Carbon Markets Building Momentum In PNG In 2026

The evolving state of carbon markets globally presents both opportunities and challenges for market participants. In Papua New Guinea, regulatory reforms introduced in late 2025 provide a framework for developing carbon projects that can integrate with global standards and markets. Momentum is forecast to build in 2026 and beyond, with new carbon projects being permitted and increasing participation in international carbon markets.

In this Insight, we provide an overview of key features of the carbon market framework in Papua New Guinea (PNG) including the Climate Change (Management) (Carbon Markets) Regulation 2025, which was recently introduced to regulate the voluntary carbon market in PNG.

Context to PNG's carbon market framework

With the race to rapidly reduce greenhouse gas emissions well and truly underway, pressure continues to mount on businesses to significantly reduce the emissions intensity of their operations.

While decarbonisation remains the priority for emission reduction, this is not always possible for operations with hard-to-abate or unavoidable emissions. In this context, carboncredits traded on the voluntary carbon market are increasingly in focus as a pathway to 'offset', rather than eliminate, emissions and support reduction commitments.

The voluntary carbon market has been subject to a high level of scrutiny, having largely emerged in the private sector outside the remit of government regulation. Now, with growing focus on the voluntary carbon market and carbon pricing, particularly in the context of mandatory climate-related reporting, the integrity and credibility of carbon projects and the credits they generate are under even sharper scrutiny. Reflecting increasing convergence of voluntary market standards and methods, the Core Carbon Principles developed by the Integrity Council for the Voluntary Carbon Market, andguidance on offsetting by the Science Based Targets Initiative, have become key tools to assist in navigating the market.

To promote responsible investment in carbon projects and facilitate evolving demand to expand the voluntary carbon market internationally, governments in many countries are striving to improve the standards that apply to the voluntary carbon market in their jurisdiction.

In PNG, international interest and strong potential for carbon projects, particularly within the REDD+ framework, has prompted the Government to develop regulatory and policy settings to support projects that generate carbon credits for sale on the voluntary carbon market. With its extensive natural capital resources including forests and wetlands, and emerging infrastructure, PNG has strong potential to be a key supplier of carbon credits to international customers (particularly from nature-based projects) and to utilise carbon markets to access international financing and investment.

Evolution of carbon market regulation in PNG

The Climate Change (Management) Act 2015 (PNG) (CCM Act) is the principal legislation that regulates climate change mitigation in PNG. This includes implementation of the Paris Agreement under the United Nations Framework Convention on Climate Change (UNFCC). The CCM Act established:

• the Climate Change Development Authority (CCDA). The functions and powers of the CCDA are broad, and include 'to establish, coordinate and manage any trading schemes for the purpose of limiting greenhouse gas emissions or encourage activities that reduce such emissions or remove greenhouse gas from the atmosphere';
• the National Climate Change Board (Board). The primary function of the Board is to control and guide the exercise of the functions and powers of the CCDA;
• recognition of customary landholders' rights and requirements on proponents in relation to free, prior and informed consent (FPIC) of landholders under 'climate change related project agreements' applicable to customary land; and
• requirements for benefit sharing arrangements with or allocation of incentives to landowners affected by climate change related projects or activities.

The PNG Government introduced significant amendments to the CCM Act in 2021 to establish a national registry for carbon projects and carbon credits.

In March 2022, the PNG Government announced an administrative moratorium on the establishment of new carbon projects in PNG to allow certain legitimacy concerns to be investigated, and further regulatory and policy settings to be developed.

The CCM Act was further amended in 2023 to authorise:

• the CCDA to establish a prescribed process for issuing permits for mitigation activities undertaken for the purpose of participation in carbon markets; and
• the Board to make decisions in relation to such permits following a recommendation made by the managing director of the CCDA.

In April 2025, the Honourable Simon Kilepa, Minister for Environment Conservation and Climate Change, announced that the moratorium was lifted. The sector then keenly awaited regulations under the CCM Act to be finalised, specifying the permitting process to be followed.

In November 2025, the Climate Change (Management) (Carbon Market) Regulation 2025 (Regulation) was published.

Categories of mitigation activities

The Regulation recognises three categories of mitigation activity, being an activity or project undertaken in accordance with the CCM Act for the purpose of achieving emission reductions or removals:

• Project approach - a mitigation activity undertaken by a person with a permit granted under the Regulation, as outlined below.
• National approach - a mitigation activity undertaken by the CCDA or a sector agency at a national scale. The PNG Government indicated at COP30 that the implementation of jurisdictional credits under the framework of ART-TREES (Architecture for REDD+ Transactions) will be explored in 2026. If implemented, individual projects within the approved forest and land use categories will need to be nested within this national framework. Such a national approach would open up opportunities to supply carbon credits into both the voluntary carbon market and certain compliance markets including CORSIA.
• International cooperation approach - a mitigation activity undertaken by a person under the auspices of a bilateral or multilateral agreement entered into by the PNG Government. This would facilitate the transfer of Internally Transferred Mitigation Outcomes in accordance with Article 6.2 of the Paris Agreement, as outlined below. Such projects will require a permit under the Regulation, confirmed via a Letter of Authorisation issued by the CCDA (unless determined otherwise by the CCDA and the relevant agency of the partnering Government).

Key features of the new permitting regime

The Regulation introduces a range of new requirements and features.

Permit Review Committee

A Permit Review Committee is established to:

• assess permit applications;
• provide advice to the Managing Director of the CCDA to help with approval or refusal of applications (noting the Board ultimately determines these applications after considering recommendations made by the Managing Director); and
• monitor implementation of mitigation activities.

The details to be recorded on the national register are now specified, including records of all permits issued, ceased, cancelled or revoked, and all carbon credits generated and to be transferred and sold. This will assist in creating greater transparency about the market, its performance and potential, and for adjustments to be made in the national register.

The Regulation requires the CCDA, when assessing applications, to implement a framework to generate high integrity carbon credits by complying with the Environmental Integrity Principles set out in the Paris Agreement.

Free, Prior and Informed Consent (FPIC) and landholder rights

A further definition of 'carbon right' is introduced. It recognises a primary carbon right that is held by customary landholders (or potentially other parties which are conferred that right by law) and a secondary carbon right that is held by the person who has been granted a permit under the Regulation (which may include a primary right holder).

Further details about the process for obtaining FPIC from customary landholders via the relevant Incorporated Land Group/s have been specified. They include a requirement for the permit applicant to provide notice to, and secure approval from, the CCDA before initiating the FPIC engagement process(noting this approval from the CCDA to commence the FPIC engagement process is separate to, and must occur before, the application for a permit).

Permit requirements

Requirements for permit applications submitted to the CCDA are specified, They include, among other things:

• written evidence that FPIC has been obtained via a Certificate of Consent (in the approved form);
• written approval from the relevant Provincial Executive Council;
• a Project Design Document;
• a Benefit Sharing Plan (which must identify the primary beneficiaries, secondary beneficiaries and any other person directly or indirectly affected by a mitigation activity) and Benefit Sharing Agreement (which can only be entered into after FPIC has been obtained);
• information on a Grievance Redress Mechanism;
• information on the proposed methodology to be applied in the calculation of carbon credits, the projected results, amount of carbon credits and revenue for the total number of crediting year; and
• other relevant information required by the CCDA.

A permit can be issued for an initial validity period up to 20 years.

Procedures are introduced for the variation, renewal and cessation of a permit.

Procedures are also introduced for the cancellation of a permit. This includes requiring a cancellation payment of up to 25% of the projected project revenue to the customary landholders if the permit is cancelled within the initial validity period.

Carbon trading, measurement, reporting and verification

Procedures are introduced for the generation, registration, transfer and sale of carbon credits, including the requirement to disclose to the CCDA the amount of carbon credits generated prior to any transfer or salein an 'approved carbon market' (undefined).

The Regulation introduces a requirement for 7% of the total revenue from the sale of carbon credits to be paid to the CCDA.

A mechanism is introduced for measuring, reporting and verifying carbon project results through the use of an independent verifier selected from a list kept by the CCDA.

Offences for Regulation breaches

Offences are introduced for breaches of the Regulation. For example, this may include obtaining FPIC through bribery, misrepresentation, coercion, intimidation or other fraudulent means, or entering into a Benefit Sharing Agreement by coercion, false pretence or bribery. Each are subject to a fine of PGK 500,000.00 or up to two years imprisonment.

Transitional provisions

Any person conducting a carbon project before the Regulation commenced has six months to notify the CCDA of their proposed FPIC engagement process for approval by the CCDA. From there, the CCDA may require the applicant to produce further documents or undertake further action (which suggests the CCDA may require existing projects to address at least part of the new permit application process).

PNG's cooperative efforts under Article 6.2 of the Paris Agreement

The implementation of PNG's framework to regulate the voluntary carbon market is expected to support its bilateral agreements for the international trade of carbon credits, referred to as Internationally Transferrable Mitigation Outcomes (ITMOs).

Article 6.2 of the Paris Agreement allows state parties to collaborate bilaterally to trade ITMOs for the purpose of meeting emissions reduction targets under the Paris Agreement, known as Nationally Determined Contributions (NDCs).

The Governments of PNG and Japan signed a Memorandum of Cooperation on a Joint Crediting Mechanism under Article 6.2 in November 2022. In December 2023, the PNG Government also signed an Implementation Agreement with the Government of Singapore under Article 6.2.

These bilateral agreements provide a framework for the international transfer of ITMOs, with provisions to ensure the integrity of accounting procedures, for example to avoid 'double counting' ITMOs towards countries' NDCs. The framework includes processes for authorising carbon projects for the generation of ITMOs to be overseen by representatives from each country. The Letter of Authorisation provisions of the new Regulation support these bilateral opportunities.

What's ahead for the carbon market in PNG

With these recent regulatory and bilateral developments, PNG is moving forward to establish a framework that reflects its domestic conditions and will enable access to international carbon markets. As those markets continue to evolve and standards and methodologies continue to be refined, it is likely that further reforms will be made in the future to ensure consistency with the UNFCC.

With demand for high integrity carbon credits on the voluntary carbon market forecast to increase over coming years, supplies from emerging markets such as PNG are well positioned to take up these opportunities. To maximise the positive impact of the recent regulatory developments, it will be important that the regulatory checks and balances for such projects are enforced on the ground to ensure high standards of integrity, responsible investment, and confidence in the supply.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.