COP27 and what it means to the voluntary carbon market

Despite many critics of the lack of progress on the mitigation front (i.e., the absence of clear commitment to phase out fossil fuels), the Sharm el-Sheikh Climate Change Conference will be remembered for its historic breakthrough on the Loss and Damage fund through which leading economies pay developing nations to compensate for climate-related losses. Additionally, the negotiation in Article 6 defines collaborative mechanisms countries may use to reach their Nationally Determined Contributions (NDCs). With COP27 now in the rearview mirror, many voluntary carbon market players have been left wondering what the recent developments to Article 6 mean to the market. The debate among voluntary and compliance market players, especially around the use of the corresponding adjustment (CA), has been critical. The corresponding adjustment is an accounting entry to ensure the transferring country can no longer use the emission reduction or removals to achieve its NDCs, while the acquiring country may use them in order to avoid double counting.