Climate Finance
Sovereign carbon market
Transactions between governments for mitigation outcomes, often linked to national climate commitments.
Sovereign transactions involve a buyer government purchasing mitigation outcomes from a host country, typically under a bilateral agreement with defined authorisation and payment terms.
They can unlock finance at scale and support national policy reform, but they raise questions about benefit distribution within the host country and about whether payment reaches the actors who deliver the reductions.
Frequently asked questions
How do sovereign deals differ from voluntary purchases?
Government-to-government agreements with corresponding adjustments, rather than corporate retirement.
What is the main risk for hosts?
Selling the cheapest abatement early and leaving harder, costlier reductions for later commitments.