Canada is developing a policy framework that could allow Canadian companies to participate more extensively in international carbon markets through internationally transferred mitigation outcomes, or ITMOs, under Article 6 of the Paris Agreement.
The move could widen access to overseas buyers for Canadian emissions reductions and removals, but its commercial significance will depend on whether Canada can establish sufficiently robust rules to protect environmental integrity while giving project developers and investors predictable rights over the resulting mitigation outcomes.
Environment and Climate Change Canada announced on September 24 that the federal government is exploring a framework for trading ITMOs, positioning the initiative at the intersection of climate policy and industrial strategy. Ottawa said the framework could catalyze investment in carbon removal technologies, nature based solutions and other mitigation activities in Canada and abroad, while creating opportunities for Canadian technology and expertise to enter international markets.
The proposal arrives as the infrastructure supporting Article 6 is moving from rulemaking toward implementation. Article 6.2 establishes the accounting and reporting framework for countries using ITMOs toward their nationally determined contributions, while Article 6.4 establishes a UNFCCC mechanism for carbon credits. The UNFCCC is also developing an international registry capable of tracking ITMOs from issuance through transfer and use. For Canada, the distinction between creating carbon credits and authorizing their international transfer is critical.
An emission reduction or removal generated by a Canadian project does not automatically become an ITMO simply because an overseas buyer is willing to purchase it. Under Article 6.2, participating governments must establish systems for authorization, tracking and accounting. Corresponding adjustments are used to account for international transfers so that the same mitigation outcome is not counted toward both countries’ climate targets.
A project developer may be able to generate a verified reduction or removal under a domestic system, but international buyers seeking mitigation outcomes for purposes covered by Article 6 need additional certainty around whether Canada will authorize those outcomes for transfer, how the transfer will be recorded and how Canada’s corresponding adjustment will be reflected in its climate accounting.
The Canadian government explicitly identified those issues in announcing the framework. It said any future ITMO trading would need to comply with Article 6 rules and ensure that traded reductions and removals are real, additional, verified and permanent. It also highlighted the need to avoid double counting and establish institutional arrangements for tracking and accounting.
The emphasis on additionality is particularly relevant for carbon removal and nature based projects. International market value depends not simply on whether a project removes or avoids emissions, but on whether the mitigation outcome represents activity that would not have occurred without the relevant intervention and whether the claimed climate benefit can be measured with sufficient confidence.
Permanence creates another layer of risk, particularly for biological removals. Forest and ecosystem based projects can face reversal risks from wildfire, disease, land use change and other disturbances. Technological removal pathways may reduce some of those risks but introduce different challenges involving measurement, energy consumption, infrastructure and long term storage.
The government has not yet specified the full design of the proposed Canadian framework, making it premature to assume which project categories will ultimately qualify or how authorization decisions will be made. What is clearer is the potential scale of the economic opportunity Ottawa is targeting.
Carbon Removal Canada, citing analysis by Navius Research, estimates that scaling Canada’s carbon dioxide removal industry to remove 300 million tonnes of carbon dioxide annually by 2050 could generate approximately C$143 billion in GDP and 332,000 jobs. Those figures describe a modeled future industry rather than current economic activity, and depend on substantial expansion of carbon removal deployment and supporting infrastructure.
That distinction is important because Canada’s current carbon removal market remains far smaller than the scale implied by the modeled scenario. Reaching hundreds of millions of tonnes of annual removal would require large increases in project development, financing, electricity and energy supply, carbon transport and storage infrastructure, measurement and verification capacity, and long term demand. International carbon markets could address one part of that problem by expanding the potential pool of buyers.
Domestic demand alone can constrain investment in emerging removal technologies when developers face high capital costs and uncertain future revenues. Access to international buyers could create additional routes to monetize verified mitigation outcomes, particularly for projects whose economics depend on long duration offtake contracts.
But international access also introduces another layer of regulatory complexity. A Canadian project could potentially interact with Canada’s domestic offset system, provincial policies, an international cooperative agreement and the purchasing country’s own climate or carbon market rules. The boundaries between those systems will need to be sufficiently clear to establish who can authorize, own, transfer and ultimately use a mitigation outcome.
Canada has already been working toward a broader Article 6 policy framework. Its 2030 emissions reduction plan identified the development of a federal policy on authorization and use of ITMOs as an ongoing task, while the government has repeatedly emphasized robust accounting and the avoidance of double counting.
The latest announcement therefore represents an evolution of work that has been underway for several years rather than the creation of an entirely new policy direction.
The international context is also changing. The UNFCCC began development of the Article 6 digital registry infrastructure in January 2026. The system is intended to support tracking, authorization and reporting of ITMOs, with interoperability between national and international registries forming part of the planned architecture.
The emerging infrastructure could make international transfers more operationally practical, but registry functionality alone does not resolve the policy questions facing individual governments. Countries still determine how they authorize mitigation outcomes, which activities qualify and what conditions apply to transfers. For Canadian companies, the eventual authorization rules could therefore be as important as the existence of international demand.
The government says it will consult provinces and territories, Indigenous organizations and other partners while considering how an ITMO system could operate in Canada. That consultation will be relevant because many potential mitigation projects involve land, natural resources, energy infrastructure and subsurface storage, areas where federal, provincial, territorial and Indigenous interests can intersect.
Canada’s existing industrial profile gives the policy particular relevance to carbon management. Ottawa points to the country’s geology, clean power resources, natural resources and industrial expertise as potential advantages for developing a carbon removal industry. The federal government is also participating in the Advance Carbon Removal Coalition, which it says will mobilize C$100 million to support a high integrity carbon removal market in Canada.
The investment case, however, depends on more than resource availability. Carbon removal projects require revenue certainty over periods that can extend well beyond conventional project financing horizons. International buyers need confidence that a mitigation outcome will retain its eligibility and environmental credibility through the project’s operating life, while developers need confidence that regulatory changes will not undermine the value of future transfers.
That makes the design of authorization and accounting rules a potential determinant of capital formation rather than simply an administrative issue.
Canada is also linking the ITMO initiative with a wider international climate finance strategy. The federal government said the Spring Economic Update committed more than C$13 billion to international climate finance and described the ITMO framework as complementary to that commitment. International climate finance and Article 6 transactions serve different functions, however. Climate finance can support mitigation and adaptation activities without necessarily creating transferable mitigation outcomes, while an authorized ITMO represents a mitigation outcome that can be transferred under the Paris Agreement’s accounting framework.
For Canadian carbon removal developers, the distinction could determine which projects can attract private capital based on future international revenue rather than relying primarily on grants or domestic policy support. The larger market question is whether Article 6 can provide that additional demand without weakening the credibility of the underlying mitigation.
The Paris Agreement’s accounting architecture is designed to address precisely that tension. The UNFCCC’s international registry assigns unique identifiers to ITMOs and records information including their originating country, vintage year and authorization status. Participating entities can transfer units between accounts within the relevant cooperative approach, creating a traceable record of ownership and movement.
For Canada, the opportunity therefore extends beyond simply selling more carbon credits. A functioning ITMO framework could connect Canadian carbon removal developers, technology providers and nature based projects with international demand, but only if the resulting mitigation outcomes are sufficiently transparent and durable to command confidence from buyers and governments.
The policy’s next phase will determine how that balance is struck. Ottawa still needs to establish the domestic mechanisms through which ITMOs can be authorized and tracked, define how different mitigation activities will interact with Canadian climate policy, and determine how federal, provincial, territorial and Indigenous interests will be incorporated. Until those rules are established, the proposed framework represents a potential market access mechanism rather than a new source of guaranteed demand.
