Aligning carbon markets with Sustainable Development Goals in the least developed countries

Carbon trading under Article 6 of the Paris Agreement presents opportunities and risks for the least developed countries (LDCs).

Rather than participating in carbon markets in an ad-hoc fashion, LDCs should build a policy framework that integrates carbon trading into existing development policy and climate policy strategies.

The international community can support LDCs through enhanced capacity-building and by strengthening the integrity of carbon markets.

This policy brief outlines key benefits, challenges, and policy recommendations for LDCs and development partners to mitigate risks associated with carbon trading under Article 6 and ensure that carbon markets support sustainable development in LDCs.

Key points:

• Carbon trading under the Paris Agreement reshapes the policy space for developing countries, creating distinct challenges and imposing constraints that affect future development pathways.
   
• The least developed countries (LDCs) need to carefully consider both the potential benefits and costs of participation in carbon markets.
   
• Carbon market projects should be aligned with broader development goals and structural transformation in LDCs.