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About the Legal Nature of Carbon Credits. Update from UNIDROIT and Article 6.

Today is Wednesday, December 27, 2023.

With the carbon markets developing fast, both the compliance (CCM) and the voluntary markets (VCM), there is growing attention to the legal nature of carbon credits.

With the task to develop “an international law instrument to provide guidance on the legal nature and other private law aspects of the voluntary carbon credits” (VCC), last October we posted an update about the 1st Session of the Working Group (WG) jointly created by UNIDROIT and the World Bank, demanded by ISDA and Paraguay.

Besides what we reported them - click here to recall - there was another document published after that meeting, worth refering to. Particulalry as it appers as an "Additional Discussion".

For Carbon Credit Markets, the core part of that additional document is the one that indicates that "in the context of the present Project, it may be premature at this early stage for the VCCs Working Group to determine the most suitable future international instrument to be developed".

Indeed. The uniform rules drawn up by UNIDROIT may take the form of various types of international law instruments, depending on the characteristics of the particular project, such as international conventions, model laws or legal guides.

UNIDROIT's follows priciples that are aimed at facilitating transactions by reducing legal uncertainty and providing guidance to legislators as well as adjudicators, practitioners and market participants, meaning to be technology, business model, and jurisdiction neutral (DAPL Principles).

In this context, 4 questions were made to the Working Group to answer:

  1. What would be the most suitable international instrument to be developed in the context of the VCC Project?

  2. Would it be appropriate for the future international instrument to take the form of a legal guidance document, including a set of best practices?

  3. Would the practical and functional approach adopted in the DAPL Principles offer a suitable framework for future work?

  4. Who should be the target audience for the instrument? Are there any specific stakeholders that would particularly benefit from any future instrument?

If you are also interested in the Carbon Credit Markets, specially on cross-border transactions involving the voluntary market or from jurisdictions where compliance and voluntary markets are minimally linked, this is an important topics to keep your eyes on in 2024.

Last but not least, related to the NDCs - Nationally Determined Contribution - we quote another important information from the latest Regional Climate Week "Middle East and Africa" by UNFCCC organized in Riyadh, Saudi Arabia a few weeks before COP-28 in Dubai:

"Article 6 Mitigation Contribution Units (MCUs). A new concept under Art.6.4 - credits that are not authorized for use towards NDCs or OIMP but contribute to the reduction of emission levels in the host party". (page 12 "Session 4 Introduction to International VCMs")

Give a look yourself. There is great and updated information about the VCM in these 27 pages.

Click at the image below for that UNIDROIT's "Additional Discussion" document.

And if you want prospective, constructive and quality information, register in our website for our email alerts.


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“Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less.”

“I am among those who think that science has great beauty”

Madame Marie Curie (1867 - 1934) Chemist & physicist. French, born Polish.

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