Carbon Markets Project

About the Carbon Markets Project

Carbon markets have developed into complex transnational ecosystems involving States, project developers, Indigenous Peoples and local communities, carbon-crediting programmes, registries, intermediaries, investors, buyers and other actors across multiple jurisdictions and legal systems.

Their operation gives rise to interconnected legal relationships across the lifecycle of a carbon project and the carbon units generated from it. These relationships may arise from the development and operation of an underlying project, the creation and issuance of carbon units, their holding and transfer through registries and other market infrastructures, and their use, potential revocation and retirement.

The HCCH Carbon Markets Project studies the private international law (PIL) issues arising from these cross-border relationships. The Project does not assess the effectiveness of carbon markets as instruments of climate policy as such. Its focus is the PIL framework required where carbon-market activities, rights, obligations and disputes extend across borders.

The Project takes a holistic approach across the different stages of carbon projects and carbon-market activity. Legal certainty is relevant not only to transactions in carbon units, but to the full range of legal relationships engaged by carbon-market activity. This includes situations in which questions concerning an underlying project, land or natural resources, or the rights of Indigenous Peoples and the rights and interests of local communities may have legal consequences at another stage of the relevant carbon project or carbon-market activity.

The Project seeks to contribute to a coherent and workable PIL framework that enhances legal certainty across carbon markets, takes account of the legal relationships, rights and interests engaged across the respective lifecycles of carbon projects and carbon units, and contributes to the conditions necessary for the responsible scaling of carbon markets across borders.

A holistic private international law framework

The Project examines the interaction among jurisdiction, applicable law, recognition and enforcement, and international cooperation. These elements are distinct but closely connected and need to be considered together across the different stages of carbon projects and carbon-market activity. The Experts’ Group has approached the work on this basis from its first meeting.

Jurisdiction determines which court or other competent authority may hear a dispute. Applicable law determines which legal system governs the relevant legal relationship or issue, including questions concerning underlying projects, proprietary rights in carbon units, contractual relationships, registries and other market arrangements.

Recognition and enforcement determine whether judgments and other relevant decisions made in one jurisdiction can have appropriate legal effect in another. They are therefore essential to the practical operation of rules on jurisdiction and applicable law across borders in order to ensure effective access to justice. International cooperation may further assist where proceedings, authorities or related matters span more than one jurisdiction.

The Project also examines how legal relationships arising at different stages of carbon projects and carbon-market activity. This includes the possible consequences for carbon units where questions arise concerning the legality of an underlying project, land and natural resources, mandatory rules of the State in which the underlying project is located, or legally recognised rights and interests, including those of Indigenous Peoples and local communities.

PIL does not itself determine the substantive standards governing those matters. Its role is to provide the cross-border framework through which the appropriate forum, governing law and effect of relevant decisions can be determined, and through which different legal systems can interact coherently.

Safeguards form an important part of this analysis. At its fourth meeting, the Experts’ Group agreed that safeguards may inform the design and operation of PIL rules, without purporting to regulate substantive law or prejudice stronger protections available under applicable domestic law. It also recalled that its mandate extends across the different stages of carbon projects and carbon-market activity and is not confined to proprietary issues or secondary-market transactions involving carbon units.

Development of the Project

In 2024, the Council on General Affairs and Policy of the HCCH (CGAP) mandated the Permanent Bureau, working with relevant subject-matter experts, to monitor developments concerning the PIL aspects of carbon markets and to cooperate and coordinate with the Secretariats of relevant international organisations, including UNCITRAL, UNIDROIT and the UNFCCC. The resulting exploratory work identified a broad range of PIL issues arising across the different stages of carbon projects and carbon-market activity and led to a proposal for an Experts’ Group.

In March 2025, CGAP established the Experts’ Group to study the PIL issues arising from carbon markets, “with an initial focus on the possible inclusion of an applicable law provision in the draft UNIDROIT Principles on Verified Carbon Credits.” Work concerning the applicable-law provision in draft Principle 4 thus constituted one initial focus within the broader HCCH mandate.

During 2025, the Experts’ Group considered both that initial focus and the wider PIL framework. Its work addressed safeguards, public policy and overriding mandatory rules, jurisdiction, applicable law, recognition and enforcement, international cooperation, as well as the relationships among different stages and actors within carbon markets.

At its second meeting in October 2025, the Experts’ Group agreed by consensus on its Comments on and Intermediate Iteration of Principle 4 of the draft UNIDROIT Principles on Verified Carbon Credits, which were transmitted to the UNIDROIT Working Group.

Following further exchanges and consideration of subsequent iterations of draft Principle 4, the Experts’ Group adopted a Consensus Position at its third meeting in December 2025, which was also transmitted to the UNIDROIT Working Group. Further comments on a subsequent iteration were transmitted in early 2026.

In March 2026, CGAP noted the fulfilment of this initial focus of the Experts’ Group’s mandate and recorded that there was, at that time, “no alignment or agreement of views between the two Groups” on the applicable-law provision in draft Principle 4, while emphasising the importance of continued cooperation and coordination with UNIDROIT.

Following completion of this initial focus, the Project continued under the mandate conferred by CGAP to examine the wider range of PIL issues arising across carbon markets.

Current work

In March 2026, CGAP approved continuation of the Experts’ Group’s work, including the mapping of possible gaps in, and difficulties with, existing instruments and initiatives and matters not currently addressed by them.

At its fourth meeting in June 2026, the Experts’ Group reviewed the scope and prioritisation of its work. It considered the role of safeguards and the interrelationship among jurisdiction, applicable law, and recognition and enforcement, and began examining international cooperation mechanisms. The Group agreed to proceed on a focused and pragmatic basis, building on existing HCCH instruments and considering additional solutions where gaps are identified. The Group also agreed to test its analysis against concrete scenarios arising at different stages of carbon projects and carbon-market activity and across different types of disputes.

The continuing work therefore examines the interaction among the principal elements of PIL; the relationship between underlying carbon projects and carbon units; safeguards and legally protected interests; registries and market infrastructure; and the extent to which existing legal frameworks adequately address the cross-border issues arising in carbon markets.

Key documents

Project mandate and foundational work

Applicable-law work

Continuing work

Reports and Aide-mémoires of the meetings of the Experts’ Group (only available in English)