Not all carbon credits are the same. UNIDROIT Update, study on the Legal Nature.

Today is Wednesday, April 24 2024.

The 2nd Session of the Working Group on the Legal Nature of Voluntary Carbon Credits that started last Monday April 22 at UNIDROIT, in Rome, ends today.

While we wait for updates, here is what we know so far. And it’s great.

As we have been reporting since early 2023, The International Institute for the Unification of Private Law (“UNIDROIT”), in collaboration with the World Bank Group, has undertaken a project to analyse the Legal Nature of Voluntary Carbon Credits.

• Innovate4Climate Conference 2023. The legal nature of carbon credits: what are you trading?

• UNIDROIT and Brazil: Legal Nature of Voluntary Carbon Credits

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

This initiative is extremely important towards aspects of international trade law. Because of that, interest is not limited to the parties mentioned in the articles above.

UNCITRAL - United Nations Commission on International Trade Law - is also very interested. UNCITRAL plays a key role in developing cross-border legal frameworks for the facilitation of international trade, and investments.

A few weeks ago, UNIDROIT and UNCITRAL produced a joint study on the Legal Nature of Verified Carbon Credits Issued by Independent Carbon Standard Setters.

All Member States of the United Nations were invited to participate, besides some nominated experts. Here the list of inputs as of March 2024: Argentina, Australia, Brazil, Brunei Darussalam, Burkina Faso, Canada, China, Côte d’Ivoire, Croatia, Dominican Republic, El Salvador, Guatemala, Guyana, Ireland, Israel, Japan, Kazakhstan, Malaysia, Mexico, Myanmar, Norway, Oman, Panama, Paraguay, Peru, Russian Federation, Singapore, Slovenia, Sri Lanka, Thailand, Türkiye, Turkmenistan, United States.

As you will read In that study, instead of “voluntary carbon credits” the expression “verified carbon credits issued by independent carbon standard setters” was used. It was argued that the 1st expression lacked precision and that the word “voluntary” could “entail confusion and be misleading”.

Same about “carbon credits”. Not all carbon credits are the same. Those properly verified by a trusted independent third part are called “verified carbon credits”, meaning that the entity in charge of the verification process is not the same conducting the climate mitigation project itself nor the one issuing the credits. (*)

Here are a few examples of current legal issues pertaining to - voluntary, verified - carbon credits:

• bundle of contractual rights

• intangible property

• digital assets

• Legal implications of the choice of a characterization

Click below to download that UNIDROIT and UNCITRAL joint study.

Joint Study on the Legal Nature of Verified Carbon Credits Issued by Independent Carbon St

.

Download • 798KB

The 45 pages document is an absolutely great reference for those interested in doing the right thing about carbon credits, specially in the voluntary markets.

“The legal nature of voluntary carbon credits determines issues such as the registration, issuance, transfer, and retirement of the credits and impacts broader considerations such as collateralisation and insolvency. Greater clarity on the legal nature of voluntary carbon credits would significantly contribute to the development of an efficient and more robust global voluntary carbon market.”

(*) Carbon Credit Markets is working on products and services to support the integrity assessment of carbon credits, both engineering and NBS. In the coming months, a marketplace with solutions will be made available. If you are interested in offering with us something with that same objective - due diligence, audit, compliance - please contact us @ contact@damasceno.org with the Subject “Integrity Marketplace”. Given that we have readers all over the World, all jurisdictions are very welcomed.

#legalissues

#carboncredits

#carboncreditmarkets

www.carboncreditmarkets.com

COP28 Article 6 related meetings pending as of 21hs, December 12, 2023. Photo by Carbon Credit Markets