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This paradox is for climate policy fans. It concerns the role of carbon credits within the Paris Agreement.

The Paris Agreement mandates governments to increase their emission reduction ambitions consistently. At the same time, Article 6 encourages “voluntary cooperation in the implementation of their nationally determined contributions to allow for higher ambition in their mitigation and adaptation actions”.

The idea is that wealthier countries can help fund climate action in poorer, more vulnerable nations. 

But here’s the paradox: As governments increase their climate ambition and require more domestic climate action, fewer projects qualify as “additional” because they’re now required by law. Paradoxically, this might discourage governments from tightening their climate policies too quickly. Weaker regulations could preserve the scope of carbon credits (or mitigation outcomes, as they are called in the Paris Agreement) as a financing tool and, hence, the inflow of foreign capital.

However, if one were to conclude that this paradox justifies eliminating the use of Article 6, it would paradoxically remove one of the only immediate financial mechanisms available for climate action, especially in regions that lack the infrastructure or funding to implement large-scale environmental projects independently.

How to address this paradox? How can governments avoid the trade-off that stringent carbon reduction targets shrink the scope of international climate funding?

In this series, two leading authorities in carbon uncover the secrets and contradictions of an entire industry – in the most fun and engaging way. Through 24 curated Carbon Paradoxes, you'll learn everything essential about this field, starting with the tensions we must address to make environmental markets thrive.

This article is also published on carbonparadox.org. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.