The Paris Agreement Crediting Mechanism (PACM) has officially approved its first project—a cookstove initiative in Myanmar. This marks a major milestone for the UN-backed carbon credit system, designed to ensure high-integrity offsets.
But with concerns over inflated climate benefits, is this approval a win for carbon markets or a warning sign of deeper issues? Let’s uncover the details behind this historical market development.
What is PACM?
The Paris Agreement Crediting Mechanism is a global initiative designed to improve the quality and integrity of carbon credits. Carbon credits are permits that let companies offset their greenhouse gas (GHG) emissions. Companies invest in projects that reduce or remove CO₂ from the atmosphere.
The PACM was set up under Article 6.4 of the Paris Agreement. This article lets countries team up and trade emission reduction units, also called A6.4ERs (Article 6.4 Emission Reductions Units), to reach their climate goals.
The PACM is different from private carbon credit programs. It is an official system backed by the United Nations (UN). This means it has more oversight and credibility.
The UN carbon credit system was finalized at COP28 in 2024. It replaces the Clean Development Mechanism (CDM). The CDM faced criticism for allowing low-quality carbon credits. Many CDM projects lacked “additionality.” This means they would have happened without carbon credit funding. As a result, they undermine real climate action.
PACM introduces stricter rules to ensure credits represent real, measurable, and verifiable emission reductions. It boosts baseline standards. It also requires upfront credit registration, which stops retroactive project approvals.
This UN-backed system aims to boost trust in carbon markets and ensure they contribute meaningfully to nations’ climate goals, also known as Nationally Determined Contributions.
With over 3,500 companies committed to net-zero, demand for high-quality credits is rising. PACM’s stricter standards can help companies buy reliable carbon offsets. This reduces the risk of “junk credits” that offer little or no real environmental benefit.
CDM’s Shadow Over PACM
One of the most debated aspects of the PACM is the transition of projects from the CDM to the new system. The CDM started in 2001. It lets countries and companies earn carbon credits by funding projects that reduce emissions in developing nations.
Over time, it became clear that many CDM projects lacked integrity. They didn’t reduce emissions beyond what would happen anyway.
Facing pressure from China and India, PACM negotiators decided to let CDM projects seek PACM approval until the end of 2025. This transition period was meant to prevent disruptions in the carbon credit market. However, experts worry that it opens the door for low-quality projects to flood the system before stricter PACM rules take effect.
According to an analysis by the NewClimate Institute, over 1,000 CDM projects have applied for PACM status, including:
- Large-scale hydropower and wind energy projects that likely would have been built anyway, with or without carbon credit funding.
- Methane capture projects in landfills, which may not meet stricter PACM rules on baseline emissions.
- Cookstove projects, which have long been controversial due to questions about how much wood use they actually reduce.
The NewClimate Institute warns that if all these projects get PACM approval, hundreds of millions of carbon credits may flood the market. Their climate benefits are unclear. This could undermine trust in the PACM before it even becomes fully operational.
The video explains the transition from CDM to PACM:
First Project Approval: Myanmar Cookstove Initiative
The first PACM-approved project is in Myanmar. It’s a cookstove program that helps families use less firewood. This also lowers CO₂ emissions. By switching to these stoves, communities can slow deforestation and improve indoor air quality, reducing respiratory health risks.
Household cooking makes up 2-3% of global CO₂ emissions. This mainly comes from burning wood and charcoal. Improved cookstoves provide climate and health benefits. However, the Myanmar project has received criticism.
- Calyx Global rated it Tier 3, the lowest quality category, due to concerns about inflated carbon savings.
The ratings company stated:
“Although the PACM may soon include stricter methodological requirements for GHG integrity of cookstove carbon credits, for now, GHG integrity – and especially over-crediting – remains a key concern at the project level.”
A big problem is the dependence on non-renewable biomass (fNRB) estimates. These estimates decide how much firewood reduction is claimed. Critics argue that project developers overestimated deforestation avoidance, exaggerating climate benefits.
The Integrity Council for the Voluntary Carbon Market (ICVCM) recently rejected this methodology, raising further doubts about its credibility.
But Calyx Global also noted that the project’s rating can still go up to a Tier 1 rating if it delivers its promised reductions.
Concerns About PACM’s Credibility
The approval of the Myanmar project has raised concerns. Will the PACM deliver on its promise of high-quality carbon credits? The mechanism looks good on paper, but in reality, many low-quality projects might get approved. Stricter rules won’t start until 2026.
Carbon market experts say that giving PACM certification to these projects might hurt trust in the system. This could happen even before it is fully implemented. If buyers see that PACM credits are just as bad as old, low-quality CDM credits, the whole initiative might lose credibility.
To address these concerns, experts like Lambert Schneider from the Oeko-Institut suggest that carbon credit buyers should be extremely cautious when purchasing PACM credits. He advises companies to carefully check whether a credit comes from a transferred CDM project or a newly approved PACM project.
What Needs to Happen Next?
The PACM could become the gold standard for carbon credits. However, it must quickly tighten its rules. This will help stop low-integrity projects from flooding the market. Key areas for improvement include:
- Stronger baseline rules to ensure reductions are calculated using reliable estimations.
- More transparency in disclosing data on methodologies and impact.
- Independent verification by 3rd-party auditors.
The Paris Agreement Crediting Mechanism represents a major step toward a more credible and effective carbon market. The next few years are key. They will decide if the PACM becomes a trusted source for carbon credits or just another place for dubious emissions reductions.
