Carbon Market: How Bilateral Agreements Create Sustainable Opportunities.

By Stephanie Petta and Tania Villagra

In a global context where climate action is becoming increasingly urgent, bilateral agreements within the framework of the carbon market are emerging as key instruments for accelerating decarbonization, promoting international cooperation, and generating economic and environmental benefits for the countries involved.

These agreements are based on Article 6.2 of the Paris Agreement, which enables States to voluntarily cooperate in climate change mitigation through the use of Internationally Transferred Mitigation Outcomes (ITMOs).

This cooperation allows a country that has reduced emissions beyond its Nationally Determined Contribution (NDC) to transfer those results to another country that needs them to meet its own climate commitments.

A recent and pioneering example of this type of cooperation is the bilateral agreement signed between Singapore and Paraguay . This agreement allows Paraguay to export carbon credits generated from projects with high environmental and social impact—such as reforestation, forest conservation, or renewable energy—while Singapore can use them to advance its carbon neutrality goals.

Such agreements not only strengthen the global climate architecture, but also bring significant benefits at the national level:

1. Attracting sustainable investment: Bilateral agreements create an environment of trust and transparency that attracts international capital to climate projects, especially in sectors such as forestry, energy, and agriculture. In countries like Paraguay, with significant natural potential, this translates into opportunities for rural development and green job creation.

2. Institutional strengthening and transparency: To participate in these mechanisms, countries must develop robust regulatory frameworks, monitoring, reporting, and verification (MRV) systems, and governance mechanisms that ensure environmental integrity and prevent double counting. This strengthens national technical and institutional capacities.

3. Technology transfer and capacity building: Bilateral cooperation fosters the transfer of knowledge, clean technologies, and good practices in the implementation of mitigation projects, which is especially valuable for developing countries.

4. Valuation of natural assets: The agreements allow for the monetization of ecosystem services and the valorization of biodiversity and natural resource conservation, transforming them into assets that can generate legitimate and sustainable income for local communities.

In short, bilateral agreements represent an innovative and strategic tool within the carbon market. Instead of competing, countries can collaborate to achieve their shared climate goals, accelerate the transition to low-emission economies, and ensure that the benefits of sustainable development reach all sectors of society.

By positioning itself as a reliable provider of high-integrity carbon credits, Paraguay has a historic opportunity to pursue climate action based on international cooperation. The agreement with Singapore is just the beginning of a promising path.

Stephanie Petta Tania Villagra