Stringent rules being developed for the Paris Agreement Crediting Mechanism (PACM), the UN’s new carbon crediting system under Article 6.4, risk “killing the economics” of new projects, market experts warned on Wednesday, September 23, during Climate Week NYC. The concern is sharpest for nature-based and land sector activities, which developers fear could be designed out of the mechanism by conservative baselines and open-ended monitoring obligations. For project developers, host countries counting on Article 6 finance, and buyers banking on future UN-credited supply, the warning goes to the heart of whether the mechanism will scale or stall.
The Two Rules at the Center of the Fight
The first flashpoint is the baseline standard. PACM methodologies require baselines to be set conservatively and adjusted downward over time, so that credited reductions stay below business-as-usual projections. Integrity advocates see this as the mechanism’s core safeguard against overcrediting. Developers see a ratchet that steadily erodes saleable volume: every downward adjustment shrinks the credits a project can issue against the same upfront capital cost, and at some point the revenue curve no longer clears the investment threshold.
The second is the treatment of non-permanence and reversals, the defining problem for forestry, soil and other land-based carbon. An early draft standard would have imposed post-crediting monitoring for as long as any reversal risk existed, which for a forest project means effectively forever. Monitoring obligations with no end date translate into uncapped liability, a cost structure that no project finance model can absorb.
This Did Not Start in New York
The Climate Week warning is the latest round of a fight that has been running for over a year. When the draft non-permanence standard (version 02.2) circulated in late 2025, the International Emissions Trading Association and 12 other organisations published a joint open letter urging the Article 6.4 Supervisory Body to reject it, arguing the post-crediting monitoring provisions would effectively exclude nature-based and land-based projects from the mechanism.
The Supervisory Body, at its 18th meeting in Bonn in October 2025, approved the standard only after stripping out the reference to an indefinite monitoring period. Under the revised framework, monitoring duration is set at the methodology level, and an activity can exit post-crediting monitoring if reversal risk is deemed negligible, if future reversals are compensated through credit cancellation, or if an approved insurance mechanism is in place. That kept the door open for nature-based projects, but it also pushed the hardest decisions down into individual methodologies, where they are being fought over now.
Governments then took the issue to COP30 in Belem. A draft decision requested the Supervisory Body to revise the standard on setting baselines in mechanism methodologies, explicitly noting that the proposed downward adjustment approaches “can discourage the development of nature-based solutions and land sector activities”. Costa Rica and Indonesia pushed for better tools on reversals and permanence, while the EU floated exploring recognition of temporary carbon storage in biogenic reservoirs. In the final text, though, the direct references to nature-based crediting, a “tailored approach” and “economic feasibility” were all dropped, leaving the Supervisory Body with latitude but no political cover.
A Thin Pipeline Raises the Stakes
The economics question matters because PACM’s supply pipeline is still embryonic. The mechanism approved its first credits for issuance only recently, from a clean cooking project in Myanmar, the first public proof point that the system works end to end. As of late 2025, the Supervisory Body was working on around 19 methodologies, with five or six expected for adoption in the second quarter of 2026.
That is a thin base for a mechanism intended to succeed the Clean Development Mechanism and anchor UN-supervised carbon trade. If baseline and monitoring rules screen out the land sector, the pipeline narrows further, concentrating early supply in a small set of industrial and household energy methodologies. Host countries in Africa, Latin America and Southeast Asia, many of which are building national Article 6 frameworks around forestry and agriculture, would see their expected credit supply squeezed first.
What It Means for Developers, Buyers and Investors
For project developers, the actionable variable is methodology-level design. The Supervisory Body has delegated monitoring duration and much of the baseline calibration to individual methodologies, so engagement at that level, not at the headline standard level, is where project economics will be won or lost. Developers with land sector pipelines should model crediting volumes under aggressive downward adjustment scenarios before committing capital.
For buyers, the near-term implication is supply scarcity at the quality end. If PACM rules keep nature-based supply constrained, A6.4 emission reductions with corresponding adjustments will remain rare and expensive, and demand will spill over into bilateral Article 6.2 channels, where rules are set country to country rather than by the UN.
For investors, the split between Article 6.2 and 6.4 is becoming a structural feature, not a transition phase. Capital that assumed a single, centralised UN market would dominate international crediting may need to be redeployed toward bilateral frameworks and the registries that serve them.
What to Watch
Three markers from here. First, the revision of the baseline standard: whether the Supervisory Body softens downward adjustment for land sector activities, as the COP30 draft requested, or holds the conservative line. Second, the first methodologies with defined post-crediting monitoring periods: the length of those periods will effectively price nature-based participation. Third, the CDM transition calendar: documentation deadlines for transitioning projects run to December 31, 2026, and the volume that successfully migrates will be an early measure of whether the mechanism’s rules are workable in practice. With COP31 in Antalya approaching, the political pressure to reopen the rulebook will only grow if the pipeline stays thin.
