The UN Framework Convention on Climate Change (UNFCCC) has issued a template for letters of authorisation (LOAs) that must be issued by host countries to allow carbon credits to be traded internationally under Article 6 of the Paris Agreement.
The template lays out precisely what information a host country must receive from project developers in order to authorise their credits for trade credits under Article 6. Credits traded under the mechanism are called internationally transferred mitigation outcomes (Itmos) and count towards the buyer's nationally determined contribution.
The lack of LOAs has been caused by logistical complications and the absence of standardisation across the market. These have become the key barrier to the issuance of more credits eligible to act as Itmos, according to market sources, which said a template such as this could go a long way toward unlocking more LOAs and Itmo trade.
The emergence of more LOAs in the market will probably improve liquidity for credits traded under the Corsia certification scheme, for which the letters are a requirement. Up to now, airlines looking to comply with the scheme's first phase, set to run until the end of 2026, have been limited to purchasing credits from a single reducing emissions from deforestation and degradation (REDD+) project based in Guyana and certified by the Architecture for REDD+ Transactions registry.
