Draft UNIDROIT Principles on the Legal Nature of Verified Carbon Credits – Public Consultation

 

The International Institute for the Unification of Private Law (UNIDROIT) is conducting a public consultation regarding the draft UNIDROIT Principles on the Legal Nature of Verified Carbon Credits.

 

Consultation period

The consultation will run for 10 weeks from 13 July 2026 to 21 September 2026 (midnight Rome time).

 

Objectives of the consultation

The purpose of the consultation is to:

    • Encourage the participation of a wide range of public and private stakeholders from across the geographical spectrum in the final stage of the drafting process;
    • Raise awareness about the instrument;
    • Seek stakeholders’ feedback on whether the instrument adequately addresses the current legal issues and relevant practical aspects arising from the trade in verified carbon credits (VCCs);
    • Ensure that the instrument provides a balanced legal framework from a commercial and a property law perspective;
    • Ensure that the instrument is well suited to application in different contexts, including both civil law and common law jurisdictions as well as developing economies, emerging markets, and developed economies.

 

Target audience

UNIDROIT welcomes feedback from all interested parties. In light of the technical content of the instrument and considering the array of public and private interests involved, feedback is especially welcome from the following stakeholders:

    • States and governmental bodies, including State entities;
    • International and supranational organisations;
    • International Financial Institutions, including Multilateral and Regional Development Banks;
    • Chambers of commerce and business and industry associations;
    • Non-Governmental Organisations, with special regard to those working on issues related to carbon markets and VCCs;
    • Bodies and associations representing local communities, including Indigenous Peoples;
    • Carbon market participants, including project proponents and developers, financiers, crediting bodies, validation and verification bodies, and VCC registries;
    • Academics and think-tanks, in particular experts and institutions focusing on legal and policy aspects of carbon markets and VCCs.

 

About the draft instrument

The main objective of the UNIDROIT Principles on the Legal Nature of Verified Carbon Credits (the VCC Principles) is to provide legislative guidance on private law issues so as to enhance confidence in VCC transactions and support the development of a well-functioning carbon market. Reducing legal uncertainty in the market decreases transactional risk and facilitates the allocation of capital to emissions-reducing projects, particularly in developing countries where many VCC-generating initiatives are based.

The draft VCC Principles were prepared by the Working Group over the course of nine sessions between October 2023 and June 2026. For more information about the Working Group, please see https://www.unidroit.org/work-in-progress/verified-carbon-credits/.

The instrument’s focus is on proprietary rights, specifically where VCCs are the object of dispositions and acquisitions, and where rights and interests in VCCs are to be asserted against third parties. The prospective instrument builds on UNIDROIT’s work on digital assets and adapts the proprietary framework to the specificities of VCCs. As with the UNIDROIT Principles on Digital Assets and Private Law (the DAPL Principles), the draft VCCs Principles are not meant to displace existing private law frameworks, but to assist jurisdictions in taking a common approach by providing guidance on how to adapt existing law to account for the idiosyncrasies of VCCs. Unlike the regulatory aspects of carbon markets, which have attracted considerable attention for some years, the analysis of the proprietary aspects of trading in VCCs lacks sufficient attention from both legislators and expert analysists, a vacuum that substantially hampers market growth.

The draft VCC Principles aim to strike an appropriate balance between traditional notions of property law common across jurisdictions with the commercial realities of a growing market in need of scaling. Importantly, the VCC Principles only address aspects of private law relating to the VCC itself and do not concern matters relating to the carrying out of any underlying greenhouse gas mitigation project, which are outside the scope of the instrument.

 

The draft VCC Principles consist of nine sections:

The draft instrument consists of an introduction and nine sections which include 25 draft Principles. Each section is comprised of black-letter provisions and explanatory commentary.

Section Principles
Introduction Reasons for the Principles

Development of carbon markets

Typical life cycle of a VCC

Relationship of Principles to domestic law

Transition rules

Section I: Scope and Definitions Principle 1: Scope

Principle 2: Definitions

Principle 3: General principles

Section II: Private International Law Principle 4: Applicable law
Section III: Creation and Transfer Principle 5: Creation

Principle 6: Transfer

Principle 7: Innocent acquisition

Section IV: Retirement and Cancellation Principle 8: Retirement

Principle 9: Cancellation

Principle 10: Revocation

Principle 11: Overissuance

Principle 12: Voluntary Cancellation

Section V: Illegality Principle 13: Illegality
Section VI: Registry Principle 14: VCC Registry: definitions

Principle 15: VCC Registry

Section VII: Custody Principle 16: Custody: definitions

Principle 17: Duties owed by a custodian to its client

Principle 18: Innocent client

Principle 19: Insolvency of a custodian and creditor claims

Section VIII: Secured Transactions Principle 20: Secured transactions: general

Principle 21: Registration in a VCC Registry as a method of achieving third-party effectiveness

Principle 22: Control agreement as a method of achieving third-party effectiveness

Principle 23: Priority of security rights in VCCs

Principle 24: Enforcement of security rights in VCCs

Section IX: Insolvency Principle 25: Effect of insolvency on proprietary rights in VCCs

 

Consultation document

The complete English draft UNIDROIT Principles on the Legal Nature of Verified Carbon Credits can be found here.

The draft black-letter Principles will be available in French here.

 

How to submit your response

Respondents are strongly encouraged to read the full instrument, including the black-letter Principles and the commentary, and to consider the draft instrument in its entirety. Respondents may provide feedback on any part of the draft instrument. Language indicated in the draft instrument in highlighted square brackets indicates options that are pending the Working Group’s consideration. Respondents are encouraged to consider and comment on such options in their feedback.

Comments should be submitted to the UNIDROIT Secretariat at VCC-consultation@unidroit.org.

All comments should be included in a Word document or equivalent open access text editor using the available template:

TEMPLATE FOR THE SUBMISSION OF COMMENTS

Comments should be provided in English or French. For each comment, please specify to which Section, Principle and paragraph number it refers.

The comments received during this consultation process will be made public. The name of respondents will be made public, unless expressly requested otherwise. UNIDROIT reserves the right not to make public any comments that contain offensive or inappropriate language, or that are unrelated to the subject matter of the consultation.

 

Next steps

The Working Group on the Legal Nature of VCCs will consider the feedback received during the public consultation at its tenth session, scheduled to take place between 14-16 October 2026. It is anticipated that the VCC Principles will be finalised and published at the end of 2026.