September 2026 Newsletter

Carbon finance deserves a more established place in funding climate action. Long-term carbon credit purchases can make projects investable and direct private capital into mitigation. Through Article 6, international cooperation can also lower the cost of meeting national targets and make additional action more affordable. That contribution should feature more clearly in the climate finance discussion as COP31 approaches.

The Climate Implementation Bridge is a Turkish Presidency initiative, aiming to help countries turn climate and development priorities into financeable projects. Carbonaires contributed its views on the role carbon finance could play in that effort at the Istanbul Climate Finance Summit in early September. The opportunity is also relevant to the wider effort to finance national climate plans.

The scale of the effort required is substantial. The Baku agreement sets a goal of at least $300 billion a year by 2035, led by developed countries, within a wider call for at least $1.3 trillion a year from all sources by that date. Bringing more private capital into mitigation will be an important part of reaching that scale.

The form of finance matters too. Developed countries provided and mobilised $136.7 billion for developing countries in 2024. Within the public share, 67% came as loans and 29% as grants (OECD, 2026). For countries with limited fiscal space, the terms on which finance arrives affect how much climate action they can afford.

Carbon revenue can improve a project’s economics by providing income from its mitigation outcome alongside any other revenues. Once earned, those payments carry no loan repayment obligation. They can also support private equity or project lending to fund the initial investment.

This makes mitigation commercially viable, scarce public and concessional finance can support needs such as adaptation and loss and damage that are harder to fund commercially.

There is evidence that buyers are financing future supply. MSCI tracked $12.3 billion in publicly announced carbon credit offtake agreements in 2025, almost three times the 2024 value. Forward and pre-purchase agreements accounted for around two-thirds of that value (MSCI, 2026). These commitments give developers a clearer basis on which to raise capital before credits are delivered.

A useful example is Chestnut Carbon’s non-recourse project finance facility of up to $210 million, closed in July 2025 and led by J.P. Morgan. The financing was underpinned by a long-term carbon removal supply agreement with Microsoft (Chestnut Carbon, 2025). A commitment to buy the credits helped bring bank financing into the underlying forestry activity. The wider opportunity is to build investable project pipelines that contribute to national climate targets, backed by credible demand for their credits. At scale, this can help unlock private finance for delivering those targets.

Countries have already signalled considerable interest. The 2025 synthesis of the first 64 new nationally determined contributions (NDCs) found that 89% of Parties planned to or might use some form of Article 6 cooperation (UNFCCC, 2025). That intention becomes useful for investors when it identifies where international carbon finance could support specific activities.

The International Emissions Trading Association (IETA) makes this point in its 2025 policy paper on NDCs. It calls for countries to identify priority sectors, activities and volumes and to explain the international support needed for their conditional commitments (IETA, 2025). That would give developers and buyers a clearer view of where to direct investment.

Host governments also need to decide what they can authorise while protecting their own NDC achievement. Reliable emissions data and an understanding of abatement costs inform that decision. Clear authorisation processes and credible accounting give buyers and investors confidence in the projects they finance. Article 6 capacity building therefore serves a commercial purpose too.

Article 6 can help host countries attract finance for mitigation activities with different abatement costs. Carbon revenue can make higher-cost domestic activities investable where other finance is insufficient, allowing countries to bring forward projects that support their longer-term climate priorities.

Host governments could also authorise a limited share of lower-cost mitigation where credits can be sold above their marginal abatement cost, with arrangements to reinvest part of the proceeds in further domestic action. This needs clear NDC guardrails. Authorisation volumes and pricing should account for the cost of replacing transferred reductions, with corresponding adjustments reflected in a credible plan for achieving the host country’s NDC.

The 2019 IETA and University of Maryland study estimated that cooperation could generate savings of around $250 billion a year in 2030, in 2015 prices, compared with countries implementing their NDCs independently (Edmonds et al., 2019). Subsequent modelling found that reinvesting the savings from cooperation in greater ambition could more than double mitigation (Edmonds et al., 2023). These are modelled outcomes, but they show the wider potential for cooperation to finance additional action.

Greater recognition should influence how national climate plans are prepared and financed. Potential carbon revenue should be considered early in project preparation, and long-term purchase agreements should be assessed alongside guarantees and concessional finance as tools for attracting investment. Initiatives such as the Bridge could help countries identify suitable activities and develop the Article 6 frameworks needed to finance them.

Support for supply must be matched by buyer commitments. Countries considering Article 6 purchases could publish indicative volumes, eligibility requirements and procurement timelines, then back them with pilot forward purchases where possible. This would help developers plan projects and give investors a clearer view of demand. A general statement of interest gives much less confidence than a funded commitment to purchase.

Credit quality, safeguards and transparent accounting are also essential if buyers and investors are to commit. We should keep improving those standards while financing projects that meet them. Recognition of carbon finance will matter most when it results in funded projects and additional mitigation.