Nationally Determined Contributions (NDCs)

Article 6 of the Paris Agreement provides flexibility to governments to engage in voluntary cooperation in the implementation of NDCs “to allow for higher ambition in their mitigation and adaptation actions”

The rules that govern such cooperation open the door to carbon market transactions under the Paris Agreement that may overlap, integrate, or compete with Voluntary Carbon Market (VCM) activities.

The generation of carbon credits under the VCM is governed by greenhouse gas (GHG) protocols, programs, and methodologies that are administered by private standards. The Paris Agreement with its governing bodies has no jurisdiction over the VCM. However, the VCM is not disconnected from the international climate regime: GHG emission reductions or removals achieved through VCM projects and programs are captured by national GHG inventories, and VCM activities can assist countries to meet their Nationally Determined Contributions (NDCs) under the Paris Agreement.

Carbon projects or programs can complement public efforts by generating carbon finance that allows countries to meet conditional NDC targets. The host country could account for the GHG emission reductions and removals from VCM activities under its conditional NDC targets.

Similarly, when VCM projects or programs are developed in sectors, for activities or for types of GHGs that are not covered by NDCs, the finance from the sale of these carbon credits may be able to support host countries in achieving additional mitigation benefits.

In both cases, host countries could decide to authorize VCM emission reductions and removals and back them with corresponding adjustments.

When the trade of carbon credits in the VCM is not backed by corresponding adjustments, the host country retains the right to apply the climate benefits associated with VCM projects or programs in its jurisdiction towards its NDC targets.