COP26 Outcome: Continuation of CDM Credits

One of the main issues at the recent COP26 was the future of carbon credits under the Clean Development Mechanism (CDM), covered in Article 6.4 of the Paris Agreement. The discontinuation of these carbon credits would have affected the future supply of carbon tax offsets (CTOs) in South Africa, creating a significant gap in the local carbon market, as there is no local substitute to replace old CDM credits.

“We are pleased with the COP26 decision to continue projects under the CDM,” comments Henk Sa, Chairman of the newly established Southern African Carbon Market Association (SACMA) – of which Ecometrix Africa is a proud founding member. “This is a positive outcome for the continuity of carbon credit supply in South Africa. It will ensure an eligible local supply that – although limited – can contribute to meeting the demand from taxpayers acquiring carbon tax credits to offset their carbon liability.”

According to the proposed Article 6.4 text, a limited number of certified emission reductions (CERs) produced between 2013 and 2020 under the CDM can be registered to be used against a country’s first or first adjusted Nationally Determined Contributions (NDCs). The approved CDM methodology can continue to be applied until the end of its current crediting period or 31 December 2025, following which an Article 6 approved methodology will apply.

Entities will need to submit their requests for issuance of CERs in accordance with the relevant requirements adopted by the appointed Supervisory Body. Small-scale CDM project activities will undergo an expedited transition process in accordance with decisions of the Supervisory Body, prioritising requests to transition from such activities.

“Moving forward, success under Article 6 and CDM transition in 2022 depend on effective implementation of what has been agreed by the parties. It’s a step forward as part of a long process,” concludes Sa.