COP31 and the Future of Carbon Markets: Can Article 6 Deliver on the Paris Agreement?

As COP31 approaches, the discussion around carbon markets is becoming less about establishing rules and more about making international carbon trading work in practice. Article 6 of the Paris Agreement could open new pathways for climate finance, but questions around credit quality, national interests and transparency remain.

For years, carbon markets have promised something quite important: a way to connect climate action with finance.

The idea is that activities which reduce greenhouse gas emissions or remove carbon dioxide from the atmosphere can generate measurable environmental benefits. These benefits can then, under the appropriate frameworks, be converted into carbon credits and traded. The money generated can help finance projects that might otherwise struggle to attract investment.

It sounds straight. In reality, it has proved considerably more complicated.

There have been projects where the claimed emissions reductions were difficult to establish, credits that raised questions about additionality, and transactions where the same environmental benefit risked being counted more than once. These issues have affected confidence in parts of the carbon market and raised an important question: how can carbon trading deliver genuine climate benefits while remaining commercially viable?

This is where Article 6 of the Paris Agreement comes into the picture

With COP31 taking place in Antalya, Türkiye, from 9 to 20 November 2026, international carbon trading will be an important area to watch. The framework has developed considerably since the Paris Agreement was adopted, and countries are now working on the systems needed to put it into practice.

For India and other developing economies, as well as countries across the Gulf, the implications could be significant.

From the Paris Agreement to an international carbon market

The Paris Agreement was adopted in 2015 with the objective of limiting global temperature rise to well below 2°C, while pursuing efforts to limit it to 1.5°C.

Under the agreement, countries submit Nationally Determined Contributions (NDCs), setting out their climate commitments and the actions they intend to take.

But countries have different economic circumstances, energy systems and capacities to reduce emissions. Some have access to significant financial resources and advanced technologies, while others have substantial opportunities for emissions reduction but face financing and infrastructure constraints.

Article 6 recognises that international cooperation can help address these differences.

It allows countries to work together to achieve their climate objectives, including through the transfer of internationally recognised mitigation outcomes.

In practical terms, this means that a country could support eligible emissions reduction activities in another country and, subject to the applicable rules, use the resulting mitigation outcomes towards its own climate commitments.

The intention is not simply to create another commodity to trade. It is to make international climate cooperation more financially practical.

However, the environmental benefit must be real, measurable and properly accounted for. Without that, international carbon trading risks becoming an exercise in moving numbers between countries rather than reducing emissions.

Understanding Article 6: Three different approaches to climate cooperation

Article 6 is often discussed as a single carbon market mechanism, but it actually contains three distinct approaches.

Article 6.2: Cooperation between countries

Article 6.2 allows countries to enter into cooperative arrangements involving the transfer of Internationally Transferred Mitigation Outcomes, commonly known as ITMOs.

Consider a hypothetical example.

A country looking to meet its climate commitments could enter into an agreement with another country to finance an eligible renewable energy or methane reduction project. If the project generates authorised mitigation outcomes and the relevant requirements are met, these outcomes could be transferred internationally.

The most important part of this arrangement is the corresponding adjustment.

When a mitigation outcome is authorised and transferred for an applicable international use, the host country must make the corresponding adjustment to its emissions accounting. This prevents both countries from claiming the same reduction towards their respective climate targets.

This is essential to maintaining the integrity of the system.

Article 6.4: A United Nations-supervised crediting mechanism

Article 6.4 establishes the Paris Agreement Crediting Mechanism (PACM).

Unlike the cooperative approaches under Article 6.2, this mechanism operates under a centralised framework supervised by a body established under the Paris Agreement.

Eligible activities can generate credits representing verified emissions reductions or removals, provided they meet the applicable standards and requirements.

An important distinction within this mechanism is between authorised emission reductions (AERs) and mitigation contribution units (MCUs).

Authorised units may be used in relevant international cooperative approaches, subject to the applicable rules. Mitigation contribution units remain associated with the host country's climate efforts and cannot simply be transferred for another country's NDC use.

This distinction matters because not every credit generated under an international mechanism automatically has the same status or permitted use.

Article 6.8: Cooperation without carbon trading

Not all international climate cooperation needs to involve buying and selling credits.

Article 6.8 provides a framework for non-market approaches, including technology transfer, capacity building, adaptation and other forms of climate cooperation.

Together, these three approaches recognise that countries need more than one way to work towards their climate objectives.

The difficult part: Making international carbon trading work

Agreeing on the principles of a carbon market is one thing. Building a system that countries and investors can actually use is another.

An international carbon transaction involves several stages. A project must meet the applicable requirements, its emissions reductions need to be measured and verified, the relevant country must establish the necessary authorisation arrangements, and the resulting units must be properly recorded and accounted for.

If any part of this process is unclear, projects can face delays and investors may become reluctant to commit capital.

This is why the development of Article 6 infrastructure is important.

In January 2026, the UNFCCC announced that work had begun on the digital infrastructure for the Article 6 registry system. The initiative is intended to support the tracking and accounting of internationally transferred mitigation outcomes, with systems designed to improve transparency and coordination between participating countries.

The Article 6.4 mechanism registry is also being developed to record credits generated under the UN-supervised mechanism.

These registries are not merely administrative tools. They are an important part of establishing ownership, tracking transfers and preventing the same mitigation outcome from being used more than once.

The UNFCCC's registry framework also distinguishes between authorised units and mitigation contribution units, reflecting the different ways in which credits may be used.

There is still work to be done on interoperability between national registries and international systems. But the development of this infrastructure is an important step towards making Article 6 operational.

Why COP31 matters now

The negotiations at COP26 in Glasgow established the foundation for Article 6. Subsequent climate conferences have worked towards clarifying and implementing the rules.

At COP29 in Baku, countries reached important agreements on Article 6.2 and Article 6.4. COP30 in Belém, Brazil, in November 2025, continued this work through further decisions on implementation.

The decisions adopted at Belém included guidance on cooperative approaches under Article 6.2 and further guidance on the Article 6.4 mechanism. The work covered matters such as reporting infrastructure, technical reviews, governance, methodologies, stakeholder engagement and funding for the mechanism.

This is important because the conversation is gradually moving from the design of the framework towards its practical operation.

As delegates meet in Antalya, several questions deserve attention.

Will countries be able to establish clear and predictable authorisation procedures? How quickly can the international registry infrastructure become fully functional? Will the cost and complexity of participation prevent smaller developing countries from entering the market? And, perhaps most importantly, will the credits being generated represent meaningful and additional climate benefits?

These are not minor technical questions. They will influence the confidence of governments, investors and project developers in the international carbon market.

COP31 will provide another opportunity to address these implementation challenges.

India: An emerging market with international ambitions

India deserves particular attention in the discussion around international carbon trading.

The country has substantial potential for emissions reduction across its industrial, energy, agricultural and waste management sectors. It is also developing a domestic carbon market through the Carbon Credit Trading Scheme (CCTS).

The Indian framework has two principal mechanisms.

The Compliance Mechanism applies to designated energy-intensive industries that are assigned greenhouse gas emission intensity targets. Entities that perform better than their prescribed targets can become eligible for Carbon Credit Certificates.

The Offset Mechanism allows eligible non-obligated entities to register projects that reduce, remove or avoid greenhouse gas emissions, subject to the applicable methodologies and requirements.

According to a February 2026 Ministry of Power update, the institutional framework, sectoral targets, approved methodologies and verification arrangements were being put in place.

A March 2026 government response also identified seven energy-intensive sectors under the compliance mechanism, covering aluminium, cement, chlor-alkali, pulp and paper, petrochemicals, petroleum refining and textiles. It reported 490 obligated entities with assigned emissions intensity targets at that point.

The government has also identified activities eligible for international carbon trading under Articles 6.2 and 6.4.

This creates an interesting distinction for Indian businesses and project developers.

A project participating in India's domestic carbon market does not automatically qualify for international trading. International transfers involve additional requirements, including the relevant national authorisation and accounting arrangements.

The opportunity, however, is significant.

Renewable energy, industrial efficiency, sustainable agriculture, methane reduction, waste management and carbon removal are all areas where India has considerable mitigation potential.

The challenge will be to develop projects that are not only financially attractive but also meet the environmental and regulatory requirements of the relevant carbon market.

The GCC's place in the changing carbon market landscape

The Gulf region brings a different perspective to international carbon trading.

The UAE, Saudi Arabia and Qatar have significant energy and industrial sectors, alongside growing investments in renewable energy, infrastructure and economic diversification.

For these countries, carbon markets can play several roles. They can help finance emissions reduction projects, support climate investment and create opportunities for international cooperation.

The UAE has been developing its climate governance framework alongside its Net Zero by 2050 ambition. Its position as an international business and financial centre also makes it relevant to discussions around carbon trading and climate finance.

Saudi Arabia's Saudi Green Initiative and Vision 2030 provide a framework for investment in renewable energy, land restoration and other environmental initiatives. The country's large-scale development programmes also raise important questions around industrial emissions and the carbon intensity of infrastructure.

Qatar's climate priorities include reducing the emissions intensity of its energy and industrial sectors, improving energy efficiency and developing lower-carbon technologies.

There is considerable potential for climate projects across the region, although the ability to generate and transfer internationally authorised mitigation outcomes will depend on national policies and the applicable Article 6 arrangements.

An important point is that carbon markets do not have to mean that every country becomes a seller of credits. Some countries may be interested in financing mitigation projects abroad, while others may focus on developing projects and attracting climate investment.

The direction each country takes will depend on its climate targets, economic priorities and approach to international cooperation.

Carbon credit quality remains the biggest concern

Even with improved international rules and registry systems, one issue will continue to determine the credibility of carbon markets: the quality of the credits themselves.

The history of carbon trading has shown that not every credit represents the same level of environmental benefit.

A project may claim to have avoided emissions, but would those reductions have happened anyway? A forest project may report carbon sequestration, but what happens if the trees are destroyed by fire or land-use changes? An industrial project may report energy savings, but are the baseline calculations accurate?

These questions relate to some of the most important principles of carbon credit integrity.

Additionality asks whether the emissions reduction would have happened without the project or its financial incentive.

Permanence considers whether the carbon removed from the atmosphere will remain stored over the required period.

Leakage examines whether reducing emissions in one location simply causes them to increase elsewhere.

Accurate quantification ensures that the claimed reductions or removals are supported by reliable data and appropriate methodologies.

Independent validation and verification provide further confidence that the project has delivered what it claims.

These principles are particularly important for nature-based projects, where environmental conditions can change over time, but they also matter for industrial and technological activities.

There is another distinction that buyers need to understand. A voluntary carbon credit, an authorised ITMO under Article 6.2 and a unit issued under the Article 6.4 mechanism are not automatically interchangeable. Their authorisation status, accounting treatment and permitted uses can differ.

A growing international market will need buyers who understand these differences and are prepared to examine the projects behind the credits they purchase.

Will carbon markets actually benefit developing countries?

This is perhaps one of the most important questions surrounding Article 6.

Developing countries often have significant opportunities to reduce emissions, but many projects struggle to secure the initial investment needed to move forward.

International carbon finance could help bridge part of that gap.

A well-designed carbon project can bring together climate finance, technology, local employment and environmental benefits. It can also create an additional source of income for projects involving agriculture, forestry, waste management and clean energy.

However, there are legitimate concerns.

If the commercial value of a project is captured primarily by intermediaries, local communities may receive limited benefits. If a country authorises the transfer of mitigation outcomes without carefully considering its own climate commitments, it may also affect the availability of those reductions for its NDC.

Developing countries therefore need to look beyond the immediate price of a carbon credit.

They must consider the long-term implications of authorising transfers, the distribution of project revenues, the contribution to domestic development and the environmental value of the activity itself.

Carbon markets should support national climate objectives, not create conflicts with them.

The success of Article 6 will depend partly on whether countries can establish arrangements that attract international capital while retaining meaningful benefits for their own economies and communities.

What should businesses be paying attention to?

For businesses, the changing carbon market landscape raises several practical considerations.

Companies operating in emissions-intensive sectors will need to pay closer attention to their emissions data, reduction targets and regulatory obligations. Carbon accounting is becoming increasingly important, not only for sustainability reporting but also for understanding exposure to emerging climate policies.

Project developers should be particularly careful when evaluating carbon credit opportunities. A project that looks attractive on paper may face challenges around methodology eligibility, additionality, authorisation or verification.

Investors and credit buyers, meanwhile, need to look beyond headline prices. The origin of a credit, the standard under which it was issued, its vintage, authorisation status and intended use all matter.

It is also worth remembering that purchasing carbon credits and reducing a company's own emissions are two different activities. Carbon credits may complement a credible decarbonisation strategy, but they should not replace efforts to reduce emissions within the business itself.

As international frameworks develop, the ability to distinguish between different types of credits and understand their underlying environmental claims will become increasingly important.

The road beyond Antalya

COP31 will not resolve every question surrounding international carbon trading. Some of the challenges are technical, others are regulatory, and many involve competing national interests.

But the direction of travel is becoming clearer.

Article 6 is moving towards implementation. International registry infrastructure is being developed. Countries are establishing domestic carbon market frameworks, and project developers are exploring how international climate finance could support mitigation activities.

For India and the GCC, this presents an opportunity to participate in a market that could influence how climate projects are financed over the coming decade.

Yet the expansion of carbon trading should never be confused with progress on climate change itself. More transactions do not necessarily mean fewer emissions. A larger market is not automatically a more credible one.

What matters is whether the system can direct investment towards projects that deliver genuine, additional and lasting climate benefits.

As countries gather in Antalya, that is the question worth keeping in mind.

The future of carbon markets will not be decided by how many credits are traded, but by whether those credits represent real progress in reducing the world's emissions.