Important international legal instruments related to carbon credits?

Two foundational international agreements have been instrumental in establishing and evolving the global framework for carbon credits and their trading.

The Kyoto Protocol

The Kyoto Protocol, operating under the United Nations Framework Convention on Climate Change (UNFCCC), was the first international treaty to establish legally binding emission reduction targets for developed nations. To achieve these targets, it introduced three market-based mechanisms: Joint Implementation (JI), Emission Trading (ET), and the Clean Development Mechanism (CDM). Together, these mechanisms established the foundational framework for the global carbon market, creating the first large-scale opportunities for trading carbon credits.5

The Paris Agreement: Article 6

The Paris Agreement builds on the principles of the Kyoto Protocol, with Article 6 specifically designed to facilitate international cooperation in achieving more ambitious climate action. It provides pathways for countries to collaborate and opens opportunities for mobilizing financial support. Article 6 is divided into three key components:

Article 6.2

Establishes a framework for bilateral or multilateral cooperation. It provides accounting and reporting guidance for countries to use "Internationally Transferred Mitigation Outcomes" (ITMOs) toward their national climate pledges, known as Nationally Determined Contributions (NDCs).

Article 6.4

Creates a new global carbon market mechanism, often seen as the successor to the Kyoto Protocol's CDM. This mechanism aims to generate high-integrity carbon credits from emission reduction projects that can be traded by public and private entities worldwide.

Article 6.8

Focuses on non-market approaches to cooperation. This framework promotes climate action through activities like technology transfer, capacity building, and policy development, without the creation or trading of carbon credits.

References

5. Tandon, U. (2015). Carbon Trading and Climate Change: An Overview of Legal and Policy Measures. SSRN. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2815416