CoP’s hasty decision on carbon credits could do more harm than good

Nearly a decade after the Paris Pact was inked, countries have agreed to implement its clause that allows countries and companies to trade emissions. Article 6 of the Pact deals with carbon markets, which allow polluting entities to offset some of the damage they cause by buying credits from less polluting entities. The provision remained contentious. At CoP 28, last year, negotiations broke down after countries could not agree on what constitutes a good carbon removal credit. Last month, a UN body circulated a draft text that laid out the methodologies for framing standards for such projects. At CoP 29 in Baku on Monday, countries arrived at a consensus on these methodologies. The agreement aims to clear the air over transparency in emissions trading mechanisms and streamline carbon market operations.

Azerbaijan which is heading the current CoP has expressed the hope that carbon markets could reduce the cost of implementing the Nationally Determined Contributions for the Paris Pact by $ 250 billion every year. However, a section of experts have criticised the Baku meet for being hasty at arriving at a decision on a particularly contentious aspect of the Paris Pact on the first day, without extensive deliberations. The agreement does not adequately address issues related to double accounting. It does not lay out guidelines for assessing projects with reversal risks — for example, carbon absorbed in a natural sink can be released into the atmosphere after a few years. Moreover, the agreement says nothing about protecting the livelihoods of communities displaced by ostensibly green projects.

Historically, poor outcomes have given carbon markets a poor reputation. The Clean Development Mechanism developed under the Kyoto Protocol fell apart because all parties lost their faith in the system. In recent years, with several developed countries setting net zero targets carbon markets seem to have regained traction. Therein, also lies a major concern: Developed countries could put their money in offsetting schemes without undertaking adequate genuine decarbonisation initiatives. This could put a large part of the burden of mitigating global warming on developing countries. After the pact on Article 6, CoP 29’s main task will be to ensure a substantive decision on climate finance. Else, the Paris Pact faces the risk of going the way of its predecessor, the Kyoto Protocol.