Third Session of the UNIDROIT Working Group on the Legal Nature of Verified Carbon Credits

From 4 to 6 September 2024, the third session of the Working Group on the Legal Nature of Verified Carbon Credits (VCCs) took place in a hybrid format at UNIDROIT’s headquarters in Rome. Held in collaboration with the World Bank, the session gathered 58 participants, including legal experts and observers from international, regional and intergovernmental organisations, as well as the private sector and academia.

 

The UNIDROIT project on the Legal Nature of Verified Carbon Credits is a high-priority initiative under the UNIDROIT Triennial Work Programme 2023-2025. The project aims to provide comprehensive guidance on private law issues to foster confidence in VCC transactions and support the development of a well-functioning market, which could play a central role in fighting climate change, thereby achieving the goals of the United Nations Framework Convention on Climate Change, in particular the Paris Agreement, and facilitating the fulfilment of the UN Sustainable Development Goals. With a significant portion of VCC-generating projects located in developing economies, a reliable carbon credit market also provides an opportunity to increase capital flow to emerging markets and provide funding to climate mitigation projects.

 

During the third session, the Working Group focused on refining the draft UNIDROIT Principles on the Legal Nature of Verified Carbon Credits that had been prepared by the drafting group. Key discussions revolved around clarifying the main stages in the life cycle of VCCs to ensure that the Introduction section of the Principles covered all essential elements. The group examined the definitions of fundamental terms, particularly those related to the nature and terminology of VCCs. Furthermore, the discussion extended to crucial aspects such as the creation, transfer, reversal, revocation, and retirement of VCCs, where the Working Group explored the implications of each phase from a private law perspective. Additionally, the Working Group underscored the critical role of a VCC registry in promoting market transparency and considered the relevant custody rules associated with VCCs.

 

The third session marked another significant step toward establishing a coherent and effective legal framework for Verified Carbon Credits. A report of the third session of the Working Group will be published in the coming weeks. The fourth session of the Working Group is scheduled in January 2025. More information about the VCCs Project can be found on the UNIDROIT website.

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