COP29 makes haste to activate the global carbon credits market

Much-awaited guidance on global carbon markets has emerged from early talks at COP29. Some hail it an early win, but others say it is too hasty.

Article 6 of the 2015 Paris Agreement laid out the ways countries could trade carbon emissions, offering two methods. Article 6.2 allows countries to engage in their own carbon transfer agreements, while Article 6.4 supports trading mediated by the UN.

But for years negotiations on how they can be implemented have gummed up adoption.

COP29’s earliest activity has seen some key details of Article 6.4 now confirmed. Negotiators have agreed on standards for carbon removal projects and improvements to the methodology for developing them. This could spur more funding for the developing world, arguably a central tenet of the conference.

Yalchin Rafiyev, COP29 lead negotiator, notes it has taken ten years to negotiate the Article 6.4 standards for carbon credit projects and mechanisms for updating them. When implemented in climate plans, it is expected to provide direct resources of $250bn/year to the developing world. According to the International Emissions Trading Association (IETA), this value is expected to increase to $1tr/year by 2050.

Maria Al Jishi, chair of the Article 6.4 supervisory body (SB), said the agreed standards go for “high hanging fruit, not low” because they aim to support projects that are very ambitious, but not financially viable without the mechanism. She added they underpin a step change in “fast but safe” carbon crediting.

While credits are not a substitute for deep cuts in carbon, the 6.4 mechanism will provide a supply of them that is aligned with the Paris Agreement, Al Jishi said.

Martin Hession, vice chair of the Article 6.4 supervisory body, added the standards would back transformational projects, not just low cost ones.

Al Jishi said the consensus reached sets the methodology for the development of more guidance, which will be ready next year. She expects 6.4 carbon credits to be issued “very soon”, she said.

Welcoming the news, the IETA said: “The new standards will give market participants the certainty they need to proceed to develop projects around the world that will generate millions of tonnes of mitigation outcomes.”

But with the announcement coming so early in the conference, some deem the developments premature. 

Erika Lennon, an attorney at the Center for International Environmental Law (CIEL), said: The “rogue move … is hardly a win for people or the planet” and “sets a dangerous precedent for the entire negotiation process”.

However, Al Jishi said the SB had followed the mandate of the CMA – the body that oversees COP’s work to deliver the Paris Agreement. She also noted the safeguarding package, including an appeals and grievance procedure, a sustainable development tool and third-party verification of projects, to deal with issues that might arise from carbon credit projects – for example, human rights abuses from the displacement of people from sites. 

In a press conference, Rafiyev said: “There is more work to do on Article 6, and the process allows for all perspectives to continue to be heard.”

In the weeks running up to the conference, the Article 6 supervisory body and stakeholders met for five straight days of negotiations, reaching many agreements on key standards before reconvening in Baku.

Further Article 6-related challenges remain for COP29. These include calls for progress in the way credits are monitored into the future, and how risks are assessed, for example, the sites of nature-based projects can be exposed to fires that release carbon.

Interested parties are also seeking clearer standards on insuring credits.