Monday, May 13, 2024.
These days we will explore outlooks from China starting today with carbon credits, based on a very good and complete article by lawyer Su Meng (Molly), partner from King & Wood Mallesons.
It starts like this: “What rights attach to a carbon credit? Who owns it? The legal nature of carbon credits sounds like a niche concept that only concerns lawyers, but it goes to fundamental aspects of trading and finance that have implications for businesses. And United Nations bodies are working to develop a comprehensive and coordinated legal framework for carbon credits.”
In other words, legal international guidance about carbon credit is still lacking, considering the increase in cross-border trading, consistency among jurisdictions and integrity issues (*).
As you know, this topic is on the agenda of UNIDROIT and UNCITRAL. Recall this post from a few days ago when we reported about their draft Research Report on the legal nature of voluntary carbon credits (VCC).
Mrs. Molly’s article relates to 2024 meetings of United Nations on the topic – including what it means for businesses, financing issues, fungibility and the benefits of China’s markets.
In there you have specific discussions such as:
that carbon credits can assume several forms: be a combination of a series of contractual rights, intangible assets, the fruits of real estate and digital assets.
that in Australia carbon credits are considered personal property (therefore be inherited), in United States intangible commodities, in Argentina a security and in Peru an intangible movable property.
the tax and accounting rules that apply to carbon credits.
Besides great questions like:
What rights carbon credit owners can assert against them?
How to dispose of carbon credits associated with market participants in the event of their insolvency?
Does the existence of VCCs depend on third-party platforms that issue and register them?
Do VCCs still have economic value in the absence of third-party platforms?
Why the need for an independent and stable mechanism to take ‘custody’?
What are the benefits of financing if carbon credits are ‘real rights’ (that is, akin to )?
Is there a way to ensure carbon credits are fungible – that is, ‘things’ that are interchangeable like cash?
Specifically about China, Mrs. Molly presents the advances of the national certified emission reductions (CCER) system compared with overseas carbon credit systems and elaborates on the advantages of the practice of ‘dual’ registration.
Very insightful.
Let’s see how it all evolves in terms of International Law, in a World that is actually split into different legal systems: civil law (˜150 countries), common law (˜80 countries), customary law (˜40 countries), religious law (˜30 countries) and mixed or pluralistic law.
Click at the image below for the full article by Mrs. Molly, who Carbon Credit Markets thanks for authorising reference in this post.
King & Wood Mallesons is the largest international law firm in Asia-Pacific. It has 30 offices and more than 3,500 legal professionals in Asia, Middle East, Europe and North America.
Tomorrow’s article will be about China’s energy transition outlook.
(*) Carbon Credit Markets is working on products and services to support the integrity assessment of carbon credits, both engineering and NBS. In the coming months, a marketplace with solutions will be made available. If you are interested in offering with us something with that same objective - documentation, due diligence, audit, compliance - please contact us @ contact@damasceno.org with the Subject “Integrity Marketplace”. Given that we have readers all over the World, all jurisdictions are very welcomed.
