ITMO prices can start “soft” for a simple reason: the pipeline looks huge, but truly binding demand is not yet aligned. The less intuitive point is that an early surplus does not mean credits ready to be delivered tomorrow. It mainly reflects supply expectations—often based on MoUs and announcements—which can compress prices in the early stages and then leave room for increases once accounting, authorizations, and registries start operating at full capacity.

For buyers and investors, this is a two-speed market. On one side, there are opportunities to enter early with lower prices and forward contracts. On the other, there is the risk of buying “supply” that never becomes usable ITMOs, or that arrives too late for compliance windows or corporate commitments.

Where the potential surplus comes from: project pipelines, authorizations, and rules still settling

Today’s “surplus” is mostly a pipeline, not inventory. Many Article 6.2 initiatives are still at the stage of bilateral MoUs, capacity building, and defining authorization arrangements. A useful indicator of operational maturity is that 17 Parties have submitted an Article 6.2 initial report, but this tells you “who has started the administrative machinery,” not how many ITMOs will be available in the near term. The pipeline can be large, but it is not automatically convertible into transferable units. Source: a6partnership.org (Article 6.2 implementation status)

Authorization and reporting deadlines create real bottlenecks. If a Party authorizes an ITMO in 2024, it must report it in the AEF format by 15 April 2025. This operational detail is often overlooked by buyers, but it can shift “deliverable” supply by quarters—sometimes more—even when the project has already generated reductions. Source: UNFCCC (FAQs on Article 6.2 submissions / CARP)

Registries and accounting are the real early bottleneck. The UNFCCC, through CARP, is putting in place requirements and workflows for identifiers, tracking, and requirements for the international registry. Until “first transfer” and tracking processes are fully bedded in, volatility emerges between announced supply and supply that is actually transferable and traceable. Source: UNFCCC (International registry requirements v1.0)

Agreements are increasing, but many remain statements of intent. The market is seeing more MoUs and Article 6.2 agreements, which fuels the “large pipeline” narrative. That helps explain why prices can start low, but also why we will see dispersion: quality, contract structure, and authorization status matter more than the “Article 6” label itself. Source: Article 6 Observatory (Article 6.2 overview)

The “transition/legacy” topic can amplify the perception of over-supply. The debate over potentially transferable volumes from previous mechanisms and how to manage legacy can create expectations of an initial wave of units. Even the perception of abundance tends to compress prices, especially if compliance demand does not absorb supply quickly. Source: EDF (commentary on Article 6 decisions and debate)

Real demand vs stated demand: who will buy ITMOs and for what objectives (NDC, CORSIA, corporate)

“Real” demand in Article 6.2 comes from governments. The three key use cases are: NDC compliance, Other International Mitigation Purposes (OIMP), and corporate claims (voluntary, often beyond value chain). The primary driver remains governmental, while private demand mainly enters via OIMP or through national schemes that enable import and use. Source: UNFCCC (Article 6.2 page)

CORSIA can move volumes, but with high uncertainty. Estimates of CORSIA demand for 2024–2026 are on the order of 17–75 Mt/year. Such a wide range pushes many buyers to pre-contract with multi-year delivery schedules, because the risk is not only “how much will it cost,” but “will there be eligible units when they are needed.” Source: ITMO.com (research meeting on CORSIA demand with sovereign ITMOs)

Stated demand is often marketing, not procurement. Many companies announce net-zero or carbon neutrality without a binding purchasing policy, without a multi-year budget, and without internal rules on MRV and quality. “Hard compliance” buyers, by contrast, have deadlines, controls, and accountability. That is why they are more willing to pay a premium for authorized units with robust accounting.

A practical example clarifies the difference. An airline or a logistics operator may seek a forward offtake to cover future CORSIA exposure, accepting long contracts and staggered deliveries. An industrial corporate buyer may purchase ITMOs for more robust claims and accept lock-in on corresponding adjustment and “no double claiming” clauses, because reputational risk weighs as much as price.

The macro context supports future demand even outside Article 6. The World Bank notes that about 28% of global emissions are covered by a direct carbon price. As more sectors enter carbon pricing regimes, interest grows in mitigation instruments and “compliance-grade” units, even when use is not immediately mandatory. Source: World Bank (State and Trends of Carbon Pricing)

What can push prices up over time: corresponding adjustment, quality, revocations, and supply limits

Corresponding adjustment creates the real “scarcity premium.” Authorized units with CA and robust accounting become closer to a compliance-grade asset. CA and authorization are not bureaucracy: they are value attributes that narrow the supply that is actually usable for NDC/OIMP and reduce double-counting risk. Source: UNFCCC (Article 6.2 Reference Manual)

Quality can tighten supply even if the pipeline grows. If methodological requirements and the rules of the Article 6.4 mechanism (PACM) raise the bar—with more ambitious baselines and more conservative additionality—net supply tends to shrink. The typical result is a higher average price, even with the same number of “projects on the list.” Source: UNFCCC/CDM (Article 6 updates)

Revocation risk or a change in authorized use feeds directly into pricing. Legal certainty depends on decisions by the host Party and on bilateral agreements. For a buyer, “revocation/change of authorization” risk translates into a required discount or stronger contractual protections. Source: Clyde & Co (analysis on carbon trading and Article 6)

Early market signals suggest premiums versus many generic VCM credits. Some benchmarks cited in Swiss engagement contexts mention average ranges of ~20–22 (currency per source) and a Thailand e-bus case around ~30 USD/tCO₂e as an order-of-magnitude for sovereign deals. This is not a “universal price,” but it helps explain why regulatory attributes can lift value. Source: Energy Transition Partnership (carbon impact assessment)

Scarcity can also be administrative and time-bound. National authority capacity, CARP reporting timelines, and registry operations can constrain supply right when it is needed, even if volumes exist on paper. For those who must deliver within compliance windows, this “calendar” scarcity can be decisive. Source: UNFCCC (CARP Article 6.2 FAQs)

Practical impacts for Italian buyers: procurement, budgeting, contract clauses, and price-risk management

ITMO procurement should be treated as a regulatory purchase, not a simple offset. A minimum checklist for carbon credit procurement and due diligence includes: the presence and content of the LoA, the authorized use (NDC/OIMP/other), vintage and eligibility rules, registry and tracking, how the corresponding adjustment is applied, and which events can block first transfer or cancellation. For Italy-based buyers, this typically sits alongside EU compliance and reporting expectations, even when the ITMO itself is governed under the Paris Agreement framework.

Internal roles should be separated to avoid gaps. Sustainability defines integrity and use requirements; Legal negotiates authorizations, remedies, and liabilities; Treasury manages price exposure and forward cashflows; Internal Audit checks the audit trail and consistency with policy and reporting.

An initial surplus can help the budget, but it increases timing risk. Lower entry prices are plausible when announced supply exceeds binding demand. The risk is a price rise when CA, authorizations, and registries become the bottleneck. A staggered approach, such as laddering, usually holds up better: a spot tranche to cover near-term needs and a forward tranche to lock in availability for key years (NDC, CORSIA, corporate targets).

Contract clauses make the difference between a “promised unit” and a “usable unit.” In B2B deals, the most important are: the distinction between delivery risk and issuance risk, authorization as a condition precedent, representations and obligations on corresponding adjustment, remedies in case of revocation/change of use, make-whole or replacement units, the operational definition of “first transfer,” and reporting and tracking responsibilities. Source: UNFCCC (International registry requirements v1.0)

Price-risk management can use “quasi-financial” tools. Caps/floors, indexation, most-favoured pricing, collars, and step-in rights for delays are mechanisms that help, especially in multi-year contracts. Useful KPIs: “€/t delivered and cancelled,” “% authorized,” “average time from issuance to first transfer.”

A typical Italian case is an energy-intensive company that wants to protect P&L from rising carbon-cost scenarios. The fact that a significant share of global emissions is already covered by carbon pricing reinforces the idea that demand for robust units may increase over time, tightening availability precisely when internal governance asks for higher quality. Source: World Bank (State and Trends of Carbon Pricing)

How to assess value beyond price: integrity, additionality, permanence, and double-counting risks

The value of an ITMO is a bundle of attributes, not just €/t. The practical “value stack” includes: environmental integrity (MRV and baseline), additionality, permanence and reversal risk, and governance (LoA, CA, registry). Without correct accounting, the risk is double claiming or double counting—exactly what Article 6 is designed to avoid. Source: UNFCCC (International registry requirements v1.0)

Rules on reversal risks affect price, especially for nature-based units. The UNFCCC notes the adoption of rules to manage reversal risks, relevant for forestry and soil carbon. In practice, buffers, obligations, or stricter requirements may appear. This tends to reduce net supply and create a premium for projects with lower or better-managed reversal risk. Source: UNFCCC (news on rules for emission reversal risks)

The buyer-side difference between generic VCM and units with an LoA is real. The Letter of Authorization and the authorized use determine whether a reduction can become an ITMO or be used as a mitigation contribution. If the LoA is missing, you are often buying a “good” credit that is not necessarily usable for the purpose you care about. Source: Apolownia (explainer on LoA and the intergovernmental framework)

A quality premium can exist even with the same technology. Market sources indicate that ITMOs with an LoA can trade at a premium versus similar credits without an LoA. The message is simple: project price and quality matter, but the “regulatory piece” can change everything. Source: CCE Group (stories and market dynamics)

A mini scoring grid helps decide when to pay more. You can use a 0–5 score for each dimension:

  • Double-counting risk (0 high risk, 5 low risk with clear CA)
  • MRV robustness (0 weak, 5 strong and verifiable)
  • Alignment with the host NDC (0 conflicting, 5 consistent and managed)
  • Authorization conditions (0 vague, 5 specific and protective)
  • Revocation/changes risk (0 high, 5 low with contractual remedies)

Strategies to prepare for a more expensive market: portfolios, long-term options, and purchase timing

A portfolio reduces the risk that a single channel gets blocked. Diversifying by host-country geography, type (reductions vs removals), sector (energy, methane, nature-based), and “regulatory layer” (6.2 bilateral vs 6.4) is a simple defense against political and administrative shocks. Source: UNFCCC (Article 6.2 page)

Timing should be decided with a buy-now vs later matrix. Four variables matter more than market “sentiment”: likelihood of CA, maturity of registry and AEF, political risk of revocation or rule changes, and exposure to compliance deadlines (for CORSIA, the initial 2024–2026 window is an operational reference). Source: UNFCCC (CARP Article 6.2 FAQs)

Long-term instruments are mainly contracts, not derivatives. Multi-year offtakes, purchase options, rights of first refusal on future vintages, indexation to benchmarks when available, and covenants on authorization and “no adverse change” are practical levers to turn what is only pipeline today into actual “supply.”

The barbell approach works well when the market is still settling. A tranche in high-integrity projects with a high probability of authorization, more expensive, and a tranche in early-stage pipeline at a discount—but with replacement or exit clauses if the LoA or CA does not materialize—balances cost and risk.

Internal governance prevents costly mistakes. A Carbon Credit Investment Policy with minimum thresholds on additionality, permanence, and CA, a risk committee, and a complete audit trail help Italian buyers report to boards and auditors, and reduce reputational risk as the market becomes more expensive and more scrutinized.