Engaging in carbon markets does not automatically require participation under Article 6 of the Paris Agreement. However, if a country intends to authorise internationally transferred mitigation outcomes (ITMOs), apply corresponding adjustments, and/or participate in the Article 6.4 mechanism, it must establish clear legal mandates and institutional procedures to do so.

More broadly, many countries are now developing national carbon market frameworks, whether or not they immediately engage under Art. 6. These frameworks typically regulate – among other things – project approval and registration, authorisation, registry systems, applicable fees and/or levies, and reporting in line with international rules.

To participate under Art. 6.2, governments must define how activities are approved, how mitigation outcomes are authorised for transfer and use towards another country’s Nationally Determined Contribution (NDC) or other international mitigation purposes (OIMP), and how corresponding adjustments are applied and reported. All these functions are anchored in clear legal foundations and mandates to provide legal certainty to market participants.

For a government to effectively implement Article 6, it remains essential to establish the appropriate governance structures and institutional arrangements. This involves defining roles and responsibilities for key actors, such as national focal points, to carry out their tasks and obligations under Article 6.

The designation of a Designated National Authority (DNA) is a mandatory requirement for Article 6.4, emphasising the integral role this entity plays in facilitating international cooperation. While not mandatory for Article 6.2, appointing an Article 6 focal point is highly recommended and serves as an important initial step in many countries. Although the DNA and Article 6 focal point can be separate entities, their roles often complement each other, enhancing coordination efforts. In countries with ample capacities, the focal point may be a well-established institution, such as a dedicated Carbon Market Office. Conversely, in other nations, a focal point might be an individual supported by an alternate, showcasing the adaptability of this approach to various national contexts. Most West African nations, along with over half of UNFCCC member countries, have already appointed DNAs.

Image source: Perspectives, based on Ghana Carbon Market Framework (2022)

To effectively participate in Article 6, a country must establish clear operational procedures covering key aspects—such as authorisation processes, and the tracking and reporting of ITMOs—in order to comply with mandatory participation requirements. Beyond these core functions, additional operational procedures are important to provide clarity for project developers and to foster a robust pipeline of mitigation activities. This may include adopting or specifying relevant methodologies, standards, and guidelines for cooperation under Article 6, as well as implementing safeguards to uphold environmental and social integrity throughout the process.

This section sheds light on some procedures and requirements, with a particular focus on activities generating ITMOs under Article 6.2. Operational procedures at the national level under the Paris Agreement Crediting Mechanism (PACM) are addressed separately in the dropdown section Engaging in the PACM.

Image source: Perspectives Climate Group (2024)

Parties interested in participating in Article 6 activities need robust systems to track and account for the authorisation, transfer, and use of ITMOs under Article 6.2. They must also record Article 6.4 emission reductions (A6.4ERs) generated under the Paris Agreement Crediting Mechanism (PACM), whether or not these are authorised for international transfer and use. This tracking is done through dedicated carbon credit registries. Under Article 6, the registry infrastructure consists of:

• Party registries and/or an international registry for recording ITMOs under Article 6.2 (including authorisations, transfers, acquisitions, cancellations, and corresponding adjustments); and
• The Article 6.4 Mechanism registry for issuing and tracking A6.4ERs generated under the PACM.

These registries interface with the UNFCCC’s central Article 6 database and reporting systems to ensure transparency, avoid double counting, and maintain environmental integrity.

Image source: Perspectives Climate Group

Numerous steps are involved in the process of generating mitigation outcomes and allocating revenue to diverse groups, including activity developers, governments and other (local) stakeholders. The host country government holds the potential to influence or stipulate provisions for many of these stages, with decisions contingent on the strategic objectives for engaging in Article 6. This section explores considerations related to price generation for ITMOs, the sharing of benefits between host and buyer countries, the sharing of benefits on the national and sub-national level, as well as the fee structure designed to cover administrative fees and opportunity costs.

Image source: Climate Finance Innovators (2024)

Article 6.4 of the Paris Agreement establishes the Paris Agreement Crediting Mechanism (PACM). It works as a UNFCCC-supervised crediting programme that issues carbon credits for projects or activities that cut emissions or remove carbon from the atmosphere. These credits, called Article 6.4 Emission Reductions (A6.4ERs), may be traded internationally if they are authorised by host country governments.

Image source: UNFCCC

Voluntary carbon market (VCM) activities can be authorised by Parties under Article 6, with decisions shaped by national strategic considerations. If a country opts to integrate VCM activities into its national carbon market framework (or equivalent system), the rules and requirements of Article 6 must apply, just as they do for any other authorised activities.

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