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The ways that countries account for their emissions and internationally transferred mitigation outcomes (ITMO), as set out in the Paris Agreement Article 6 guidelines and approved during COP 26 in Glasgow and COP 29 in Baku, will be based on the nature of their interactions with the market (whether supplying or purchasing).Such accounting preferences will also probably affect supply within the Article 6 ITMOs and CORSIA markets.
With Article 6 markets gaining momentum, the complexities of dynamics between ITMOs transferred under the bilateral Article 6.2 cooperative approaches and credits eligible for CORSIA markets have come to the fore in April 2026.
One of the main reasons for the Kenyan government’s reluctance to provide a Letter of Authorization (LoA) to clean-cooking technology supplier KoKo Networks, which led to KoKo’s eventual collapse, was that the government wanted to preserve its national emissions inventory and not provide its entire quota of Article 6 aligned credits to one project developer. KoKo went into administration on February 19 this year.
This indicates that countries will seek to maximize their revenues from adjusted mitigation outcomes under Article 6, and hence may give a higher priority to Article 6.2 cooperative approaches before taking their Article 6 aligned supply to CORSIA markets.
Buying countries have already started to forward contracting ITMOs by signing multilateral agreements under Article 6.2 of the Paris agreement, indicating that sovereign buyers expect the ITMO market to be in contango.
According to the Article 6 pipeline of the UN Environment Program (UNEP) Copenhagen Climate Centre, 105 bilateral agreements have been signed, involving 62 different countries and 196 activities. Of this number, only 13,649 tCO2e of ITMOs have been delivered through two Article 6.2 agreements. These were between Ghana and Switzerland in July 2025 (11,733 tCO2e) and Thailand and Switzerland in January 2024 (1,916 tCO2e).
Notably, sector sources have indicated to Fastmarkets that ITMOs from Thailand traded around $27.90 per tCO2e in late 2023 and early 2024.
Additionally, Singapore’s carbon tax, which allows select ITMOs for as much as 5% of its obligation, is set at S$45 ($35.29) per tCO2e in 2026 and 2027, with the hope of reaching S$50-80 per tCO2e by 2030.
Fastmarkets’ price assessment for CORSIA Phase 1 was $14 per tCO2e on April 8, indicating a price premium of around $14-30 per tCO2e between ITMOs for country use and CORSIA CP1 eligible credits.
Additionally, accounting for ITMOs becomes more significant when the assessment criteria for carbon credits’ eligibility under CORSIA phase 2 – undertaken by the International Civil Aviation Organization’s (ICAO) Technical Advisory Body (TAB) – indicates that LoAs from host countries should mention the chosen accounting method, consistent with the treatment of cooperative approaches under Article 6.
Under the Paris Agreement adopted during Conference of Parties (COP) in 2015, signatory countries agreed to submit Nationally Determined Contributions (NDCs) every five years to set escalating national emission reduction targets, and to report progress toward the global efforts to limit the average temperature increase to 1.5°C above pre-industrial levels.
NDCs are politically backed voluntary non-binding climate action commitments by each signatory country. This was different from the preceding Kyoto protocol, under which only developed countries (also known as Annex 1 countries) were required to set binding climate targets.
Single-year versus multi-year targets
While setting their NDCs, countries could look at either single-year or multi-year targets. While multi-year NDC targets determine intentions or goals for multiple years within the five-year NDC compliance period, most countries and regions (including the EU and UK) have opted for single-year targets which govern mitigation targets for the end year of the NDC implementation period.
Usually, achievement of the NDC is tracked through a country’s emission balance, which is the net of overall CO2e emitted by its industrial sectors, fuel consumption, and so on, and any CO2e sequestered by its sinks such as forests, mangroves, carbon capture infrastructure and the like.
Notably, for single-year targets, it does not matter whether the country’s emissions increase in the interim as long as it meets the target at the end of the NDC implementation period.
It is a given that, for a country to achieve a sufficiently ambitious climate target, it will have to gradually decrease its emissions balance leading up to the target year. However, a single-year target provides more flexibility on the rate of decarbonization during the NDC implementation period than multi-year targets.
Conditional and unconditional goals
Countries also include estimated budgets for achieving their NDC targets, with many developing countries describing certain goals as ‘conditional’ and beyond their ‘unconditional’ goals, because these targets are dependent on availability of external financial support.
Developing countries may require support on technology transfer and capacity building to achieve these targets because they lack the necessary resources domestically.
Article 6 of the Paris Agreement enables host countries to voluntarily cooperate to meet their NDCs. It allows for a connected international carbon market wherein countries can transfer carbon credits earned through emission reductions and removals within their jurisdiction to one or more countries to assist in their NDC achievement.
These carbon credits are what are often referred to as Internationally Transferred Mitigation Outcomes (ITMOs).
This approach is believed to encourage the most cost-efficient way to ensure decarbonization because it enables developed countries and private-sector investors to invest in projects from developing countries where the cost of decarbonization is lower, due to lesser penetration of technology and policy infrastructure, leading to lower marginal abatement costs.
How corresponding adjustments prevent double counting
To avoid double counting of an ITMO by both the host country and the acquiring country, parties must account for ITMO transfers by ensuring corresponding adjustments to their emission balances.
To apply the corresponding adjustment, the host country forgoes the mitigation outcomes to be transferred from its NDC achievement by adding the corresponding emissions to its balance, and the acquiring country gains those mitigation outcomes for its NDC achievement by lowering its emission balance accordingly.
This double-entry bookkeeping ensures that double-counting of mitigation outcomes is avoided, leading to an overall decrease in global emissions.
Additionally, as per the Article 6 guidelines, a corresponding adjustment should relate to the year in which the ITMO was generated, and the use of ITMOs should only occur in the same NDC implementation period in which the ITMO was created.
Under the Paris Agreement, there are two approved accounting approaches that are used to harmonize corresponding adjustments with NDC implementations, namely trajectory and aggregate accounting.
While multi-year NDC targets are best suited for trajectory accounting because they include targets for each year of the NDC implementation period, single-year NDC targets can apply either aggregate accounting or trajectory accounting by providing an indicative multi-year emissions trajectory in line with its NDC.
This flexibility has been rendered to parties until 2030, because it has been agreed that the NDC implementation period beyond 2030 will adopt a single mandatory approach for all parties, which will be reviewed under the Article 6 guidelines in 2028.
Trajectory accounting
Under the trajectory accounting approach, annual adjustments are made in accordance with the implementation and achievement of the NDC. A country’s annual budget will be adjusted based on the actual number of ITMOs transferred during the year.
Aggregate accounting
Under the aggregate accounting approach, adjustments are made according to the average of ITMOs transferred during an NDC implementation period. A country’s annual emission balance will be adjusted based on the total number of ITMOs transferred during the NDC implementation period divided by the number of years elapsed in the NDC implementation period.
Here is an example to illustrate the features of different accounting types for a host country looking to sell ITMOs and to raise funds for mitigation activities to achieve its NDCs, and an acquiring country looking to buy ITMOs in the Article 6 markets.
For this illustration, assume that both Country A and Country B have a single-year NDC target to reduce their emissions balances from 3,000 million tCO2e annually to 2,600 million tCO2e annually over a five-year implementation period.
Country A, a developing country and a natural seller in Article 6 markets, overachieves on its NDC target (this could be due to external funding for collaborative approaches under Article 6) and its actual emissions at the end of NDC implementation period is 2,400 million tCO2e.
Country B, a developed country and a natural buyer in Article 6 markets, underachieves on its NDC target and its actual emissions at the end of NDC implementation period is 2,800 million tCO2e.
Emission balances over the five-year NDC implementation period based on actual emissions for both the countries is as seen in the graph below. for the ease of this illustration, consider a linear reduction in emissions.
Trajectory accounting approach for seller countryTo deploy a trajectory accounting approach, Country A will first have to adopt an indicative multi-year emissions trajectory which is in line with it achieving its NDC target. The adopted emissions trajectory, for the ease of the illustration, is assumed to be a linear reduction in annual emissions. However, a country could choose a non-linear trajectory to best accommodate its climate action plans. The adopted emissions trajectory is as shown in the table 1.
As can be seen in table 1, when the actual emissions are less than the adopted emissions trajectory, Country A can export ITMOs equivalent to the difference.
To appropriately account for the ITMOs exported, corresponding tonnes should be added back to the adjusted emissions balance so as to apply a corresponding adjustment and demonstrate that these mitigation outcomes are no longer contributing toward Country A’s NDCs.
Because Country A intends to sell into the Article 6 market, in this illustration it is assumed that it will maximize the number of ITMOs it can export while also achieving its NDC of 2,600 million tCO2e annual emission balance by the target year.
Under the trajectory accounting approach, the cumulative amount of ITMOs exported during the NDC implementation period comes out to be 500 million tCO2e.
Aggregate accounting approach for seller countryUnder the aggregate accounting approach, because there are no yearly targets or adopted trajectory, Country A has some flexibility in terms of the rate of reported emission reductions, as long as it meets its climate targets at the end of the NDC implementation period.
As the name suggests, the adjustment in emission balance is calculated based on the aggregate ITMOs transferred by the said year, and dividing it with the number of years elapsed in the NDC implementation period.
In this instance, due to the assumed NDC targets and actual emission trajectory, adjustment in emission balance at the end of the NDC implementation period – the difference between the NDC target and actual emissions in the target year – is 200 million tCO2e (2,600 million tCO2e minus 2,400 million tCO2e = 200 million tCO2e). because the NDC implementation period is five years, the aggregate amount of ITMOs that can be transferred by Country A is 1,000 million tCO2e (200 million tCO2e multiplied by 5 years).
Now, given the nature of single-year NDC targets, these 1,000 million tCO2e can be adjusted from the actual emission trajectory at any time. However, taking into account market implications of either front-loading or back-loading the supply, assuming a uniform distribution of ITMOs over the 5 years, the emissions accounting for Country A will look as in table 2:
As is shown from the above discussion and by table 2, under the aggregate accounting approach, the cumulative amount of ITMOs exported during the NDC implementation period comes out to be 1,000 million tCO2e.
Why aggregate accounting maximizes seller supply
The above example illustrates that the number of ITMOs exported is maximized under an aggregate accounting approach (1,000 versus 500 million tCO2e) and hence could be the preferred accounting method for a country seeking to supply ITMOs to the Article 6 markets.
But the aggregate accounting approach leads to overall higher adjusted emissions during the NDC implementation period (14,500 million tCO2e versus 14,000 million tCO2e). This is because emissions in the interim years leading up to the NDC target year could be higher under the aggregate accounting approach.
Though the aggregate approach results in a higher number of ITMOs that can be exported without double-counting mitigation outcomes, the overall adjusted emissions using this approach is higher than in the trajectory approach, and this could be one of the considerations while reviewing the Article 6 guidelines in 2028 and standardizing the ITMO accounting approach for post-2030 NDCs.
Trajectory accounting approach for buying countryLooking at a buying country – Country B – under a trajectory accounting approach, it would need to adopt an indicative multi-year emissions trajectory.
As can be seen in table 3, when the actual emissions are more than the adopted emissions trajectory, Country B will need to purchase ITMOs equivalent to the difference so as to adhere to its set emissions trajectory.
To appropriately account for the ITMOs imported, corresponding tonnes should first be added back to the adjusted emissions balance of the seller country and then removed from Country B’s emission balance, so as to apply corresponding adjustment and demonstrate that these mitigation outcomes are no longer contributing toward the seller country’s NDC target but are counted toward Country B’s NDCs.
Under the trajectory accounting approach, the cumulative amount of ITMOs imported by Country B during the NDC implementation period comes out to be 500 million tCO2e.
Aggregate accounting approach for buying countrySimilarly, under the aggregate approach, due to the assumed NDC targets and actual emission trajectory, the adjustment in emission balance at the end of the NDC implementation period – the difference between the NDC target and actual emissions in the target year -is 200 million tCO2e (2,800 million tCO2e minus 2,600 million tCO2e = 200 million tCO2e).
Because the NDC implementation period is five years, the aggregate amount of ITMOs that have to be transferred into Country B is 1,000 million tCO2e (200 million tCO2e multiplied by five years).
Given the nature of single-year NDC targets, these 1,000 million tCO2e can be adjusted from the actual emission trajectory at any time. However, taking into account market implications of either front-loading or back-loading the supply, assuming a uniform distribution of ITMOs imported over the five years, the emissions accounting for Country B will look as in Table 4.
Under the aggregate accounting approach, the cumulative amount of ITMOs to be imported during the NDC implementation period comes out to be 1,000 million tCO2e.
The above example illustrates that the number of ITMOs imported is minimized under the trajectory accounting approach (500 versus 1000 million tCO2e) and hence could be the preferred accounting method for a country looking to acquire ITMOs from the Article 6 markets.
As shown above, for countries seeking to procure ITMOs from the Article 6 market, the trajectory accounting approach delivers the optimum outcome. This approach also leads to back-loaded demand for ITMOs from sovereign buyers, meaning that potential supply under CORSIA markets may be siphoned off to the ITMO market toward the end of NDC implementation period. This would be 2030 for NDC2.0, which partially overlaps with the CORSIA Phase 2 deadline for 2027-29 (with offset surrendering deadline of early 2031).
If airline operators backload demand for CORSIA as seen in phase 1, this could lead to a potential supply squeeze of eligible ITMOs at the end of the decade.
Implications for CORSIA pricing and policy risk
This interplay between the ITMOs transferred under the bilateral Article 6.2 cooperative approaches and CORSIA markets could lead to supply constraints in the CORSIA market, which could raise its prices, contracting the premium Article 6.2 ITMOs holds over CORSIA eligible units.
But the terms of the Paris Agreement, and the intent among countries to achieve their NDCs in the absence of a penalty mechanism, as well as the EU’s review of CORSIA and jurisdictionally legislated penalties for CORSIA non-compliance, among other macro-economic policy levers, pose significant policy risks for both the Article 6.2 ITMO and CORSIA markets.
Track Article 6, CORSIA pricing, and policy shifts as they happen