The Accounting Move at the Centre of Every Bilateral Deal
Two governments sign a deal under Article 6 of the Paris Agreement: one pays for a million tonnes of emissions reductions, and the other delivers them. The contract, the price, and the registry paperwork all hang off a single bookkeeping move. For the transfer to change either country’s position, the selling country must apply a corresponding adjustment that adds the transferred tonnes back into the emissions balance it reports against its nationally determined contribution, while the buying country subtracts those same tonnes from the balance it reports against its own target. Until that adjustment lands, none of the surrounding activity has altered a single national ledger.
Authorisation Is a National Prerogative
The legal frame sits in the UNFCCC text and the decisions of the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement. The SBSTA 60 draft text reaffirms that authorisation is a national prerogative of the first transferring Party. In practice, a mitigation outcome cannot become an internationally transferred mitigation outcome until the host country says it may. The host Party decides what is authorised and on what terms.
The same draft text notes that authorisation of cooperative approaches, entities and internationally transferred mitigation outcomes may be separate processes that follow different timelines. A country might approve a cooperative approach in one filing, authorise a project developer in another, and authorise specific mitigation outcomes later. The draft text also contemplates sequential arrangements that collectively address required information, producing separate authorisations rather than a single omnibus decision. That layered design means the point at which an outcome becomes internationally transferable can be far later than the point at which a project or a bilateral memorandum is announced.
Under the draft text, a cooperative approach is the voluntary participation of a Party or Parties in a mutually agreed scope of activities and the international transfer of mitigation outcomes consistent with CMA decisions. That definition leaves the host Party in control of what enters the approach. The same national prerogative extends to authorising entities under the cooperative approach, which is one of the elements the draft text lists as part of authorisation content.
The Corresponding Adjustment Changes Accounting Balances, Not Targets
The corresponding adjustment is the anti-double-counting rule made operational. When an authorised transfer occurs, the selling Party’s emissions balance used to track progress toward its nationally determined contribution increases by the transferred amount. The buying Party’s balance decreases by the same amount. Neither country’s nationally determined contribution document is edited; the accounting that measures progress is what changes.
This is the opposite of the way many summaries describe it. The seller is not deducting the reduction from its target and handing it to the buyer. It is adding the transferred amount back into the emissions it counts, so the reduction no longer helps its own target. The buyer then counts that same amount toward its own target, which is why both cannot claim the same tonne. The adjustment therefore works on the tracking ledger, not on the substance of either country’s pledge.
First Transfer Is a Design Choice, Not an Afterthought
The UNFCCC draft text allows a participating Party to specify “first transfer” as authorisation, issuance, or use or cancellation of the mitigation outcome. That choice sets the moment at which the corresponding adjustment attaches. A host that chooses issuance triggers the adjustment when a credit is issued; a host that chooses use or cancellation delays it until the outcome is retired. This looks like drafting, but it is one of the design choices that shapes how bilateral deals behave.
The draft text also clarifies that internationally transferred mitigation outcomes can only be first transferred once they have been authorised under an authorised cooperative approach, with a bracketed condition tied to completion of the Article 6 technical expert review. The bracket means negotiators have not settled whether that review is a precondition. Participating Parties may also authorise entities under the cooperative approach, adding another layer to the sequence. Each of those markers can be reached at a different time, so the same outcome may pass through several authorisation gates before it can move.
Where the Voluntary Carbon Market Stops
A corporate buyer retiring an offset against its own climate target is not using Article 6. That transaction can happen inside the voluntary carbon market, where the buyer and the project developer settle the accounting privately, without a corresponding adjustment by any national government. The offset does not move the buyer’s country’s nationally determined contribution at all. The corporate claim is separate from the sovereign ledger.
An authorised transfer under Article 6.2 is a different instrument. It exists because a host Party has agreed to adjust its own national accounting so the buyer’s country can use the reduction. That boundary between private retirement and sovereign accounting is the spine of the subject; the mechanics of cap-and-trade and carbon taxes sit on the compliance side and operate on a different ledger. The same distinction appears in corporate inventories, where an offset retired for a voluntary target is not the same as a corresponding adjustment in national reporting under Scope 1 and Scope 2 accounting.
6.2 and 6.4 Are Two Different Machines
Article 6.2 works through the Parties’ own authorisation, accounting and reporting. The units, internationally transferred mitigation outcomes, move between countries when the host and buyer follow the agreed sequence. Article 6.4 is a supervised crediting mechanism with its own methodologies, its own supervisory body, and its own direction of a share of proceeds to adaptation. The distinction to keep in view is what each changes: 6.2 changes national accounting, while 6.4 changes the supply of a particular type of credit.
The same principle separates them from compliance markets. In a cap-and-trade system such as the European Union’s, allowances are created by regulation and retired against compliance obligations; they are not sourced from another country’s abatement. Article 6 deals in transfers between national ledgers rather than allowances inside one jurisdiction. An authorised outcome used against a nationally determined contribution is not a substitute for a compliance allowance.
How an Authorised Transfer Moves Through the System
The sequence starts with the host Party deciding whether to authorise and on what terms. Once authorised, the mitigation outcomes become internationally transferred mitigation outcomes, and the corresponding adjustment is applied and reported by the transferring Party. The Article 6.2 report then meets the UNFCCC technical review process. Finally, the registry records the change of holder.
Each step is a precondition for the next. If the host withholds authorisation, there is no internationally transferred mitigation outcome and no corresponding adjustment. If the report fails technical review, the transfer cannot be completed under the current draft’s bracketed condition. The buyer can possess an instrument, but without the registry entry and the adjustment, it has changed nobody’s net position.
Where Arrangements Actually Stand
Announcement and authorisation are frequently confused. A government may sign a cooperation agreement or issue a letter of intent long before it authorises specific mitigation outcomes. Those signed arrangements set out commercial or diplomatic terms rather than an active Article 6 transfer. Confirmation sits in the underlying records: where the relevant registry or reporting system logs the transfer, that entry provides a direct check that authorisation and the corresponding adjustment have been applied. Which record performs that function depends on the Article 6 arrangement and on how the host country has implemented it.
Public evaluations of Article 6 pilot activity, including the Climate Action Tracker’s country assessments, point to a gap between announced interest and completed registry transfers. Some host Parties have moved early authorised transfers through the sequence; others have signed agreements but not yet filed the authorisations and adjustments. That pattern cautions against treating announced deals as operating arrangements.
What Binds at the End
Authorisation is a sovereign decision that a Party can withhold, defer, or attach conditions to. That power is the reason the whole structure negotiates the host’s terms rather than forcing them. A Party that transfers its cheapest abatement overseas has less of it left for its own nationally determined contribution, which is the core tension every bilateral carbon deal must resolve. The accounting sequence exists to make that tension explicit.
References
- UNFCCC — SBSTA 60 draft text on matters relating to Article 6, paragraph 2, guidance on cooperative approaches
- MMCM — ITMOs and NDCs under Article 6
- Climate Action Tracker — CAT Article 6 evaluations
- Offset8 Capital — Corresponding Adjustment Guide
