How carbon markets support climate action

How Carbon Markets support Climate Action

Article 6 of the Paris Agreement sets out the framework for countries to voluntarily cooperate to achieve their climate targets, or Nationally Determined Contributions (NDCs).

Under Article 6, countries can trade Internationally Transferred Mitigation Outcomes (ITMOs) voluntarily to jointly achieve their NDCs. These ITMOs have the potential to help host countries go above and beyond their unconditional Nationally Determined Contributions (NDCs), or climate commitments that the host countries intend to achieve without external support. ITMOs could come in the form of carbon credits with corresponding adjustments. Corresponding adjustments is a mechanism to ensure no double counting of emissions reductions and removals by countries.

For example, when Country X buys 1 MtCO₂e of carbon credits from Country Y, Country Y has to add 1 MtCO₂e to its GHG inventory while Country X will reduce 1 MtCO₂e in its GHG inventory.

Illustration of the process of corresponding adjustments.