Japan, Philippines to develop Article 6.2 carbon credits from agriculture projects

The Japanese government published a draft Article 6.2 methodology for issuing carbon credits from projects that improve water management and cut greenhouse gas emissions in Philippine rice paddy fields, the Ministry of Agriculture, Forestry and Fisheries said in a statement June 28, marking the first step toward extending Japan's Article 6.2 mechanism into the agriculture sector.

Article 6.2 is an UN-backed mechanism that allows two countries to sign bilateral agreements to transfer emission mitigation outcomes across national boundaries. Countries can either choose existing methodologies in the international voluntary carbon market or design new, tailormade methodologies under their bilateral programs.

This tailormade methodology enables carbon credits to be issued from a selected rice paddy if the water management approach can be altered from continuously flooded to single or multiple drainage, or from single to multiple drainage, according to the draft methodology released by the MAFF on the same day.

To justify the project's additionality, the selected field should not adopt any improved approach in the past two years before the project's implementation, the methodology showed.

The development of this tailormade Article 6.2 methodology is a first-of-its-kind practice in agricultural sector, the MAFF said in the statement.

"In Asia, including Japan, bilateral crediting efforts have not been carried out in the agricultural sector so far, and this is the first time that this methodological proposal has been published. In addition, if a project based on this methodology proceeds and a credit is issued, it will be the first of its kind in the world in the agricultural sector," the MAFF said.

Methodology details

Similar methodologies have been developed in the international VCM, however, there has been criticism over the additionality and the accuracy of estimated emission reductions.

In February 2023, Verra, the world's largest VCM credit issuer, announced pausing all its projects(opens in a new tab) for improved water management in rice cultivation for further review. Later in December 2023, Verra announced the development a new version of this methodology with enhanced environmental integrity.

When estimating emission reductions, this tailormade Article 6.2 methodology has come up with local parameters based on the condition of Philippine rice paddy fields.

Alternatively, project proponents can directly measure emissions from the project's field and emissions from a reference rice paddy field that does not have any improvement in water management, in order to compare and calculate emissions avoided by the project, the methodology document showed.

Article 6.2 for agriculture

The MAFF said the methodology is co-developed with Asian Development Bank.

This methodology is part of a bigger program, under which ADB, the governments of Japan, the Philippines and Vietnam, as well as international organizations and research institutes formulate an expert committee to facilitate the use of Article 6.2 to finance projects that reduce greenhouse gas emissions, especially methane, from rice paddies in Southeast Asian countries, ADB's official website showed.

Another tailormade methodology for Vietnam is under development and needs further discussion in the expert committee, ADB said in a statement published earlier in June.

Japan's Article 6.2 program is called the Joint Crediting Mechanism or JCM, which enables partner countries to be financed by Japanese public and private sectors and utilize Japan's decarbonization technologies. Meanwhile, Japan can use these JCM credits from projects overseas to meet its own national climate targets.

Japan has signed JCM partnership agreements with Vietnam in 2013 and the Philippines in 2017. However, JCM projects have taken a long time to be developed due to the lack of UN-level guidelines before the UN Climate Change Conference 2021, or COP26, and the complexity of Article 6.2 regime.

Platts, part of S&P Global Commodity Insights, assessed the nature-based avoidance carbon credit price at $3.4/mtCO2e on June 28.