Paris Agreement Article 6 Regular Update / JCM Permanence Requirements

This article is an automatically translated version of the original Japanese article. Please refer to the Japanese version for the most accurate information.

This is the newsletter from Deloitte Tohmatsu SustainaCraft, Inc. This article is Section B (Policy Trends) of our VCM Updates (Voluntary Carbon Market updates).

Introduction

In this month's highlight (deep dive article), we present an analysis of permanence requirements in the JCM. The content is organized as follows:

• Policy Trends
  • Major Global Regulatory Trends
    • Paris Agreement Article 6.2 (Bilateral Cooperation)
    • Paris Agreement Article 6.4 (Paris Agreement Crediting Mechanism)
    • National Carbon Policies
    • Non-State Actor Initiatives
  • UNFCCC Registry
• Deep Dive Article
  • Permanence Requirements in the JCM

1. Major Global Regulatory Trends

The three primary highlights are as follows:

1. Materialization of Article 6.2: National-level credit procurement and market formation are accelerating. Singapore has launched the second stage of a large-scale credit procurement tender for 12 million tons, and South Korea is moving toward enacting its own "Voluntary Carbon Market Act."
2. Deepening of EU ETS and CBAM Preparation: In the EU, an agreement was reached to maintain the cancellation mechanism for the Market Stability Reserve (MSR), and the formulation of Carbon Dioxide Removal (CDR) targets for the next climate package has emerged. Additionally, the UK is establishing practical rules for the introduction of its CBAM.
3. Market Formation in the Global South: Infrastructure development and alignment with international standards are progressing in credit-supplying countries. Bangladesh granted its first Article 6 authorization for clean cooking, and VCMI is strengthening partnerships with East African nations.

Paris Agreement Article 6.2 Related

Major progress was seen in Paris Agreement Article 6.2 (bilateral and multilateral cooperative approaches) regarding both the full-scale procurement of credits by nations and the integration of domestic systems with international standards.

[Background] As of August 2026, Singapore has moved forward with rapid credit procurement utilizing existing VCM standards (such as Verra and Gold Standard), reaching Implementation Agreements (IA) with 11 countries. In contrast, Japan has established its own Joint Crediting Mechanism (JCM) with over 30 partner countries and, by 2025, completed the first transfer of ITMOs (Internationally Transferred Mitigation Outcomes) as JCM credits with Thailand and the Maldives (Refer to Paris Agreement Article 6 Regular Update / Comparison of Article 6.2 with South Korea and Singapore and Paris Agreement Article 6.2 & 6.4 Regular Update / Exploring the Current State of REDD+).

This month, these strategies translated into more concrete market actions.

• Launch of Large-Scale National Procurement
  • The Singapore government launched the second stage of a selective tender to procure at least 12 million tons of Article 6 credits to achieve its 2030 and 2035 NDCs. It is requesting high-quality project proposals from companies that passed the pre-qualification stage (Source).
  • Singapore also signed an Implementation Agreement with Laos on bilateral carbon credit cooperation, further expanding its partnerships (Source).
• Domestic Market Legislation and International Standardization
  • The South Korean government is promoting the enactment of a "Voluntary Carbon Market Act" and announced plans to open a VCM within the Korea Exchange (KRX) by the end of 2026. This market will collaborate with the international Global Carbon Council (GCC) to ensure dMRV and registry interoperability, aiming for compliance with Article 6.2 and CORSIA. To create initial demand, the government plans to directly purchase up to 200,000 tons of high-quality credits (Source).
• Authorizations and Technical Support in Supplier Countries
  • Bangladesh granted its first Article 6.2 authorization for carbon credit issuance to clean cooking developer ATEC. This aims for 1.29 million tons of reductions through the distribution of induction cookstoves in the Chittagong Division (Source).
  • Zambia and Switzerland also authorized mitigation activities under Article 6.2 for an improved cookstove project (Source).
  • Regarding market infrastructure, Verra and Gold Standard released a joint tool to help governments report Corresponding Adjustments (CA) under Article 6.2, aimed at removing technical barriers (Source).
• Progress Between Japan and India
  • Japan opened a new channel for JCM cooperation with India, eyeing entry into the Article 6 market (Source). Since India became the 31st JCM signatory in September 2025, specific project formation through the JCM is highly anticipated (Refer to Paris Agreement Article 6.2 & 6.4 Regular Update / Comparison of Japan and Singapore Approaches, etc.).

Paris Agreement Article 6.4 Related

While there were no new authorization articles for Paris Agreement Article 6.4 (the new mechanism) this month, the transition process toward the conclusion of the CDM (Clean Development Mechanism) by the end of 2026 is at a critical stage.

[Background] Since early 2026, the Supervisory Body and the Methodological Expert Panel (MEP) have repeatedly discussed the development of reversal risk assessment tools regarding the permanence of credits, the operation of the buffer pool, and the necessity of Corresponding Adjustments (CA) (Refer to Paris Agreement Article 6.2 & 6.4 Regular Update).

The current focus is on the transition of projects from the CDM to the PACM (Paris Agreement Crediting Mechanism) and the establishment of authorization procedures under the new mechanism. Moving forward, the application of new standards—particularly for Nature-based Solutions (NbS) and those considering "suppressed demand"—will significantly impact market supply.

National Carbon Policies

Countries are accelerating the deepening of Emission Trading Schemes (ETS) and the creation of practical rules for the implementation of Carbon Border Adjustment Mechanisms (CBAM).

[Background] The EU's CBAM entered its full operational phase in January 2026, where importers are now required to not only report emissions but also purchase certificates (Refer to Paris Agreement Article 6.2 & 6.4 Regular Update). Within the EU ETS, discussions have focused on setting benchmarks to determine free allocation amounts for 2026–2030 and the operational methods for the Market Stability Reserve (MSR) (Refer to Paris Agreement Article 6.2 & 6.4 Regular Update / Exploring the Current State of REDD+).

• Deepening of EU ETS and Pushback
  • EU Member States reached a provisional agreement to maintain the cancellation mechanism for allowances in the ETS Market Stability Reserve (MSR). This is a vital decision to curb oversupply and maintain price signals (Source).
  • Conversely, the European Commission’s proposal to include waste incineration facilities in the ETS (scheduled for 2031) is facing difficult negotiations, as mayors of major cities demand exclusion due to concerns over increased costs (Source).
  • The European Commission is also expected to propose domestic Carbon Dioxide Removal (CDR) targets in its next climate package (Source).
• CBAM Operational Implementation and Spillover Effects
  • The UK announced detailed CBAM rules, clarifying that importers can use 2026 emissions data for tax filings the following year (Source).
  • The Spanish government approved the allocation of an annual average of 38.1 million tons in free emission allowances for industry for the 2026–2030 period. This is a reduction from the previous period and aligns with the phased withdrawal of free allocations ahead of CBAM implementation (Source).
• Trends in Asia and Oceania
  • China approved its allowance allocation plan for the national ETS for 2025–2026 (Source).
  • In New Zealand, emission allowance auctions have failed for seven consecutive rounds because the government-set floor price diverges from market reality. In response, the ACT Party has made a campaign pledge to abolish the floor price and cut the carbon tax, making it a political focal point (Source).
  • The Philippines announced new emission reduction targets but stated that international financial support is essential for their achievement (Source).

Non-State Actor Initiatives

Initiatives aimed at strengthening the credibility of the Voluntary Carbon Market (VCM) have shown two directions: support for the Global South and warnings about future supply shortages.

[Background] In the first half of 2026, credits assigned with the CCP label (Core Carbon Principles) issued by the IC-VCM were confirmed to have price premiums, signaling a move toward selecting high-quality credits (Refer to Paris Agreement Article 6.2 & 6.4 Regular Update / Exploring the Current State of REDD+). Additionally, VCMI (Voluntary Carbon Markets Integrity Initiative) has continuously introduced support measures for vulnerable countries to utilize the market.

• Market Penetration in the Global South
  • VCMI announced a partnership with the East Africa Carbon Markets Forum & Climate Finance Alliance (EAA). This collaboration aims to accelerate growth in East African countries (which account for approximately 10% of the global VCM) through technical assistance and infrastructure development, targeting $1 billion in economic opportunities and the creation of 1.7 million jobs by 2030 (Source).
• Alarm Regarding Carbon Dioxide Removal (CDR)
  • Experts warned companies aligned with the SBTi (Science Based Targets initiative) that they face the risk of failing to meet net zero targets if they do not procure Carbon Dioxide Removal (CDR) credits early, citing concerns over future supply shortages and price spikes (Source).

2. UNFCCC Updates

During the period from August 16 to September 15, 2026, a total of two reports were submitted to the UNFCCC registry. The highlight of this month is that Uzbekistan, a JCM (Joint Crediting Mechanism) partner country of Japan, submitted its Annual Information Report based on Paris Agreement Article 6.2. The report includes actual records of the First Transfer of approximately 7.8 million tons of Internationally Transferred Mitigation Outcomes (ITMOs), signaling the full-scale operationalization of the Article 6 market. Additionally, Oman submitted its Initial Report under Article 6.2, confirming progress in the utilization of carbon market mechanisms in the Middle East.

Summary Table

JCM Partner Countries

Other Countries

Uzbekistan (UZB) - Annual Information Report

Basic Information

• Document Submitted: Annual Information Report v1.0
• Submission Date: 2026-09-08
• Source: UNFCCC Submissions

1. NDC Targets and JCM Relevance
Uzbekistan has indicated a policy of actively utilizing Paris Agreement Article 6.2 to achieve its Nationally Determined Contribution (NDC) for the target year 2035. This report shows that ITMO transfers have been authorized not only for NDC achievement purposes but also for "Other International Mitigation Purposes (OIMP)," including CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation), confirming an extremely proactive stance toward utilizing international market mechanisms, including the JCM.

2. Position of the Forestry/REDD+ Sector
Since this Annual Information Report is a data sheet focused on specific methane reduction projects in the energy distribution sector, it does not include specific mentions of forestry sector emissions/removals or REDD+.

3. Energy and Energy Efficiency Sectors
Currently, a methane reduction project in the energy distribution network led by GasGreen Asia LLC is being conducted as an Article 6.2 cooperative approach (Cooperative Approach ID: CA0042). Energy infrastructure efficiency and leakage prevention in the country are major sources of credit generation.

4. Article 6 Infrastructure Development Status
Uzbekistan has developed a domestic registry (Registry: UZ) and established a tracking system using the VCS (Verified Carbon Standard) as the underlying registry. Notably, for the 2024 and 2025 vintages, it has already recorded First Transfer achievements totaling 7,797,455 t CO2 eq. Furthermore, as a policy for Corresponding Adjustments (CA), it has adopted an approach that defines the First Transfer for OIMP as "Authorization," which is strictly managed under Authorization ID "UZB-0001."

5. Implications for JCM Project Formulation

• Priority Sectors: Since there is already a track record of large-scale ITMO creation and transfer in methane reduction and energy infrastructure efficiency, similar energy-related JCM projects (gas leak prevention, introduction of energy-saving equipment, etc.) are likely to receive government approval easily.
• Opportunities: A hybrid infrastructure that links a unique domestic registry with international private standards like VCS is operational, and the authorization process is in the practical implementation stage. For Japanese companies, this means high predictability in administrative procedures when formulating JCM projects.
• Challenges/Risks: As projects based on private standards (VCS, etc.) are leading the way, the practical focus will be on ensuring consistency with the domestic system when applying JCM-specific methodologies and aligning double counting prevention measures.

3. Deep Dive Article: JCM Forest Sector Reversals—Who Bears the Responsibility and to What Extent? —A Comparison of Guidelines from the Philippines, Cambodia, and Laos—

Introduction

Following the adoption of JCM forestry guidelines in the Philippines in November 2025 and Cambodia in March 2026, July 2026 saw the approval of PH_AM005, the first JCM A/R (Afforestation, Reforestation and Revegetation) methodology, in the Philippines. JCM nature-based projects are finally moving from the stage of guideline preparation to the stage of project formulation.

As project formulation becomes more concrete, we have recently received frequent questions. These include: "If forests are lost due to unintentional natural disasters such as typhoons or forest fires, must the developer compensate for the amount exceeding the buffer?" and "If an investor receiving credits is named in the PDD, does that investor also bear the risk of reversal?"

In the deep dive article of our March issue, we introduced the shift in reversal handling from "discounting" to "buffer pooling" in the comparison of Cambodia’s old and new guidelines. Additionally, the August 2025 newsletter covered discussions regarding the handling of reversals under Paris Agreement Article 6.4 (PACM). This article delves deeper into these points, comparing the original guidelines of the Philippines, Cambodia (old and new), and Laos to clarify what current rules define—and what they do not—regarding these two questions.