Article 6

June 2025 VCM Updates Section B

sustainacraft Newsletter

27 6月 2025 • 13 min read

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.

Seminar Announcement

Before diving into the main topic, we have a seminar announcement. This time, we will be holding a seminar on topics related to **corporate value chains**.

This seminar will explain concrete strategies Japanese companies should adopt, considering major regulations such as the **EU Deforestation Regulation (EUDR)**, **forced labor prevention laws (UFLPA・EU FLR)**, **Corporate Sustainability Due Diligence Directive (CSDDD)**, **European Battery Regulation**, and **Carbon Border Adjustment Mechanism (CBAM)**.

Title: **Data-driven Sustainable Supply Chain Strategy ~ Integrated Response to CBAM, EUDR, CSDDD, UFLPA, Trump Tariffs, and Scope 3 Reduction ~**
Date: **Tuesday, July 8, 2025**
Registration page: Please register here.

How should "supply chain" and "sustainability" departments collaborate? How can high-risk suppliers and goods be identified for the aforementioned regulations, and how can the impact of future regulatory changes be simulated? We will introduce quantitative analysis examples using our platform. We hope this will be a valuable reference for those considering building sustainable supply chains.

In this article, we will report on key carbon-related policy trends announced from May to June 2025, covering the following topics:

Paris Agreement Article 6.2 (Bilateral Cooperation)
Paris Agreement Article 6.4 (Paris Agreement Credit Mechanism)
National Carbon-related Policies
Activities of Non-state Actor Initiatives

Keywords: **Article 6.2, JCM, Article 6.4 Mechanism, SBTi, VCMI, ICVCM**

Introduction

There has been significant progress regarding bilateral frameworks under Paris Agreement Article 6.2. For the Joint Crediting Mechanism (JCM), an agreement with Tanzania was announced, bringing the total number of JCM partner countries to 30. Regarding other bilateral cooperations, an agreement was announced between Kenya and Sweden, and Singapore published eligibility lists for Rwanda and Bhutan, indicating an environment conducive to project formation and implementation under bilateral agreements. Bilateral agreements involving developed countries other than Japan can be seen as competition for the JCM, so it is important to closely monitor these negotiation trends.

Furthermore, regarding the Paris Agreement Credit Mechanism under Article 6.4, there have been developments, primarily centered around the 6th meeting of the Methodology Expert Panel (MEP), held in late May, which we will outline.

For national carbon-related policies, we will discuss the ongoing conflict over the use of Carbon Credits in the EU's 2040 target, as well as the progress of carbon policies in host countries such as Brazil, Vietnam, Laos, Kenya, and Ethiopia. While the carbon market still has some way to go to mature, a solid policy foundation is steadily being established in each country.

Finally, regarding the activities of non-state actor initiatives, we will introduce the SBTi's public consultation for a new standard for the automotive sector, the "Country Guidance for Navigating Carbon Markets" - a new practical guidance developed jointly by the World Bank and key organizations like VCMI and ICVCM - and ICVCM's report on Permanence / Durability. In particular, the ICVCM report on Permanence / Durability is related to the extension of Core Carbon Principles (CCP) monitoring and compensation periods, and its details will be explained at the end of this newsletter.

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). The developments seen in the past month are as follows:

Memorandum of Understanding on JCM Establishment with Tanzania (link)

On May 28, 2025, Tanzania and Japan signed a Memorandum of Understanding for cooperation in establishing the JCM. With Tanzania joining, the total number of JCM partner countries is now 30. Based on estimated annual Emission Reduction (ER) from registered and Pipeline Voluntary Carbon Market (VCM) projects, Tanzania (approximately 16 MtCO2e) has the second-highest potential among African JCM countries (Ethiopia, Kenya, Senegal, Tunisia, Tanzania), following Kenya (approximately 70 MtCO2e). There is also a certain level of Nature-based Solutions potential, and project formation under the JCM is anticipated in the future.

Signing of a Bilateral Agreement between Kenya and Sweden (link)

On June 16, 2025, Kenya's Ministry of Environment, Climate Change, and Forestry and the Swedish Energy Agency signed a cooperation agreement on Emission Reduction trading under Paris Agreement Article 6. Discussions for this agreement began in early 2024, and implementation of Emission Reduction projects will now proceed. Sweden has previously established cooperation with UNDP and the Global Green Growth Institute (GGGI), and plans to collaborate with these organizations in its future initiatives in Kenya. Notably, Sweden has similar agreements with Ghana, Zambia, and Nepal, and for Kenya, this is its fourth bilateral agreement, following Japan (JCM), Singapore (MOU), and Switzerland.

Publication of Singapore's Eligibility List for Rwanda and Bhutan (link)

Singapore has published eligibility lists for Rwanda and Bhutan for its International Carbon Credit (ICC) framework to operationalize trading under Paris Agreement Article 6.2. The list for Rwanda prioritizes energy access and technology-based projects while excluding most land-use and forestry Methodologies, demonstrating Singapore's strategic preferences in international Carbon Credit procurement. The list for Bhutan allows the use of most Methodologies from major standards such as Gold Standard (GS) and Verra / Verified Carbon Standard (VCS), excluding land use, forestry, and Agricultural Land Management (ALM) Methodologies. However, all Architecture for REDD+ Transactions (ART) Methodologies are permitted.

Paris Agreement Article 6.4 (Paris Agreement Credit Mechanism)

Activities of the Methodology Expert Panel (MEP) (link)

The Methodology Expert Panel (MEP), which plays a central role in building the technical foundation for Paris Agreement Article 6.4, has been active over the past month, particularly around its 6th meeting held in late May. Key themes discussed at the meeting included the treatment of "suppressed demand" and the interoperability of guidance for Emission Reduction and Removal / Sequestration activities. As a result, a draft criterion for suppressed demand and a Concept Note on Removal / Sequestration Methodologies have been published. These documents outline concrete directions to ensure market integrity and fairness, such as preventing excessive Issuance of Credits while maintaining flexibility to ensure the practicality of diverse projects. Stakeholder dialogue is also progressing, with public comments solicited for related Concept Notes until June 23.

Furthermore, the MEP is advancing plans to modernize seven Clean Development Mechanism (CDM) era Methodologies (such as renewable energy and waste management) and considering the development of new tools to support market integrity. Recently, a new Methodology for clean cooking (improved cookstoves) was submitted, and public comments were opened for its review in the next MEP meeting in July. These developments indicate that the technical rule-making for the operationalization of the new UN-led Credit market is steadily progressing, marking an important step towards paving the way for the first projects to issue Credits under this mechanism.

Controversy over the use of Carbon Credits in the EU's 2040 Target

A point of contention surrounding the EU's 2040 Emission Reduction target, for which a final legislative proposal is expected to be published in July 2025, is whether to permit the use of international Carbon Credits.