Carbon Markets Deliver First Results for Business

UN approves first Paris Agreement carbon credits

The United Nations has issued the first carbon credits under the Paris Agreement’s new market mechanism. Meanwhile, separate research shows that national climate policies prevented 3.1 billion tonnes of carbon dioxide from entering the atmosphere in 2022 alone.

These developments mark a turning point for international climate action. For the first time, the Paris Agreement framework is moving from theory into operational reality. At the same time, evidence confirms that domestic policy packages deliver measurable results at scale.

The first credits relate to a clean cookstove project in Myanmar. The initiative distributes efficient cooking stoves to rural households, reducing indoor air pollution and cutting pressure on local forests. South Korean companies financed the work as part of their compliance obligations under Korea’s emissions trading system.

The approval matters because it activates Article 6.4 of the Paris Agreement. This provision creates a centralized system for generating and trading emission reductions between countries. It replaces the older Clean Development Mechanism that operated under the Kyoto Protocol from 2006 to 2020.

How the new mechanism differs from previous systems

Article 6.4 establishes what officials call the Paris Agreement Crediting Mechanism. It generates tradable units known as Article 6.4 Emission Reductions. Countries and private companies can use these credits to meet their national climate commitments, known as Nationally Determined Contributions.

The system includes several safeguards that distinguish it from earlier approaches. Two percent of all credits are automatically cancelled to deliver an overall reduction in global emissions. Another five percent of proceeds fund the UN Adaptation Fund, which supports vulnerable countries facing climate impacts. Furthermore, projects must prove additionality more rigorously than before, demonstrating they would not have happened without carbon finance.

Governments finalized the rulebook at COP29 in 2024. That conference shifted the focus from designing the mechanism to actually operating it. However, the transition has raised concerns about quality standards, particularly for projects originally registered under the older Clean Development Mechanism.

The Myanmar cookstove project began under that older system. It is one of 165 projects now transitioning to the new framework. Consequently, the credits issued represent a test case for how transition rules work in practice.

Myanmar cookstove credits issued at 40% reduction

The Article 6.4 Supervisory Body approved approximately 60,000 tonnes of carbon dioxide equivalent for the Myanmar project. This figure sits roughly 40% lower than the amount that would have been issued under the previous Clean Development Mechanism rules.

The reduction stems from updated baseline methodologies and more conservative calculation approaches. Supervisory Body Chair Mkhuthazi Steleki emphasized this point directly. He stated that the lower figure reflects careful application of Paris Agreement standards, ensuring each credited tonne genuinely represents a real reduction in emissions.

The credits received provisional approval in February 2026. They remain subject to a 14-day appeal period before final issuance. This represents standard procedure under the new governance structure, which builds in opportunities for stakeholder review.

Importantly, the Clean Development Mechanism itself closes at the end of 2025. Therefore, all projects seeking continued participation must transition to Article 6.4 by that deadline. The Myanmar project serves as an early example of how this transition unfolds.

Evidence shows climate policies prevented 3.1 billion tonnes of emissions

A separate peer-reviewed study published in Nature Communications quantifies the real-world impact of national climate policies. Researchers used cross-country econometric analysis to isolate the effect of policy packages covering renewable energy deployment, efficiency standards, and fossil fuel phase-outs.

The analysis found that these combined policies prevented 3.1 gigatonnes of carbon dioxide from being released in 2022. This figure demonstrates that domestic policy frameworks deliver substantial emission reductions when implemented consistently across multiple sectors.

The research matters because it provides empirical evidence rather than projected estimates. Many climate models forecast future reductions based on announced policies. In contrast, this study examines actual emissions data to calculate what has already been avoided.

For businesses, the findings confirm that regulatory environments are shifting measurably. Companies operating in jurisdictions with comprehensive climate policies face different cost structures and competitive dynamics than those in less regulated markets. As a result, supply chain partners and procurement teams increasingly ask about emissions performance as part of standard due diligence.

Market demand forecast at 2 billion tonnes by 2030

Industry analysts project demand for Paris Agreement carbon credits will reach 2 billion tonnes annually by 2030. Some estimates extend to 13 billion tonnes by 2050, reflecting growing corporate net zero commitments and national compliance requirements.

Current price ranges vary significantly, from $5 to $90 per tonne of carbon dioxide equivalent. The wide spread reflects differences in project type, verification standards, and co-benefits such as biodiversity protection or community development. Credits issued under Article 6.4 are expected to command premium pricing due to stricter methodologies and UN oversight.

The mechanism aims to channel finance toward developing countries, where many mitigation opportunities exist but upfront capital remains scarce. The UN estimates that developing nations need $4.3 trillion annually by 2030 to meet their climate goals. Carbon markets represent one tool among many to mobilize this finance, though they cannot substitute for direct public investment and grants.

For UK businesses, the market’s operationalization creates several practical implications. Companies participating in voluntary carbon markets gain access to UN-certified credits with robust accounting. Those facing compliance obligations under domestic or international schemes see a potential new supply source that reduces price volatility. Additionally, firms tendering for public contracts or large corporate buyers increasingly face questions about carbon neutrality claims and offsetting strategies.

Concerns remain about transition project quality

Despite the milestone, concerns about credit quality persist. Carbon Market Watch, an independent watchdog organization, flagged the Myanmar cookstove project specifically. The group calculated that the project received 26 times more credits than scientific literature suggests is justified for similar interventions.

This criticism highlights tensions inherent in transitioning projects from old to new standards. The Myanmar initiative began under Clean Development Mechanism rules, which allowed certain baseline assumptions and calculation methods. Transitioning it to Article 6.4 involves applying updated methodologies, but not retroactively changing all previous decisions.

The 40% reduction in credited volumes represents a compromise. It applies more conservative calculations going forward while allowing some continuity for projects already underway. Nevertheless, critics argue that transition rules remain too lenient, risking over-crediting during the critical early years when market integrity must be established.

The Supervisory Body faces pressure to balance several objectives. It must maintain environmental integrity to ensure credits represent real emission reductions. It must also provide sufficient certainty for project developers and investors, who need predictable rules to commit capital. Furthermore, it must support developing countries hosting projects, many of which rely on carbon finance to fund climate action.

Key details about the new carbon market mechanism

• The Paris Agreement Crediting Mechanism issues Article 6.4 Emission Reductions, which countries and companies can use toward climate targets.
• Two percent of all credits are cancelled automatically to deliver a net global emission reduction, while five percent of proceeds fund adaptation in vulnerable countries.
• The first credits, totaling approximately 60,000 tonnes of carbon dioxide equivalent, were issued for a Myanmar clean cookstove project in February 2026.
• Credits from transitioned Clean Development Mechanism projects receive roughly 40% fewer units than they would have under previous rules, reflecting stricter methodologies.
• The Clean Development Mechanism closes at the end of 2025, requiring all continuing projects to transition to Article 6.4 by that deadline.
• Market demand is forecast to reach 2 billion tonnes annually by 2030 and potentially 13 billion tonnes by 2050.
• Independent research published in Nature Communications found that national climate policies prevented 3.1 billion tonnes of carbon dioxide emissions in 2022.

What this means for UK businesses navigating carbon markets

The activation of Article 6.4 creates a UN-certified supply of carbon credits with standardized accounting. For businesses making net zero commitments, this provides a credible offsetting option alongside emission reduction efforts. However, the mechanism does not replace the need for absolute emissions cuts within company operations and value chains.

Companies participating in voluntary carbon markets should evaluate whether UN-certified credits align with their carbon neutrality claims. Stakeholders increasingly scrutinize offsetting strategies, particularly regarding additionality and whether credits represent genuine emission reductions. Article 6.4 credits offer stronger governance than many voluntary standards, though prices will likely reflect this quality premium.

Businesses tendering for public sector contracts in the UK face growing requirements related to carbon reduction under Procurement Policy Note 06/21. While PPN 06/21 emphasizes actual emission cuts over offsetting, understanding carbon markets helps companies respond to supply chain due diligence requests. Our net zero program for carbon reporting compliance supports businesses navigating these requirements with structured guidance on measurement and reduction strategies.

The evidence that national policies prevented 3.1 billion tonnes of emissions in 2022 signals that regulatory environments will continue tightening. Businesses should anticipate that efficiency standards, renewable energy mandates, and fossil fuel phase-outs will expand in scope and stringency. Early adaptation to these trends creates competitive advantage, particularly for companies operating across multiple jurisdictions with varying policy ambitions.

Supply chain transparency will become more important as carbon markets mature. Buyers will ask suppliers to demonstrate emission reductions and justify any offsetting claims. Companies using Article 6.4 credits can point to UN verification, but they must also show how credits fit within a broader decarbonization strategy that prioritizes direct reductions.

Further reading

The UN Framework Convention on Climate Change publishes official documentation about Article 6.4, including methodologies, project registrations, and Supervisory Body decisions. This resource provides the most current information about mechanism rules and approved projects.

The UK government’s guidance on the UK Emissions Trading Scheme explains domestic compliance obligations for businesses in covered sectors. While the UK ETS operates separately from Article 6.4, understanding both systems helps companies evaluate carbon market options and potential linkages.

Carbon Market Watch maintains independent analysis of carbon market integrity, including assessments of specific projects and methodologies. Their reports offer critical perspectives on credit quality and governance challenges.

For businesses requiring support with carbon measurement, reduction planning, and compliance, our ESG compliance and carbon reporting services provide practical assistance tailored to UK SMEs. We help companies navigate regulatory requirements while building credible net zero strategies grounded in operational reality rather than offsetting alone.