Article 6.4 PACM and CDM Transition Advisory
The Paris Agreement Crediting Mechanism, created by Article 6.4, is a UN-supervised mechanism that can issue A6.4 emission reductions. Some units may later become internationally transferred mitigation outcomes if the host Party authorizes them. Financely advises sponsors on PACM participation and CDM transition files. It does not issue units, act as a designated operational entity, or grant host Party approval.
What is the Article 6.4 Paris Agreement Crediting Mechanism?
Article 6.4 of the Paris Agreement establishes a voluntary mechanism, now commonly called the Paris Agreement Crediting Mechanism or PACM, which Parties can use to cooperate on emission reductions or removals and on sustainable development. The Supervisory Body oversees the mechanism. Activities that are registered can issue Article 6.4 emission reductions, abbreviated as A6.4ERs, subject to the mechanism's rules.
Those units are not all the same. UNFCCC materials distinguish Mitigation Contribution A6.4ERs, which the host Party has not authorized and which therefore contribute to the host Party's nationally determined contribution, from Authorized A6.4ERs, which the host Party has authorized for use toward nationally determined contributions and, or, other international mitigation purposes. Authorized units are subject to corresponding adjustment. Once first transferred, they are internationally transferred mitigation outcomes under Article 6.2.
Article 6.2 itself is the accounting, reporting and review guidance that applies to cooperative approaches involving internationally transferred mitigation outcomes. It is not a second crediting standard. The existing group guide, Article 6 of the Paris Agreement: a top-level guide, and the blog series on Article 6 readiness, authorization and corresponding adjustments, already cover that cooperative-approach layer. This page does not replace them. It is the money page for PACM participation and for CDM activities that are seeking to transition into the mechanism.
Readers who need host-country authorization process guidance should stay with when a carbon project may need host country authorization and how to prepare a carbon project for Article 6 authorization discussions. Commercial strategy around corresponding adjustments remains on corresponding adjustments and carbon credit commercial strategy. International buyer structuring remains on Article 6 carbon project structuring for developers seeking international buyers.
How does CDM transition into Article 6.4 work?
Clean Development Mechanism activities and programmes of activities may transition into the Article 6.4 mechanism if they follow the Supervisory Body's transition procedure and if the host Party approves the transition through its designated national authority. Transition is not automatic. A request, host Party approval, and later conformity with Article 6.4 methodological rules are all part of the official process.
UNFCCC documentation has set cut-off dates for transition requests and for host Party approvals, and those dates have been the subject of later Conference of the Parties serving as the meeting of the Parties to the Paris Agreement decisions. This page does not restate a single deadline as if it cannot change. Sponsors should confirm the current dates on the UNFCCC CDM transition pages, including the official frequently asked questions, before they treat a file as still eligible.
Methodologies also change at transition. A transitioning CDM activity may be able to keep its current CDM methodology only until the earlier of the end of the current crediting period or a date specified in the transition standard, after which an Article 6.4 mechanism methodology applies. Host Party methodological requirements can force an earlier switch. Design documents may need revision and validation by a designated operational entity. Financely can help a sponsor map that work. It does not act as the designated operational entity and it does not approve the transition.
What should a PACM or transition file contain?
A useful file identifies the activity, the host Party, the designated national authority contact path, the current registration status, the crediting period, the methodology, and whether the sponsor is seeking mitigation contribution units, authorized units, or has not yet made that choice. It should also record any letter of authorization or approval already issued, and any conditions attached to it.
| File item | Why it matters | Who ultimately decides |
|---|---|---|
| Host Party participation and DNA process | A host Party must be participating in the PACM for activities on its territory to move forward under the mechanism | The host Party and its designated national authority |
| Authorization, or the absence of it | Authorization determines whether units remain mitigation contribution units or can become authorized units and, after first transfer, ITMOs | The host Party |
| Transition request and approval, for CDM activities | Without a valid request and host approval under the current procedure, a CDM activity does not become an Article 6.4 activity | The project participants, the host Party, and the Supervisory Body process |
| Methodology pathway | CDM methodologies may only be used for a limited period after transition, and may have to be replaced sooner | The Supervisory Body rules and any host Party methodological requirements |
| Corresponding adjustment implications | Authorized units used as ITMOs require corresponding adjustment under Article 6.2 guidance | The participating Parties, under Article 6.2 reporting rules |
End-to-end carbon development, including PDD and validation support on voluntary standards, still starts from the carbon project consulting hub and from the blog guide on carbon project development advisory from feasibility to first issuance. Article 6 readiness for voluntary projects remains on Article 6 readiness for voluntary carbon project developers. This mandate is additional to those pages, not a second general Article 6 hub.
What does Financely do, and what does it not do?
Financely is an advisor and arranger. It helps sponsors assemble a PACM or CDM transition file, map host Party and methodology issues, and prepare materials for discussions with legal counsel, technical consultants and counterparties. It does not issue A6.4ERs, grant letters of authorization, act as a designated operational entity or designated national authority, or perform corresponding adjustments.
It also does not guarantee registration, transition approval, authorization, issuance, or any particular buyer treatment. Those outcomes sit with the Supervisory Body process, the host Party, and the counterparties to any offtake. Capital raising around a carbon project, if that is in scope, stays on structured capital raising for carbon projects and types of funding for carbon projects.
Retained work typically sits in the USD 50,000 to 200,000 band, with a USD 500 intake first. Productized file reviews, where they fit, start from USD 2,000 and can run to USD 100,000 or more by quote. Terms are confirmed in an engagement letter. No success fee is stated on this page.
Frequently asked questions
Is Article 6.4 the same thing as Article 6.2?
No. Article 6.4 creates the Paris Agreement Crediting Mechanism, a UN-supervised crediting mechanism that can issue A6.4 emission reductions. Article 6.2 provides accounting, reporting and review guidance for cooperative approaches that involve internationally transferred mitigation outcomes. Authorized A6.4 units can become ITMOs after first transfer, at which point Article 6.2 accounting applies.
What is the difference between mitigation contribution units and authorized units?
Mitigation Contribution A6.4ERs have not been authorized by the host Party, so the mitigation they represent can count toward the host Party's nationally determined contribution. Authorized A6.4ERs have been authorized for nationally determined contributions and, or, other international mitigation purposes, and are subject to corresponding adjustment. Authorization can, in some cases, be given later.
Can every CDM project automatically move into Article 6.4?
No. Transition requires the official Supervisory Body procedure and host Party approval through the designated national authority. Cut-off dates have been set and later adjusted in UNFCCC decisions, so sponsors must confirm the current dates on the official CDM transition pages. Financely can help prepare a file. It cannot approve a transition or extend a deadline.
Does Financely issue Article 6.4 units or letters of authorization?
No. Units are issued under the PACM rules. Letters of authorization and host Party approvals are issued by the host Party through its official process. Financely is an advisor and arranger only. It does not issue units, grant authorization, act as a designated operational entity, or perform corresponding adjustments.
Do voluntary carbon credits always need a letter of authorization?
Not always. Whether a voluntary credit needs host Party authorization depends on the intended use, the host Party's rules, and whether the parties want authorized units or ITMOs. The existing blog guides on host-country authorization and corresponding adjustments cover that question. This page focuses on PACM participation and CDM transition files.
Where should I start if I already have a voluntary carbon project?
Start with the live carbon project consulting hub and the Article 6 readiness guides already on the blog, then use this page if the work is specifically PACM registration or CDM transition. Do not treat this page as a second general Article 6 pillar. The existing top-level Article 6 guide on the group site remains the overview.
If you want advisory support on an Article 6.4 PACM file or a CDM transition pack, submit the file through the deal submission form. Financely is an advisor and arranger only. It does not issue units or grant host Party approval.