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INTRODUCTION
Carbon Markets, most conventionally conceptualised in the context of Article 6 of the Paris Agreement, have emerged as a critical tool in global efforts to combat climate change. Designed to cap and reduce greenhouse gas (GHG) emissions, these markets provide a framework for companies, governments, and organizations to trade emissions allowances and credits. This market-based approach incentivizes emission reductions, making the cost of polluting visible and measurable while rewarding investments in low-carbon technologies or conservation efforts.
A Carbon Market operates on the principle that one ton of carbon dioxide (or equivalent greenhouse gases) has a specific, tradable value. In this system, countries or companies that emit greenhouse gases can purchase emissions allowances or credits to offset their emissions or sell allowances if they emit below permitted limits. This creates a financial incentive to reduce emissions, encouraging a shift toward greener operations and helping to lower overall carbon footprints.
Carbon Markets are categorized into two primary types: compliance markets and voluntary markets. Compliance markets are regulated by governments and adhere to legal emissions limits. Under frameworks like the European Union’s Emissions Trading System (EU ETS), companies receive a specific number of allowances based on a cap set by the governing body. If a company exceeds its emissions allowance, it must purchase extra credits or face fines, creating a strong incentive to invest in low-carbon technologies.
Conversely, voluntary carbon markets allow organizations and individuals to buy carbon credits voluntarily. These credits support projects that capture or reduce greenhouse gases, such as reforestation or renewable energy initiatives. Voluntary markets appeal to companies seeking to enhance their sustainability image and offset emissions that cannot be easily abated, even though participation is not legally required.
The mechanics of carbon trading revolve around two main units: emission allowances and carbon credits. An emission allowance is essentially a permit to emit a set amount of carbon dioxide, commonly allocated by governments in compliance markets. In contrast, carbon credits represent emissions reduced or removed by projects beyond capped limits, primarily in voluntary markets. Companies with emissions exceeding their allowances buy extra credits from those emitting below their cap, promoting a balanced approach to emissions reduction. For example, a factory with high emissions might purchase credits from a wind farm or reforestation project, indirectly funding initiatives that help offset emissions.
Carbon markets encapsulate both market and non-market approaches. On the one hand, market approaches involve using economic incentives to encourage emission reductions. This can be achieved through mechanisms like cap-and-trade schemes, baseline-and-credit systems, and carbon offsets. These mechanisms assign a monetary value to carbon emissions, incentivizing businesses and governments to reduce their carbon footprint. On the other hand, non-market approaches (NMAs) to carbon markets are measures that countries use to tackle climate change without relying on traditional carbon markets. They involve voluntary cooperation, policies, and regulations aimed at achieving mitigation, adaptation, and sustainable development goals. NMAs are defined in Article 6, paragraph 8 of the Paris Agreement as mechanisms that enhance public and private sector participation in implementing nationally determined contributions (NDCs) and enable coordination across instruments and institutional arrangements.
Essentially, Carbon Markets aim to make it financially advantageous to reduce emissions. By setting a price on carbon, these markets drive innovation, fostering the development of sustainable technologies that check reliance on fossil fuels. Additionally, Carbon Markets can potentially transfer funds from wealthier to developing countries by supporting projects in regions lacking extensive infrastructure, like tree-planting initiatives, deploying clean cooking solutions or solar energy installations.
However, Carbon Markets are not a magic wand! They have certainly emerged with their own residual challenges. One ongoing debate revolves around “carbon offsetting”, with critics arguing that it allows companies to “pay to pollute” instead of making genuine operational changes. Others emphasize the need for robust verification to ensure that emissions reductions are real, additional (beyond business-as-usual operations), and permanent. These challenges notwithstanding, Carbon Markets continue to grow and evolve globally, with new policies and stronger oversight frameworks enhancing credibility and effectiveness. As carbon pricing gains traction worldwide, these markets are expected to become even more influential, potentially integrating more regions, industries, and carbon sequestration technologies. One of the most recent breakthroughs was registered at the 29th Session of the Conference of Parties (COP 29) to the United Nations Framework Convention on Climate Change (UNFCCC), where an agreement was reached, on global carbon market standards under Article 6.4 of the Paris Agreement. This landmark deal established a UN-managed mechanism for carbon credit trading, potentially enabling more efficient and affordable climate action.
It is against the foregoing backdrop that the Minister for Water and Environment, in exercise of the powers conferred on him by sections 8, 9, 12 and 29 of the National Climate Change Act, Cap. 182, made the National Climate Change (Climate Change Mechanisms) Regulations, 2025 on the 7th day of November, 2024. They were launched on the 29th Day of May, 2025, at the Ministry of Water and Environment. It should be noted that these regulations were amended on 28th March, 2025, by the National Climate Change (Climate Change Mechanisms) (Amendment) Regulations, 2025.
These regulations, loosely referred to as the ‘Uganda Carbon Markets’ regulations, are a much-anticipated response to the global imperative to create a conducive local environment for the operationalization of carbon markets through enabling legal, regulatory and institutional frameworks. It ought to be recalled that at the 29th Session of the Conference of Parties (COP29) to the United Nations Framework Convention on Climate change, carbon markets were operationalized, particularly under Article 6 of the Paris Agreement, 2015. This milestone marked the legitimization of the process of implementing and making functional the framework for international carbon trading. This involves establishing rules, mechanisms, and institutions to enable countries and organizations trade carbon credits; promoting emissions reductions and climate action.
The regulations are disaggregated into 6 segments. Part 1 deals with preliminary matters like definitions. Part II deals with the measurement of greenhouse gas emissions. Part III deals with the registration of verifiers. Part IV deals with the approval of climate change mechanisms projects. Part V deals with the transfer of certified emissions reduction units. Finally, Part VI deals with general matters like appeals, the register, changes to, and the transition of climate change mechanisms projects.
PART I—PRELIMINARY
The regulations (as amended) define “certified emissions reduction units” as units of quantified greenhouse gas emission reduction or removal from the atmosphere arising from implementing a climate change mechanism project certified by the United Nations Framework Convention on Climate Change Carbon Markets Certification Standards, the Gold Standard, the Verified Carbon Standard, REDD+ Environmental Excellence Standard, the Plan Vivo System, the Climate Action Reserve, the American Carbon Registry, the Carbon Farming Initiative, the Global Carbon Council, the International REC Standard, the ISO 14046 Standard or the Carbon Neutrality Standard.
The regulations further define a “climate change mechanism” as a mechanism to contribute to the mitigation of greenhouse gas emissions and support sustainable development and includes cooperative and non-market approaches as defined under article 6 of the Paris Agreement.
An emissions reduction unit is defined to mean a tradable unit, that represents one ton, of verified quantified greenhouse gas emission reduction or removal from the atmosphere, arising from implementing a climate change mechanism project.
According to the regulations, the targeted greenhouse gases are; carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), Nitrogen Trifluoride (NF3) and any other greenhouse gas declared by the Minister in consultation with the Climate Change Department (CCD), to be a targeted greenhouse gas.
PART II— MEASUREMENT OF GREENHOUSE GAS EMISSIONS
The regulations stipulate that a lead agency must measure the emissions of greenhouse gases in accordance with the Intergovernmental Panel on Climate Change (IPCC) Guidelines for National Greenhouse Gas Inventories. A lead agency as defined by the National Climate Change Act, Cap.182 is a ministry, department, local government or agency of Government which is responsible for undertaking response measures for climate change in accordance with the Act and the National Climate Change Policy, 2015. Accordingly, a project proponent who wishes to undertake a climate change mechanism project must in the first place, estimate the emissions or reductions of greenhouse gases. Secondly, they must determine the net emissions reductions for the period in relation to the targeted greenhouse gas for that project in accordance with the greenhouse gas baseline in the project design document.
PART III— REGISTRATION OF VERIFIERS
Anyone that intends to conduct validation or verification of emissions reduction units in Uganda ought to apply to the Commissioner for Climate Change to be registered as a verifier. Such an application must be accompanied by proof of accreditation in consonance with the United Nations Framework Convention on Climate Change Carbon Markets Certification Standards, the Gold Standard, the Verified Carbon Standard, REDD+ Environmental Excellence Standard, the Plan Vivo System, the Climate Action Reserve, the American Carbon Registry, the Carbon Farming Initiative, the Global Carbon Council, the International REC Standard, the ISO 14046 Standard or the Carbon Neutrality Standard. Additionally, the application to the Commissioner for Climate Change must be accompanied by proof of payment of the registration fees for a verifier.
On submission of the application, the Commissioner for Climate Change is mandated to consider the same within twenty-one working days. The applicant, if successful, is then issued with a certificate of registration. Upon issuing a certificate of registration of verifier, the Commissioner for Climate Change must then enter the details of the verifier on the register. The certificate in question is valid for the period specified in the proof of accreditation.
The regulations also stipulate the grounds under which the Commissioner for Climate Change may revoke a certificate of registration of a verifier. These include where; the verifier violates any law of Uganda, the verifier obtained the certificate of registration by misrepresentation of material information, or the accreditation of the verifier under the standards recognized by the regulations has been revoked. In any case, the Commissioner for Climate Change must give the holder of a certificate of registration notice, stating the reasons in writing for the revocation or suspension of the certificate of registration. A verifier seeking to renew a certificate of registration ought to apply to the Commissioner for the same.
PART IV ― APPROVAL OF CLIMATE CHANGE MECHANISMS PROJECTS
A project proponent who wishes to participate in a climate change mechanism must, before commencing the climate change mechanism project, submit to the Minister a formal request. Such a request must state the name and contact details of the applicant, the legal nature of the applicant, the geographical location of the proposed project for the climate change mechanism, indicating the coordinates, where applicable; and any other information as may be required by the Minister.
The request to participate in climate change mechanisms must be accompanied by a project idea note and proof of registration of the project proponent in Uganda.
Once a request to participate in climate change mechanisms is submitted, the Minister for Water and Environment is mandated to consider it within twenty-one working days from the date of receipt of that request. Should the Minister require additional information, the project proponent must submit the requested information within seven working days.
Once the Minister is satisfied with a request to participate in a climate change mechanism, they may grant a letter of no objection to the project proponent. It is this letter of no objection that permits the project proponent to carry out feasibility studies on the proposed climate change mechanism project.
Should the Minister not be satisfied with the request to participate in climate change mechanisms as submitted, the regulations mandate him/her to refuse to grant a letter of no objection. In that case he or she must inform the applicant in writing, stating the reasons for the refusal. Where a letter of no objection is granted, the same is valid for a period of twenty-four months from the date of issue. Before the effluxion of time, the Minister is given powers to cancel a letter of no objection where a project proponent submitted false information or uses the letter of no objection for purposes other than the carrying out of feasibility studies.
Furthermore, a project proponent issued with a letter of no objection must, every six months, submit to the Minister a report of activities that the project proponent has initiated, carried out or completed. Should the project proponent fail to submit the progress report within six months as required, he or she commits and offence thereby and is liable on conviction, in the case of an individual, to a fine not exceeding UGX. 10,000,000 (Uganda Shillings Ten Million) or a term of imprisonment not exceeding two years, or both; or in the case of an entity, to a fine not exceeding UGX. 10,000,000 (Uganda Shillings Ten Million).
A project proponent who has commenced activities and has complied with the reporting obligations as intimated above can apply for extension of the validity of the letter of no objection, stating the reasons for the extension. This application must be submitted to the Minister at least three months before the expiry of the letter of no objection. If satisfied with the reasons for seeking an extension of validity of a letter of no objection, the Minister is mandated to grant the extension sought. The foregoing notwithstanding, the extension of the letter of no objection must not exceed twenty-four months at a time; and cannot be granted more than twice.
A project proponent must, during the period of validity of the letter of no objection, apply for approval of a climate change mechanism project. Additionally, the application must be accompanied by a project design document, a feasibility study or business plan, and a letter of recommendation from the relevant lead agency.
The regulations require a project proponent to submit a benefit sharing plan, together with the application for approval of a climate change mechanism project. The said benefit sharing plan must demonstrate equity, fairness, engagement and consultation of beneficiaries and other interested groups.
Upon receipt of an application for approval of a climate change mechanism project, the Minister is mandated to consider the same within twenty-one working days from receipt. In so doing, the Minister is enjoined to take into account the sustainable development criteria prescribed in the regulations. The criteria comprise environmental, social, economic, and technological elements and monitoring indicators. The elements are subdivided into sub elements. Project proponents are expected to provide baselines for each sub-element and a monitoring plan.
In case the Minister is of the view that the application for approval of a climate change mechanism requires further information, they must inform the applicant in writing, of the areas that require additional information. The applicant/project proponent must then provide the additional information required within fourteen working days from the date on which the request for further information was made.
Should the Minister be satisfied with the application for approval of a climate change mechanism, he or she may issue an approval of climate change mechanisms. Moreover, the Minister is given powers to impose conditions as he or she may deem necessary on an approval of a climate change mechanism.
The Minister may refuse to grant the approval for a climate change mechanism and where this happens, he or she must inform the applicant in writing, stating the reasons for the refusal. Notwithstanding the foregoing, a project proponent can reapply for approval of a climate change mechanism project.
Under the regulations, the approval for a climate change mechanism project granted is valid for the crediting period of the climate change mechanism.
A project proponent must, within twelve months after receiving an approval for a climate change mechanism project, commence the implementation of the climate change mechanism activities. Additionally, the project proponent must, within six months of commencing of the climate change mechanism project, notify the Minister in writing of the commencement of the project. Should the project proponent fail to commence the implementation of the climate change mechanism activities within twelve months as required, the Minister is mandated to cancel the approval of the climate change mechanism project.
Furthermore, a project proponent ought to submit a progress report on the project to the Commissioner for Climate Change in accordance with the reporting cycle specified in the project design document.
A project proponent must, during the course of the climate change mechanism project, prepare a monitoring report on the project emissions reduction in relation to baseline emissions in accordance with the project design document. This report must be submitted to the Minister once in each year. A project proponent who fails to prepare a monitoring report as stipulated, commits an offence, and is liable, on conviction; in the case of an individual, to a fine not exceeding UGX. 10,000,000 (Uganda Shillings Ten Million) or imprisonment for a period not exceeding two years or both; or in the case of an entity, to a fine not exceeding UGX. 10,000,000 (Uganda Shillings Ten Million).
A project proponent who wishes to cease carrying out a climate change mechanism project must notify the Minister within thirty working days before the intended date of cessation of the climate change mechanism project.
The regulations create latitude for the Minister to cancel the approval for a climate change mechanism project. This may happen for the following reasons; failure to commence the project activities within twelve months, non-compliance with the conditions of the approval, obtaining approval through misrepresentation or fraud, where it is necessary to protect human health or to prevent harm or further harm to the environment, cultural resources or affected communities due to a situation that was not foreseen, where continued implementation of the project activities is overridden by other public interests; or where information is brought to the attention of the Minister which could have precluded the approval, had it been made available prior to the issuance of the letter of approval.
An approval for a climate change mechanism project issued under the regulations is not transferable.
A project proponent of a climate change mechanism project must, upon receipt of the approval for a climate change mechanism, submit the documents relating to the climate change mechanisms project to a registered verifier for validation. The project proponent must then submit the validation report to the Minister in accordance with the approved project design document.
A project proponent must submit to a registered verifier the monitoring report for verification. Upon receipt of a verification report from the registered verifier, the project proponent must then submit a copy of the monitoring report and verification report to the Minister.
The regulations oblige the registered verifier to, on behalf of a project proponent, apply to the standards referred to in the project design document for issuance of the certified emissions reduction units. The standard to which the verification report is submitted must issue the project proponent with a certificate of certified emissions reduction units. The project proponent must, upon receipt of the certificate of certified emissions reduction units, lodge the certificate with the Ministry for purposes of entry into the register. The project proponent must use the certified emissions reduction units for the purpose stated in the project design document only and for the approval of a climate change mechanism.
The regulations stipulate that a person who owns a source of emissions reduction units or emissions reduction mitigation technology, is deemed to be the owner of the emissions reduction units. Where the person owns the source of emissions reduction units but does not own the emissions reduction mitigation technology, the ownership of the emission reduction units must be stipulated in the benefit sharing plan.
PART V―TRANSFER OF CERTIFIED EMISSIONS REDUCTION UNITS
The regulations stipulate that a project proponent who wishes to transfer certified emissions reduction units ought to, within thirty working days before the transfer, notify the Minister in writing stating whether the transfer is a domestic or international transaction—attaching proof of registration of the certified emission reductions, indicating the particulars of the person or country to whom the transfer is being made, stating the intended use of the verified emissions reduction units by the transferee; and indicating the amount of verified emissions reduction units being transferred. A project proponent who fails to notify the minister accordingly, commits an offence and is liable, on conviction―in the case of an individual, to a fine not exceeding UGX. 10,000,000 (Uganda Shillings Ten Million) or a term of imprisonment not exceeding two years or both; or in the case of an entity, to a fine not exceeding UGX. 10,000,000 (Uganda Shillings Ten Million).
A project proponent who transfers certified emissions reduction units to another person within Uganda must, within fourteen working days of the transfer, submit a report to the Minister. A project proponent who fails to do so, commits an offence, and is liable, on conviction―in the case of an individual, to a fine not exceeding UGX. 10,000,000 (Uganda Shillings Ten Million) or a term of imprisonment not exceeding two years or both; or in the case of an entity, to a fine not exceeding UGX. 10,000,000 (Uganda Shillings Ten Million).
A project proponent who wishes to carry out an international transfer of verified emissions reduction units must apply for authorisation from the Minister. The application referred to in sub-regulation (1) must state―proof of ownership of the emissions reduction units, proof of registration of the verified emissions reduction units, the particulars of the person or country to whom the transfer is being made, the intended use of the verified emissions reduction units of the transferee, the amount of verified emissions reduction units being transferred; and evidence of payment of the prescribed fee. The Minister is mandated to consider the application within thirty working days from the date of receipt. Where the Minister is satisfied with the information in the application, he or she is mandated to issue a letter of authorisation. It ought to be noted that this authorization is valid only for the transfer for which it was sought.
Notwithstanding the foregoing, the Minister may cancel an authorisation before the use of the verified emissions reduction units where; the holder of the authorisation contravenes any provision of the National Climate Change Act, Cap.182, the holder of the authorisation fails to comply with the conditions stipulated under the authorisation, the Minister considers it to be in the interest of the environment or in the public interest to cancel the authorisation; or the holder submitted false information or misrepresentation in the application.
Emissions reduction units that are transferred internationally for the purpose of meeting Nationally Determined Contributions commitments of another country and other international mitigation purposes, including Carbon Offsetting and Reduction Schemes for International Aviation attract a corresponding adjustment fee of 10% of the Internationally Transferred Mitigation Outcomes (ITMOs). Regarding other fees payable, application for approval of a climate change mechanism attracts a fee of UGX. 2,000,000/= (Uganda Shillings Two Million), payable by the project proponent. Registration of verifier attracts a fee of UGX. 6,000,000/= (Uganda Shillings Six Million), payable by the verifier. Inspection of the register attracts a fee of UGX. 3,000,000 (Uganda Shillings Three Million), payable by any interested person.
PART VI―GENERAL
The regulations oblige the Climate Change Department to keep and maintain a register of climate change mechanism projects approved by the Minister. In so doing, the Department must indicate against every such climate change mechanism project the following details; the name of the project, the physical location of the project, the details of the project proponent, registration of mitigation activities and voluntary carbon market projects, carbon market project activities, data for the greenhouse gas accounting of the Nationally Determined Contributions of Uganda and for international reporting; and information on transfers and retirements of all emissions reduction units.
A project proponent must, before making any planned changes to a climate change mechanism project, notify the Minister of the intended change, not less than sixty working days before the effective date of the change.
Every person has the right to access any information in the register, subject to the 1995 Constitution of the republic of Uganda and the Access to Information Act, Cap. 95.
A person aggrieved by a decision of the Minister made under the regulations can appeal to the High Court within thirty days of receipt of the decision in question. A person aggrieved by a decision of the Commissioner for Climate Change made under the regulations can appeal, in writing, to the Minister within thirty days of receipt of the decision.
Finally, a climate change mechanism approval granted before the commencement of the regulations will remain valid until the 31st day of December, 2027.
CONCLUSION
By and large, as Uganda embraces the new Carbon Markets Regulations—the timing couldn’t be more critical! We must take deliberate steps to; popularize and break down the concept of carbon markets, foster public participation and informed engagement, mitigate residual risks that often accompany market-based approaches, and most importantly, ensure Uganda is not left behind in unlocking the vast opportunities that carbon markets promise for climate finance, community development, and green innovation.
Howard Mwesigwa
Team Leader – Energy, Environment & Sustainability Department