Global Carbon Market Approved at COP29, Paving the Way for International Carbon Trading Under Paris Agreement’s Article 6
Global Carbon Market Approved at COP29: At COP29, hosted in Baku, Azerbaijan, countries finalized a landmark decision to establish a global carbon market under Article 6 of the Paris Agreement, marking a significant step forward in climate action. This long-awaited agreement provides a structured system for trading carbon credits between countries, aimed at supporting global emissions reduction targets.
The global carbon market, finalized on November 12, 2024, offers two pathways for participation: bilateral trading between countries under Article 6.2, and a universal market mechanism under Article 6.4. The carbon credits, certified reductions of carbon emissions, will have prices influenced by emission caps, with trade regulated by a United Nations supervisory body.
Negotiations to implement Article 6 have been ongoing since the Paris Agreement’s adoption, with final details, especially on accounting practices, being ironed out at COP29. Ensuring the integrity of carbon credits was a key point of discussion, with particular emphasis on the transparency and credibility of projects contributing to emission reductions. The approved standards for carbon removal projects and their monitoring aim to make carbon credits both verifiable and enforceable.
One major question resolved at the summit concerned cross-border financing and accounting. For example, if a developed country funds a carbon-offsetting project in a developing country, like afforestation, how should the resulting credits be accounted? COP29 delegates agreed on frameworks for credit eligibility, allowing credits generated through foreign investments to be counted towards the investing country’s emission reduction targets under certain conditions.
Indian delegation officials expressed cautious optimism about the agreed text. As part of its nationally determined contributions (NDC), India aims to reduce emissions intensity by 45% from 2005 levels and to create an additional carbon sink of 2.5-3 billion tonnes through forest and tree cover by 2030.
“This will be a game-changing tool to direct resources to the developing world,” said Mukhtar Babayev, COP29 president, emphasizing the potential of the carbon market to fund climate action in lower-income nations. The finalized Article 6 could reduce the cost of national climate plans by $250 billion per year by enabling global cooperation.
A broader climate finance target, known as the New Collective Quantified Goal (NCQG), was also a central topic at COP29. This target aims to update the previous commitment of $100 billion annually from developed to developing countries. U.N. Climate Change Executive Secretary Simon Stiell stressed the importance of a new financing goal, stating that climate finance is not charity but essential for achieving global climate objectives. The NCQG is expected to take effect in 2025.
As the global carbon market prepares to roll out its first U.N.-sanctioned credits in 2025, COP29 marks a pivotal moment in climate policy, with a concrete mechanism now in place to facilitate international collaboration on emissions reduction.
