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To learn more about Regulatory Frameworks for Project-Based Carbon Credit Markets, click here.
Executive Summary
Project-based carbon credit markets (PCCMs) facilitate the generation, trading, and retirement of carbon credits from projects that remove, reduce, or avoid greenhouse gas emissions. They offer a pathway to crowd in significant financing for critical decarbonization activities that would otherwise struggle to attract investment, while also, in some cases, providing important co-benefits such as the preservation of water, land, forests, and biodiversity.
PCCMs have expanded steadily following the Paris Agreement, which prompted a proliferation of corporate net-zero commitments. However, the pace of growth has slowed as demand is now concentrating on a smaller pool of high-integrity credits that produce independently verified real, additional, measurable, unique, and permanent reductions in greenhouse gas emissions. In response to this demand, several credible and robust standards have been proposed to advance credit integrity, but because they remain voluntary by design, they cannot provide enforceable safeguards, consistent oversight, or dependable recourse for market participants. For PCCMs overall to gain credibility and function with integrity, countries need regulatory frameworks that can fill these gaps, much as regulation has strengthened trust and accountability in broader financial markets. That said, regulatory oversight should be viewed as an enabling condition rather than a guarantee of a scalable, high-integrity market because structural barriers may still keep demand weak and markets fragmented.
To better understand the varying evolution of regulations for PCCMs across the globe, the Center on Global Energy Policy (CGEP) at Columbia University SIPA conducted a year-long project combining research and stakeholder engagement through multiple convenings. The effort examined regulatory frameworks for PCCMs and emerging trends across countries and regions and assessed whether such frameworks could help close the integrity gap in these markets. The project aims to inform policymakers and regulators seeking to design or refine regulatory approaches for PCCMs, as well as market participants and other stakeholders for whom these regulations are pertinent. This white paper, a product of this effort, provides a comparative analysis of how G20 countries and Singapore align and differ across key dimensions of PCCM regulation based on an in-depth stocktake of their regulatory landscapes, which are included in the appendix. (The United States was excluded from the stocktake and analysis in this report because it is part of a separate study.)
Several cross-cutting themes emerged from the analysis:
- Compliance markets are increasingly accepting carbon credits: While voluntary carbon markets have been the primary driver of demand for PCCMs from companies seeking to meet their climate pledges, a growing number of countries with compliance mechanisms for mandatory emissions reductions now permits the use of project-based carbon credits under binding rules, but with varying limits on credits and design frameworks.
- Supply-side frameworks have advanced: Early regulatory efforts have concentrated on credit generation, where jurisdictions have made the clearest progress in governance and are converging around the quality criteria used to determine credit integrity, although with differing comprehensiveness and stringency.
- Demand-side rules are emerging but with divergences: Rules governing credit use and disclosure are gaining traction; however, a lack of consistency, especially around transparency and assurance, is limiting buyers’ ability to manage exposure to greenwashing, legal, and reputational risks.
- Market-side rules reflect a spectrum of regulatory maturity: Market infrastructure for PCCMs varies across jurisdictions, with regulated exchanges in some countries and self-regulated platforms in others, although bilateral transactions dominate. These differences influence market transparency, oversight, and price discovery.
- Countries are creating national tracking systems instead of relying solely on international registries: The shift toward national, government-supervised systems reflects a broader transition to using registries not just for record-keeping but also for authorization, accounting, and market oversight.
- Progress toward data standardization enables integrity: Efforts to make credits more traceable across domestic and international markets—including a recent proposal by the G20 Sustainable Finance Working Group for a voluntary carbon data model—seek to strengthen digital interoperability, standardize data, and tighten integration with disclosure and national accounting systems.
- Legal classification of credits varies: Jurisdictions differ in how they classify carbon credits and the extent to which they subject them to broader legal and financial oversight. This divergence matters because it shapes not only ownership, taxation, and oversight but also cross-border transferability, which is key to market scalability.
- Article 6 readiness is a key milestone: Countries are forming bilateral authorization frameworks and interoperable registry systems to operationalize Article 6 of the Paris Agreement—which allows for voluntary cooperation between countries to reduce emissions using carbon credits—by either incorporating them into regulations or exploring approaches for compatibility.
Looking ahead, PCCM regulation is likely to move toward a more state-anchored, integrity-driven, and interoperable architecture in which credits are treated less as stand-alone voluntary instruments and more as part of broader climate-governance systems. The next phase of market development is likely to center on deeper integration into national climate law and compliance frameworks, stronger domestic integrity rules that are still globally aligned, and faster development of demand-side governance around claims and disclosure. At the same time, sovereign registries are likely to become critical regulatory infrastructure, while financial oversight may deepen as carbon credits become more liquid and widely traded.
