Paris Agreement Article 6 explained: what it changes in carbon markets

The minute

• Article 6.2 lets two countries directly trade mitigation outcomes (ITMOs)
• Article 6.4 creates a centralised, UN-supervised crediting mechanism, successor to the old CDM
• For a result to count toward a country’s target, it needs a corresponding adjustment, so it is not counted twice

Why it matters: Without Article 6 actually working, international carbon trading risks counting the same avoided tonne in two countries at once.

The two paths

Article 6.2 is bilateral: one country buys another’s mitigation outcome through a direct deal, as Switzerland and Ghana already do. Japan, Singapore and South Korea have also been negotiating bilateral agreements under 6.2, each setting its own criteria for which project types qualify.

Article 6.4 is centralised: a UN mechanism registers and oversees projects, similar to the old Clean Development Mechanism (CDM), but with stricter additionality rules. A Supervisory Body appointed by the Conference of the Parties oversees methodologies, project registration and credit issuance under 6.4. The body has been developing baseline and monitoring standards since its creation, and approval of the first batch of methodologies has taken longer than many market participants expected.

How a transaction works in practice

Under Article 6.2

The selling country (the “host”) and the buying country negotiate terms, including which sectors and project types are eligible. The host country authorises the transfer through a formal letter. Once mitigation results are verified, the host reports the transfer to the UNFCCC and applies a corresponding adjustment to its own greenhouse gas inventory. The buying country then adds the ITMO to its own records and counts it toward its NDC. Both sides must report these transfers in their Biennial Transparency Reports.

Under Article 6.4

A project developer submits a proposal to the Supervisory Body, following an approved methodology. If the project is registered, an independent auditor (a Designated Operational Entity) validates the design and later verifies emission reductions. The Supervisory Body issues credits, automatically deducting a share: 5% of issued credits go to the Adaptation Fund, and at least 2% are cancelled to contribute to overall global emission reduction. The host country then decides whether to authorise those credits for international transfer (triggering a corresponding adjustment) or leave them unauthorised.

The corresponding adjustment

When a country sells a mitigation outcome, it must subtract that tonne from its own climate target (NDC). Without that adjustment, the same reduction could be counted by both the selling and the buying country. This is the mechanism that distinguishes Article 6 trading from older offset schemes, where double counting was a persistent criticism.

Why it affects voluntary credits

Voluntary market methodologies are adapting to Article 6 rules, and more buyers now ask whether a credit does or does not carry a corresponding adjustment. The distinction matters: a credit that carries an authorisation from the host country (and a corresponding adjustment) can be used toward compliance or national targets, while an unauthorised credit cannot. Some corporate buyers prefer unauthorised credits precisely because they do not subtract from the host country’s NDC, meaning the climate benefit is arguably additional to what countries have pledged. Others want authorised credits to avoid the risk that the host country is already claiming that reduction. There is no consensus yet on which approach represents a stronger climate claim.

Brazil and Article 6

Brazil has been discussing bilateral deals under Article 6.2, but most Brazilian supply still goes to the voluntary market. Domestically, Brazil passed legislation creating the SBCE (Sistema Brasileiro de Comércio de Emissões de Gases de Efeito Estufa), a regulated cap-and-trade system for large emitters. The SBCE is relevant to Article 6 because once Brazil operationalises its domestic market, the government will need clear rules on which reductions can be sold internationally and which must remain in the national inventory.

For project developers operating in Brazil, the practical question is whether the Brazilian government will authorise specific project types for Article 6.2 transfers. Until that authorisation framework is published, most credits generated in Brazil continue to flow through voluntary registries (such as Verra or Gold Standard) without corresponding adjustments. Operators should track regulations from the Comissão Interministerial de Mudança Global do Clima (CIMGC), which advises the government on climate policy, including international carbon market participation.

The most common mistake

Treating “authorised” and “issued” as the same thing. A credit can be issued under Article 6.4 or through a voluntary registry without ever being authorised for international transfer. Authorisation is a separate, sovereign decision by the host country. Buyers who assume that any credit from an Article 6.4 project automatically carries a corresponding adjustment risk misrepresenting their climate claims.

What is still unresolved

Several pieces remain open. The transition of legacy CDM projects into the Article 6.4 mechanism is still being defined: which old projects qualify, under what conditions, and whether their existing credits can convert to new Article 6.4 credits. Methodologies under 6.4 are being approved slowly, which delays new project registrations. There is also no binding international standard on how voluntary market credits interact with corresponding adjustments when a host country has not taken a formal position. These gaps mean that much of Article 6 exists on paper but is not yet fully operational at scale.

Frequently asked questions

Does Article 6 replace the voluntary market?

No. They coexist; Article 6 governs trade between countries, the voluntary market governs purchases by companies and individuals.

Is Brazil trading under Article 6.2 yet?

Brazil has been discussing bilateral deals, but most Brazilian supply still goes to the voluntary market. The SBCE legislation creates a domestic framework, though international transfer rules are still pending.

What is an ITMO?

An Internationally Transferred Mitigation Outcome, the result one country transfers to another under Article 6.2.

Read next: voluntary vs compliance market.

Read next: what a carbon credit is.

Primary sources: Paris Agreement, official text, Article 6 (UNFCCC, 2015); Decisions 2/CMA.3 and 3/CMA.3, rules for Article 6.2 and 6.4 (UNFCCC, 2022); Law 15,042/2024 creating the SBCE, official text in Portuguese (Presidency of Brazil, 2024).