An emissions reduction has value. But value and price are not the same thing.
It starts with a project (perhaps a renewable energy project, improved agricultural practices or reforestation) that is designed to reduce or remove emissions.
But simply reducing emissions doesn’t make something an ITMO. The emissions reduction needs to go through the relevant processes under Article 6, including authorisation for international transfer.
Once authorised and transferred, the resulting ITMO can be acquired by a country and, subject to the Article 6 rules, used towards its NDC.
So why would a country pay for one?
Because it has a use for it.
The project has created a measurable emissions reduction. The Article 6 framework provides a way for that reduction to be transferred internationally. The country acquiring the ITMO can use it towards its climate commitment, subject to the relevant rules and accounting.
That gives the emissions reduction a financial value.
It also creates a potential route for private investment. The opportunity isn’t simply in buying an ITMO. It’s in providing capital to a project that creates measurable emissions reductions, with the resulting ITMOs providing a potential source of revenue when they are transferred to an international buyer.
But value and price are still two different things.
An ITMO doesn’t have one fixed price. The price can vary depending on the project, the emissions reduction, the country, the authorisation and terms of the transaction, and what a buyer is prepared to pay.
Value tells us why the ITMO is worth something. Price tells us what someone is actually prepared to pay for it.
Next: What makes one ITMO more valuable than another?