement Article 6. This follows the legalization of JCM by the revised Act on Promotion of Global Warming Countermeasures, which came into effect on April 1, 2025, and the previous JCM operational guidelines were abolished. With this comprehensive approval, the Issuance of Credits (Internationally Transferred Mitigation Outcomes, ITMOs) from individual JCM projects and the approval of Project Developers are expected to generally occur at the Project Registration stage, with the final amount of ITMOs approved at the Credit Issuance stage.
Establishment of JCM Designated Implementing Agency (JCM Agency, JCMA)
On April 1, 2025, in accordance with the Act on Promotion of Global Warming Countermeasures, the "JCM Agency (JCMA)" was established as the designated implementing agency for JCM, with the Global Environment Centre Foundation (GEC) assuming this role. The JCMA will comprehensively handle administrative tasks ranging from JCM Project Registration to Credit Issuance, as well as coordination with partner countries. The establishment of the JCMA is intended to strengthen the JCM operational structure and promote efficiency and speed. By centralizing JCM-related operations, which were previously handled by multiple ministries and agencies, at the JCMA, it is expected that the contact point for Project Developers will become clearer, and the process from application to approval will be simplified and expedited.
Building JCM Partnership between India and Japan
It was reported on April 1 that India and Japan are in the final stages of negotiations to conclude a JCM partnership. Both countries signed a Memorandum of Cooperation (Aid-Memoire) regarding JCM establishment in March 2023, mutually confirming that a portion of JCM Credits would be utilized for Japan's NDC achievement. Keidanren (Japan Business Federation) has also expressed high expectations from the industry, citing India as the primary country with which JCM should be promptly concluded due to high business needs from Japanese companies, making future developments noteworthy.
Singapore's Conclusion of Bilateral Agreements (Peru, Chile, Rwanda, Paraguay)
Singapore has been actively pursuing the conclusion of bilateral agreements on Carbon Credit cooperation under Paris Agreement Article 6.2, signing implementation agreements with Peru on April 1, 2025 (link), Chile on April 7 (link), Rwanda on May 6 (link), and Paraguay on May 23 (link). This brings the total number of implementation agreements signed by Singapore to seven, including those previously concluded with PNG, Ghana, and Bhutan. It has also been reported that negotiations for an implementation agreement with Vietnam are virtually concluded (link).
Moves Towards Concluding Bilateral Agreements by Uganda and Kenya
It was reported that Uganda is advancing negotiations for bilateral agreements under Article 6.2 with Switzerland, Singapore, and the UAE (link), while Kenya is doing so with Sweden (link). While Uganda has not yet concluded any bilateral agreements, Kenya has already signed bilateral agreements with Japan (JCM), Singapore (MOU), and Switzerland. As Kenya has multiple bilateral agreements and is in a position to choose under which country's agreement to form projects, it is necessary to be aware of this competitive environment when forming JCM projects in Kenya.
Paris Agreement Article 6.4 (Paris Agreement Credit Mechanism)
Key Decisions at the 6.4 Mechanism Supervisory Body Meeting SB16
The Supervisory Body Meeting (SB16) was held from May 12 to 16, 2025. We present excerpts of the main decisions and important matters from this meeting.
Adoption of Standards for Ensuring Integrity
The most notable achievement at SB16 was the adoption of two key standards for ensuring the integrity and environmental soundness of the 6.4 Mechanism: the Baseline Setting Standards and the Leakage Response Standards. These standards are core elements for guaranteeing the quality of issued Carbon Credits (A6.4ERs) and contributing to the achievement of the ambitious goals of the Paris Agreement. Details of these will be introduced in the methodology newsletter.
Ambitious Baseline Setting Standards
The setting of the Baseline is particularly important for ensuring the integrity of Emission Reduction projects. At SB16, detailed standards (A6.4-SBM016-A12) for setting this Baseline were adopted.
Standards for Addressing Emission Leakage
The phenomenon where the implementation of project activities unintentionally leads to an increase in emissions or a decrease in Removals outside the activity boundary is called "Leakage." At SB16, standards (A6.4-SBM016-A13) were agreed upon to identify, avoid, and minimize this Leakage, and to quantify and subtract any remaining negative Leakage.
Other Matters
Decision on the Transition of Cookstoves Activities
A decision was adopted to align Cookstoves activities aiming to transition from CDM to the 6.4 Mechanism with the latest data and guidance.
Enhanced Host Country Participation
The initiation of a consultation process on how to equitably share project Benefits with Host Countries and a new focus on capacity-building, including clarifying the role of Host Countries, were agreed upon.
National Carbon-Related Policies
EU 2040 Target
The European Commission is expected to submit a legislative proposal for the EU's 2040 climate target in June 2025.