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Asian countries leverage Paris Agreement Article 6.2 through international carbon trading to achieve new NDC targets.（Image: iStock）
Following the establishment of detailed framework for bilateral cooperation under Article 6.2 of the Paris Agreement during COP29 in Baku, countries have been strengthening their implementation of international carbon trading.
This article provides an overview and latest update on the status of bilateral cooperation under Article 6.2 across the Asia-Pacific region. Japan and Singapore have been so far the most active countries in implementing Article 6.2, with several agreements and MOUs inked in the previous months.
In contrast, countries in the Pacific region like New Zealand and Australia have yet to explicitly specify their approaches towards international carbon trading within Article 6.2. As the scheduled deadline for countries to submit their 2035 NDC targets draws near, this article further examines new climate commitments by key Asia-Pacific countries, as well as key uncertainties for implementing Article 6.2 as a tool to help countries achieve their new NDC targets.
Figure 1. International cooperative under Article 6.2: Bilateral agreements and MOUs (Source: IETA)
Status-quo: Bilateral cooperation under Article 6.2 across Asia-Pacific
Asia’s acceleration of Article 6.2 bilateral cooperation
As estimated by World Economic Forum, Asia accounts for above half of the world’s emissions and Gross Domestic Product (GDP). A majority of countries in the region are currently in the industrialisation process and have yet to peak emissions, thus have a huge potential to reduce emissions and become key sellers of Internationally Transferred Mitigation Outcomes, or ITMOs – tradable units under Article 6.2.
In Asia, Japan has been amongst the most active countries in seeking bilateral cooperation under Article 6.2. The country has been promoting Joint Crediting Mechanism (JCM) partnership with 30 countries. In late August 2025, Japan signed a MOU with India (making India the 31st partner country), agreeing to invest in low carbon technologies in India and enable the international trading of ITMOs.
India, aiming to achieve its Net Zero target by 2070, has been preparing for the launch of its voluntary carbon market, scheduled for the end of this year. Early this year, this country issued a dozen of draft offset methodologies and indicated a strong willingness to export their domestic credits under Article 6.2. In late July, India articulated a list of activities eligible for carbon credit issuance under Article 6. With trading commencement planned to occur by 2026, carbon market in India is estimated to be the third largest one worldwide, inferior only to those in China and the EU.
While further details regarding both sides’ cooperation still need to be fleshed out, their MOU at the first glance appears to be a significant step: India with its carbon market’s scale has a potential to become one of the largest carbon credit suppliers worldwide, whereas Japan will likely be amongst the global biggest purchasers, given its anticipated rising demand in the upcoming mandatory phase of Japan’s Green Transformation (GX) ETS.
In parallel, Japan has been seeking JCM cooperation with other Southeast Asian countries. Since mid-July, Japan and Thailand have deepened discussions on three proposed JCM methodologies. Japan subsequently called upon comments regarding Thai’s 13 emissions reduction projects. Currently, Japan and Malaysia are also working on launching their JCM partnership scheduled for this year end.
In comparison, South Korea has been recently active in revitalising its domestic voluntary market and preparing infrastructure for future Article 6 credit exchange. In mid-September, the current trading platform of its national ETS – South Korea Exchange (KRX) inked a MOU with Xpansiv – a global infrastructure provider for environmental commodity market.
Both sides aimed to develop the KRX carbon credit market in South Korea, which will facilitate trading of Article 6 credits. In July 2025, this country secured its first host-country approval for a bilateral initiative with Cambodia, which also marked the first authorised Article 6 project of this Southeast Asian country.
Since early 2025, South Korea has been actively working on establishing an intergovernmental cooperation model for facilitating international emissions reduction projects, followed by the release of its agreements with the UNFCCC and the Global Green Growth Institute (GGGI) in late May. This collaboration focuses on creating a model framework and project methodologies aligned with Article 6 of the Paris Agreement, strengthening transparency and credibility in international carbon trading.
While not involved in any bilateral cooperation under Article 6.2, China recently indicated initial policy signals towards its implementation of Article 6. The policy document entitled “Opinions on Promoting Green and Low-Carbon Transformation and Strengthening the Construction of the National Carbon Market” issued by China’s State Council in late August emphasised that the world’s largest emitter aims to align its domestic voluntary carbon market with international standards, and that this country would actively participate in the formulation of rules under Article 6.
Furthermore, in the 2025 report of China’s national ETS released by the end of September 2025, China explicitly pronounced that it would continue to facilitate COP negotiations of this article’s implementation and actively develop administrative measures to align its domestic credits with international standards.
In Southeast Asia, Singapore has been the most active country in seeking bilateral cooperation under Article 6.2. Since 2023, Singapore has inked 9 implementation agreements and 15 MOUs with other countries. In August and September 2025, Singapore respectively signed bilateral implementation agreements with Thailand and Vietnam, the first Southeast Asian countries that have such agreements with Singapore. In early 2025, Singapore and Malaysia also signed a MOU to cooperate on Article 6.2 initiatives, followed by an anticipated implementation agreement between both sides by the year end. Prior to that, another MOU was inked between Singapore and the Philippines at the end of August 2024.
Southeast Asian countries such as Indonesia, Vietnam and the Philippines also accelerated Article 6 implementation. In mid-September, Indonesia finalized mutual recognition agreements (MRAs) with Plan Vivo and Global Carbon Council (GCC).
Indonesia has been working to expand the global reach of its carbon credits through mutual recognition agreements (MRAs) aligned with international standards. In May, it inked an MRA with Gold Standard, while negotiations with Verra are expected to conclude in the coming months. Earlier in late May, Indonesia decided to lift moratorium on international credit sales, aiming to draw international investments and step up Article 6 cooperation.
Following the release of Decree 119/2025 regarding Vietnam’s ETS which allows the use of 30% offset ratio from both domestic and international projects, Vietnam has been in the process of building its legal framework for implementing Article 6 – Read our earlier analysis for further details. Meanwhile, since the end of August, the Philippines has been seeking feedback on carbon credit policies, a step needed to create a legal framework for this country’s bilateral cooperation on Article 6 implementation.
Slow uptake in the Pacific
Key countries in the Pacific region like Australia and New Zealand have yet to clarify specific plans for using international credits under Article 6 towards their NDC targets.
New Zealand’s ETS, known as the world’s second emissions trading system, currently does not allow the use of offset credits. While the EU has been contemplating the option of permitting a limited volume of Article 6 credits for regulated installations under the EU ETS to meet a part of compliance obligations, following strong advocacy from several EU member states, New Zealand remains cautious, prioritising high environmental integrity and strict alignment with international standards.
As an initial step, New Zealand has sought cooperation on Article 6.2 with Singapore, the Philippines and Thailand. A joint declaration on climate cooperation between New Zealand and the Philippines in November 2024 refers to both sides’ consensus on the future’s transfer of ITMOs to meet NDC targets.
Opportunities: Using carbon credits to meet climate targets
Overall, implementing Article 6.2 forms a key part of emissions trading – one of the three flexible mechanisms under the Kyoto Protocol. Facilitating international carbon trading enables developing countries to export their domestic credits and attract investments, while developed counterparts can purchase carbon credits at affordable prices and use them towards their NDCs. Nonetheless, it remains to be seen whether countries intend to use these credits to meet their climate targets – this should be clarified in their NDCs.
As most countries had missed the formal submissions deadline (February 2025) of 2035 NDC, the prolonged de-facto deadline has been acknowledged to be September 2025, well ahead of COP30. So far, around 40 countries have submitted their NDCs, whereas amongst the world’s largest emitters, China, India and the EU have yet to do so. A few days ago, President Xi Jinping announced that China aimed to achieve a net GHG emissions reduction by 7% to 10% by 2035 compared to its peak levels. This might translate into a cut of approximately 1.1 to above 1.5 billion tonnes, given that annual emissions of the world’s largest emitter has exceeded 15.5 billion tonnes.
South Korea has been deliberating four different options for its 2035 NDC, with considered reduction targets ranging from 40% to 67% compared to 2018 levels. Observers acknowledged the link between the country’s climate ambition and its reliance on international carbon credits. The higher reduction target the country adopts, the more international credits it is likely to source. Given the ongoing lobbies of industries and domestic environmental groups, the Ministry of Environment (South Korea) might be unable to submit the official 2035 NDC before November this year.
Table 1 below summarises the key reduction targets of key countries across the Asia-Pacific region that have submitted their 2035 NDCs to the UNFCCC Secretariat, along with their position on the use of international credits issued under Article 6 to meet their climate targets.
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Table 1. Key Asia-Pacific countries’ NDCs and stances towards Article 6 credits (Source: UNFCCC)
Challenges: A lack of international carbon standards
Furthermore, concerns exist regarding how to guarantee a cohesive regulatory framework and aligned carbon standards for international carbon trading. Following the roll-out of their MOUs and implementation agreements, Singapore and its partner countries need to work on how to establish a pathway for their carbon credits to be mutually recognised and transferable, and at the same time to ensure the high environmental integrity of these credits.
The lack of alignment with international carbon standards indeed hampers trading. For instance, in the case of Indonesia which hosted the first international transactions earlier this year, the lack of evidence for aligning with Article 6 requirements led to low buying interests. Article 6 of the Paris Agreement requires selling countries to align with corresponding adjustments – an accounting mechanism demanding the selling countries to prevent the double-counting of their emission reductions.
As part of ensuring corresponding adjustments, countries need to issue Letters of Authorisation (LoAs), announcing that their emission reductions transferred as ITMOs will not be counted towards their own NDCs. Given a lack of LoAs, Indonesia’s claim of being correspondingly adjusted was widely considered to be invalid.
Amid the global trend towards the use of Article 6 credits, the potential for Australia and New Zealand to allow these credits to count towards their NDC targets might be high. Nevertheless, it remains to be seen to what extent these countries plan to utilise ITMOs, and the development of disclosure mechanisms and legal frameworks for ITMO transfers could be a lengthy process.
As for Australia, the country’s NDC target released on 19 September has been widely considered to be weak, causing the bearish trend in current prices of carbon credits in the Australia Safeguard Mechanism. The lack of climate ambition in Australia’s 2035 NDC may hint at the country’s low ITMO demand, pointing to its restrained engagement in Article 6 activities over the short- to medium-term.
This column is a collaboration between RECCESSARY and Mai Duong. All rights reserved. Reproduction without permission is strictly prohibited.
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