COP29's global carbon market push is expected to boost carbon trading. (Photo: UN Climate Change - Kiara Worth)
On the opening day of the United Nations Climate Summit (COP29), a major breakthrough was achieved in global carbon market negotiations.
Member countries endorse a United Nations-backed carbon credit trading mechanism. Under this new framework, countries can use carbon credits earned through assisting other nations in reducing emissions as part of their own Nationally Determined Contributions (NDCs). However, some experts have criticized the summit for rushing the process, setting a controversial precedent for "backdoor" deals.
COP29 approves key framework for global carbon market
A pivotal provision for establishing a global carbon market was Article 6.4 of the Paris Agreement, which had previously faced challenges due to concerns over methodology and carbon removal practices. With increasing global pressure to reduce emissions, the Supervisory Body presented a new set of standards in October 2024, which were reviewed and approved at COP29.
With the backing of the United Nations, the credibility of carbon market trading is expected to be strengthened. COP29 Chair and Minister of Ecology and Natural Resources of Azerbaijan, Mukhtar Babayev, stated that “by matching buyers and sellers efficiently, such markets could reduce the cost of implementing NDCs by $250 billion a year.”
Sherry Hu, a carbon market researcher at RECCESSARY, believes that the Article 6.4 mechanism, under strict UN oversight, ensures the environmental integrity of carbon credits. This is expected to attract more businesses and countries to engage in carbon trading, fostering investment in climate initiatives, particularly in renewable energy and carbon capture sectors. The predictability provided by the mechanism reduces market risks, encouraging long-term investment.
Article 6.4 of the Paris Agreement has been passed, expected to attract more companies and countries to participate in carbon trading. (Photo: lefteye81/Pixabay)
New framework faces criticism for procedural issue
However, the approval of this framework has sparked concerns over the adequacy of the discussions leading up to it. Erika Lennon, Senior Attorney at the Center for International Environmental Law (CIEL), criticized states allowed this “rogue move” from the Supervisory Body to prevail in the quest to start COP29 with a “win” But this is hardly a win for people or the planet.”
Isa Mulder, Policy Expert at the independent think tank Carbon Market Watch, expressed concerns that the lack of proper deliberation undermines the procedural integrity of the UN Climate Summit. He described the "backdoor" deal as setting a bad precedent for transparency and proper governance.
The passage of Article 6.4 is only a first step in building a global carbon market, Sherry Hu noted. Challenges such as establishing a global carbon registry, setting standards for carbon removal, and preventing double counting of carbon credits will become more complex as more countries and carbon credit programs participate. Double counting risks could arise, especially when carbon credits move from voluntary markets to regulated markets, or when they are transferred between countries.
Furthermore, Hu pointed out that establishing consistent methodologies and baseline settings will be critical. A lack of careful oversight could result in a decline in carbon credit quality, ultimately affecting market credibility. And developed countries and resource-rich corporations may dominate the development of the carbon market, potentially marginalizing developing countries and exacerbating resource distribution inequalities—another potential risk to watch in the future.
Source: Carbon Herald、Guardian、CIEL
