VLP Legal Press #18
Carbon Markets - Simple Overview - Party 2
How Carbon Credit Projects Work in Cambodia?
In our previous VLP Legal Press #17, we discussed Article 6 of Paris Agreement: an article that provides a framework for countries to cooperate on climate action through market and non-market mechanisms, helping them achieve their NDCs. The framework includes international trading of GHG ER credits between countries, where GHG ER credits achieved in one country can count towards NDC targets of another country in exchange for payment.
⁉️Not sure what some of the abbreviations (such as GHG ER or NDC) mean? You can refer back to 📢VLP Legal Press Issue #17 for an explanation.
Today, we take a closer look at Cambodia’s Operations Manual for Implementation of Article 6 of the Paris Agreement on Climate Change (Manual) 📗which came into effect in year 2023.
1. Purpose 🎯: the Manual tells project developers, carbon credit buyers and relevant governments how Cambodia will authorize and manage internationally transferable GHG ER credits. As the Manual mentioned: the key action taken by a host country to allow an activity to generate GHG ERs for international transfer under Article 6 of Paris Agreement is ‘authorisation.’
2. Who takes charge of it 👔: the Cambodia’s Ministry of Environment (MOE) is the national authority in charge. It coordinates technical review, signs authorizations, run secretariat and reports to United Nations Framework Convention on Climate Change.
3. Why authorization matters 📋: the host country must authorize any GHG ER credit that will be sold abroad to prevent double-counting.
4. Pilot phase 🛫: Cambodia will start Phase 1 so only a limited number of projects are authorized until December 2025. Wider rollout will follow after studies are done through implementation of Phase 1.
5. What projects will be approved 🪪: only projects on “positive list,” i.e. the activities the country listed as conditional in its NDC are eligible for authorization.
6. Key eligibility rules 📃: GHG ER credits generated from 2021 onwards, produce real, verified and additional reductions, use an eligible carbon standard, set conservative baselines, manage permanence/leakage risks, and support Cambodia’s sustainable-development criteria.
7. Reserve for domestic use🗃️: a portion of a project’s credits must be kept for Cambodia (percentage decided case-by-case) so the country still counts some reductions toward its own NDC.
8. Ownership of GHG ER credits and sale proceeds🏷️: for projects which have obtained a letter of authorisation from the Government, ownership will be given to the authorized project participant according to the agreed distribution specified in the letter. If the Government is not a participant but takes lead related to enactment of policies, the Government may claim onwership up to 10% - any government share is placed into an Environmental and Social Fund.
9. Fees payable💰: project proponents pay administrative fees (and for REDD+ extra monitoring fees); a per-credit corresponding-adjustment fee is also required before positive examination is issued.
10. Simple process (involving project proponent) overview🎛️: (a) optional Letter of No Objection for early feedback; (b) validation by an independent auditor and registration with a carbon standard; (c) mandatory Letter of Authorization from MOE to allow international transfer; (d) independent verification; (e) Letter of Positive Examination; (f) issuance, notification to MOE, then transfer/cancellation and application of corresponding adjustments.
This is for general reference only and does not constitute legal advice. For further guidance, contact us at: