CARBON CREDITS ARE CREATED, TRANSFERRED, HELD, RETIRED AND SOMETIMES USED AS COLLATERAL ACROSS MULTIPLE JURISDICTIONS. YET PRIVATE LAW DOES NOT ALWAYS PROVIDE A SETTLED OR CONSISTENT ANSWER TO WHAT A VERIFIED CARBON CREDIT IS OR WHETHER IT CAN BE TREATED AS PROPERTY.
UNIDROIT’S DRAFT PRINCIPLES ON THE LEGAL NATURE OF VERIFIED CARBON CREDITS SEEK TO PROVIDE A JURISDICTION-NEUTRAL FRAMEWORK FOR THE PRIVATE-LAW TREATMENT OF VERIFIED CARBON CREDITS ACROSS THEIR LIFECYCLE.
CLEAR PRIVATE-LAW TREATMENT CAN REDUCE TRANSACTION RISK, IMPROVE PREDICTABILITY AND SUPPORT FINANCE. THE PRINCIPLES MATTER BECAUSE MARKET INTEGRITY DEPENDS NOT ONLY ON ENVIRONMENTAL STANDARDS, BUT ALSO ON CONFIDENCE IN OWNERSHIP, TRANSFER, CUSTODY, SECURITY AND INSOLVENCY ARRANGEMENTS.
The 25 draft Principles cover scope and definitions, applicable law, creation and transfer, innocent acquisition, retirement and cancellation, illegality, registries, custody, security rights and insolvency.
The draft Principles confirm that a verified carbon credit can be the subject of proprietary rights. They also address how credits are held in registries or through custodians, and how security rights can be created and made effective against third parties.
Once finalised, the Principles are intended to operate as jurisdiction-neutral guidance that states can incorporate into national legislation and regulatory frameworks. Further work will be needed to support implementation to help make the Principles accessible and operational.
UNIDROIT is also working on a Tokenisation Annex intended to be added later. This links the private-law treatment of credits with wider questions about digital representation and market infrastructure.
IETA welcomes UNIDROIT’s draft Principles and supports completion of the work in 2026. A common legal foundation for verified carbon credit financing and transactions can reduce risk, provide predictability and support market growth across jurisdictions.
IETA has participated in the UNIDROIT Working Group and drafting committee, with the objective of ensuring that the Principles reflect how the market operates and support the scaling of finance towards climate mitigation.
Covering the credit lifecycle
Draft Principles published
Adoption intended by UNIDROIT
Legal certainty complements environmental integrity by clarifying ownership, transfer, retirement and remedies.
The Principles address registry structures, operator duties, record accuracy and correction of registry errors.
Rules on custody, segregation and insolvency are important for certainty of transfers and where credits are held for clients or through intermediaries.
The framework addresses creating, perfecting, prioritising and enforcing security interests in verified carbon credits.
Cross-border transactions require clarity about the law governing contractual and proprietary issues.
The parallel Tokenisation Annex connects carbon credits to digital representation and technology-enabled market infrastructure.
Clear proprietary treatment can support consistent decisions about recognition, control and reporting, while accounting standards remain a separate policy framework.
Although prompted by verified credits outside compliance systems, clearer private-law treatment can inform transactions across different market settings.