Article 6 and the carbon market: Progress and future

Article 6 of the Paris Agreement sets the framework for international cooperation on emissions reduction through carbon markets. It allows countries – and, by extension, companies – to trade carbon credits toward meeting their climate goals.

While Article 6 was agreed to in principle in 2015, it took years to resolve key operational details. COP26 (2021) laid out broad rules, but technical issues such as double counting, transparency and benefit-sharing remained unresolved through COP27 (2022) and COP28 (2023).

It wasn’t until COP29 (2024) in Baku that negotiators finalized the rulebook for carbon trading under Article 6.2 (bilateral trading between countries) and 6.4 (a UN-supervised market open to both countries and corporations). This decision paves the way for full operationalization in 2025.

Rulebook for compliance and voluntary carbon markets

As a broader system where carbon credits are traded, the carbon market functions within the guidance provided by Article 6. With compliance markets, governments set legal limits on emissions, which means companies must buy credits if they exceed their cap. With the voluntary carbon market (VCM), however, companies and individuals choose to buy credits to offset their emissions, usually as part of sustainability goals.

The compliance market has government oversight and enforceable rules, making it a regulated market. The VCM, however, is optional and therefore largely unregulated. The Baku decision strengthens the foundation for compliance markets. However, the voluntary market remains fragmented and under scrutiny. Concerns persist around the quality of credits, double-counting and whether carbon trades deliver real emissions reductions.

Implications of operationalizing Article 6

The launch of Article 6.4 could significantly reshape global carbon trading in 2025. But its success depends on whether it addresses existing gaps, especially around equity and integrity. For Indigenous peoples and local communities, the integration of safeguards and fair benefit-sharing remains uncertain, raising concerns over whether carbon finance will genuinely reach them or instead become entangled in bureaucratic and technical barriers.

Companies, particularly those engaged in voluntary markets, face increased scrutiny and compliance requirements. As market-based approaches evolve, potentially incorporating biodiversity credits and hybrid financing models, companies will need to navigate accordingly.

Regulatory bodies, such as the Integrity Council for the Voluntary Carbon Market (ICVCM), and other standard-setting organizations are under growing pressure to align their methodologies more closely with UNFCCC regulations while maintaining the credibility of voluntary markets.

Voluntary carbon markets

A major challenge with VCMs is the lack of standardization and trust in voluntary carbon credits. Compliance markets benefit from government oversight and enforceable rules, whereas the integrity, transparency and impact of voluntary markets are still being questioned.

The ICVCM and other governance bodies are working to strengthen quality benchmarks, but slow adoption and fragmented approaches continue to undermine confidence. In early June 2024, it released its Core Carbon Principles-labelled methodologies. These approved methodologies marked a step forward in raising VCM standards.

Still, uptake has been slow, and market trust remains fragile. Verra, one of the world’s largest crediting registries, has also moved to update its rules. After ICVCM approval of Verra’s Landmark Verified Carbon Standard Program in early May 2024, it has been aligning with ICVCM standards and announced a transition to revised methodologies.

In April 2025, the French government announced its commitment to support the use of carbon credits aligned with ICVCM’s Core Carbon Principles in their ‘Charter for Paris-aligned and high integrity use of carbon credits’. This commitment signals strong support for building a high-integrity global carbon market around a common understanding of quality.

The carbon offset market question

The carbon offset market is a subset of the carbon market specifically focused on carbon credits generated by projects that reduce, remove or avoid emissions such as reforestation, renewable energy or methane capture. These credits can be sold to entities looking to compensate for their own emissions.

This market has been criticized for allowing high-emitting and wealthier countries and corporations to continue polluting while purchasing credits rather than reducing emissions at source. This includes carbon offset projects, especially in forest-rich Global South countries.

The Center for International Environmental Law (CIEL), for example, notes that Article 6 allows for the trading of carbon credits to meet climate targets. Seeing this as a major flaw, CIEFL argues that the carbon offset market creates pressure for the Global South to sell off their most accessible and potentially most cost-effective mitigation efforts to avoiding deforestation while wealthier countries use these credits to claim emissions reductions.

Corporate buyers are becoming more cautious. With increasing scrutiny of greenwashing, companies are hesitant to invest in voluntary credits without robust guarantees of permanence, additionality and social co-benefits. Many companies are shifting towards insetting, nature-based solutions and direct emissions reductions, which is further weakening the demand for offsets.

An evolving challenge

Although the progress made in Article 6 mechanisms is a positive step for the global carbon trade, it does not directly address the governance and trust issues in the voluntary carbon market.

This moment calls for deeper reflection: Should the voluntary carbon market align more closely with compliance markets or should it evolve independently with stronger integrity frameworks?

Despite the progress in refining carbon markets and establishing guardrails, ensuring their effectiveness and legitimacy remains an evolving challenge. As efforts to enhance the integrity of the voluntary carbon market continue, discussions on trust, transparency and accountability have become more urgent.

It is important to remember that narratives driven by communication campaigns, vested interests and public perception are shaping the global response to climate change as well as scientific consensus.

The road ahead

We will continue to face challenges. Demand-side dynamics, evolving regulations and shifting investor priorities are continually shaping market-driven climate action.

Advancing high-integrity carbon markets will require coordinated efforts from governments, businesses, civil society, Indigenous Peoples and local communities. And while integrity baselines may lead to higher transaction costs and administrative complexities, they are necessary investments in market credibility and long-term effectiveness.

Recognizing that carbon market integrity is not a fixed target but an ongoing process, RECOFTC continues to advocate for standards that uphold environmental justice and drive adaptation and mitigation. With Indigenous Peoples and local communities at the core of our work, and as the operationalization of Article 6 moves forward, we will continue to engage in this evolving discourse.

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Mamta Lama is programme officer at RECOFTC.