Enabling Conditions to Unlock Private Sector Demand in Carbon Markets: Policy Considerations for Host Jurisdictions

Co-authored by Luke Pritchard (Beyond Alliance), Julia Strong (Symbiosis Coalition) and Philip Brady (Emergent)

As COP30 closed in Brazil, the message on carbon markets was clear: it’s time to move from negotiations into full-scale implementation. While COP decisions progressed several key operational elements of Article 6, private sector participation in the voluntary carbon market (VCM) remains critical to realizing the full potential of carbon markets for accelerating ambitious climate action.

Private sector investment through the VCM has the potential to mobilize over US$50 billion annually by 2030 to support climate action and sustainable development (World Economic Forum, 2023). Despite the potential scale of finance, investment remains far below this potential. The key to unlocking this finance? Clear, stable policy frameworks in host countries that provide the regulatory certainty buyers need to make long-term commitments and scale high-quality carbon credit supply.

Today, the Beyond Alliance, Emergent, and the Symbiosis Coalition, with support from Adren Climate, are releasing “Enabling Conditions to Unlock Private Sector Demand in Carbon Markets: Policy Considerations for Host Jurisdictions” which outlines nine priority enabling conditions host countries may consider to help enable private sector investment while advancing their climate and development goals.

Why We Wrote This Paper

This paper responds to questions we hear consistently: What policy barriers limit private sector investment in VCMs, and what can host countries do about it?

The answer starts with understanding that market integrity is two-sided. Buyers must follow the mitigation hierarchy, maintain transparent disclosures, and make credible claims. But host countries can play an equally critical role by creating the policy certainty that helps to enable investment to flow. When action is taken on both the supply and demand side, it can expand and support new markets, ultimately driving higher levels of climate finance.

In collaboration with our members and partners, we’ve identified specific policy frameworks that buyers and investors consistently cite as critical for directing capital to carbon projects with confidence.

By articulating best practices for host countries to build confidence and investment from buyers, this effort complements the Shared Principles recently launched by the Coalition to Grow Carbon Markets, which articulate a set of high-level principles defined by governments to guide corporate use of carbon credits.

Nine Priority Enabling Conditions

The paper outlines nine actionable policy considerations that can help host countries develop the enabling conditions needed to scale private sector investment in VCMs. The first six apply broadly across carbon market activities and the final three are specific to nature-based solutions.

Market-Wide Enabling Conditions

• Integrate carbon finance in Long-Term Low-Emission Development Strategies to ensure VCM activities align with climate and development priorities. Embed carbon finance into long-term strategies with clear implementation pathways, enforcement mechanisms, and governance capacity to translate policy commitments into action.
• Provide clear guidance on corresponding adjustments (CAs) for VCM and Article 6 interactions to reduce regulatory uncertainty for VCM participants. Clarify whether countries will require CAs for VCM transactions and establish transparent processes for both authorized and non-authorized credits, recognizing that CAs are not required by the Paris Agreement for voluntary transactions.
• Define robust, yet efficient, governance frameworks for domestic VCM issuance to promote market integrity and quality assurance. Align with internationally recognized standards, establish transparent registries and approval processes, promote fair benefit-sharing, and ensure efficient credit issuance.
• Promote interoperability and alignment with international approaches to reduce fragmentation. Leverage existing international frameworks and infrastructure, promote registry compatibility, and engage in coordination forums to harmonize standards while maintaining flexibility.
• Create incentive structures that promote high-integrity projects and jurisdictional initiatives to attract quality investment and scale impact. Provide fiscal and non-fiscal incentives, ensure policy stability across political cycles, and invest in jurisdictional-scale programs to accelerate project development and de-risk implementation.
• Clarify local tax treatment of carbon credit transactions to provide certainty for investors and project developers. Clearly define applicable taxes and revenue-sharing mechanisms, ensure fiscal policy consistency over time, and avoid excessive tax burdens.

Nature-Based Solutions–Specific Enabling Conditions

• Demonstrate strong land sector ambition, governance, and political commitment to build investor confidence in nature-based solutions. Set ambitious sectoral targets, strengthen land-use governance systems, and demonstrate high-level political commitment to promote long-term investment signals and durable climate outcomes.
• Ensure equitable and inclusive project development and implementation by establishing clear frameworks for land tenure, carbon rights, and Indigenous Peoples’ and local communities’ (IPs’ and LCs’) participation. Establish legally binding frameworks that uphold IPs’ and LCs’ rights including Free, Prior, and Informed Consent, resolve land disputes, support accessible land registries, and ensure IPs and LCs are equal partners with direct technical support and capacity strengthening.
• Define clear REDD+ nesting requirements and processes to ensure alignment between project-level and jurisdictional approaches and build investor confidence. Provide clarity on how projects interact with jurisdictional accounting frameworks, establish fair benefit distribution processes, and offer practical transition pathways that avoid creating stranded assets while recognizing that countries are at different stages of readiness.

From Policy to Practice: Implementation Support Is Essential

Implementing these enabling conditions will require significant support for many host country governments, including but not limited to technical assistance, capacity-strengthening, and introductions to market participants. Donor governments, development finance institutions, and philanthropies can play an important role in providing such support to governments, and in doing so, help catalyze private capital to flow at scale.

What’s Next?

Clear, stable policy frameworks are not just about attracting investment. They’re about ensuring that carbon market activities deliver real, measurable benefits to people and nature while aligning with national development priorities. Host countries that establish these enabling conditions can position themselves as leaders within the carbon market by demonstrating a commitment to social and environmental integrity that can help attract private capital needed to advance their wider sustainable development objectives.

We invite governments, development partners, civil society organizations, and market participants to consider these recommendations. Whether you’re a host country seeking to strengthen your carbon market framework, a development partner providing technical assistance, or a buyer considering national policy environments for investment decisions, these policy pathways offer a potential roadmap for building the high-integrity markets we need to achieve our collective climate ambitions.

Download the full paper

For additional information, please contact the Beyond Alliance at info@beyond-alliance.org, Emergent at info@emergentclimate.com, or the Symbiosis Coalition at hello@symbiosiscoalition.org.