COP29 in Baku begins with an agreement on the global carbon credits market

The inaugural day of Cop29 marks a step forward on the international carbon credits market.But without a real debate.

• COP29 in Baku begins with a step forward on Article 6.4 of the Paris Agreement.
• New standards to regulate the global carbon credit market have been approved.
• In fact, however, the text was already ready and there was no room for discussion.

It was an uphill start to COP29, the twenty-ninth Climate Conference of the Parties in Baku, Azerbaijan, from 11 to 22 November 2024.Despite defections and delays, however, this year too - as in 2023 - a result has been achieved already on the first day of negotiations. At COP28 in Dubai it was the turn of the loss and damage fund, this year the protagonist is Article 6 of the Paris Agreement which regulates the global market of carbon credits.

What does Article 6 of the Paris Agreement provide?

The first day of negotiations in Baku focused onArticle 6 of the Paris Agreement, whose goal is to spur state-to-state collaboration to reduce emissions.The mechanism is that of carbon credits, the so-called “rights to pollute”:Simply put, a state that remains below a certain emissions threshold earns credits that it can transfer to another state that has instead generated more greenhouse gases than it should.By doing so, decarbonizing becomes economically advantageous.

Given that each country is required to submit its own emission reduction plans (nationally determined contributions, ndc), article 6.2 of the Paris Agreement ensures that they can agree with each other to exchange these mitigation results.Technically we talk about Itmos, Internationally transferred mitigation outcomes.It works roughly like this:State A buys a credit from State B and the latter spends the money received on a project that has a positive impact (such as the installation of solar panels or the electrification of public transport).State A, at that point, can account for the emissions saved within its own ndc, as it would have done for a project at home.Or, it can sell them to another state that needs them.The important thing is not to count them twice (in jargon we speak of double counting).So far, around ninety agreements of this type have been signed, but the only one that has been completed is the one between Switzerland and Thailand.

Up to this point we are only talking about bilateral agreements between states.THE'article 6.4 of the Paris Agreement instead plans to establish a new one international carbon credits market, supervised by the United Nations, in which public and private entities can participate.

What was decided on the global carbon credits market

After years of impasse, the inaugural day of Cop29 marked an important step forward on international carbon credits market.“By efficiently matching buyers and sellers, this market could reduce the cost of implementing NDCs by $250 billion per year,” said the COP29 president. Mukhtar Barbayev.In this context the buyers are the industrialized countries, lagging behind in their decarbonization journey, and the sellers are the developing countries who need resources to protect their CO2 reservoirs (such as forests) or to develop clean energy projects.

The two new standards for the carbon credit market concern respectively the removal of CO2 and it development and evaluation of projects.The first theme, in particular, appears rather controversial.“The text leaves many questions unanswered, for example on how to manage projects whose benefits risk being cancelled:for example, storing CO2 in a natural reservoir that could release it after a few years", explains Isa Mulder, which is participating in COP29 in Baku on behalf of Carbon Markets Watch.If then the representatives of the indigenous peoples they fear the "selling off" of their lands for the planting of trees, there are also those who fear that in the cauldron of CO2 compensation they will also end up experimental technologies with yield still uncertain.

However, all this was not discussed.In fact, the procedure was rather irregular, because the two new standards for the carbon credit market they actually were already ready.They had been prepared in recent weeks by the technicians ofsupervisory body on the mechanism of Article 6.4, without proposing – as is usually done – multiple alternative versions to choose from.This sped up the process but, in fact, drastically limited it space for debate.According to Erika Lennon, lawyer for the Center for international environment law, this represents “a dangerous precedent for the entire negotiation process”.