COP29 Negotiators Agree on Global Carbon Market Mechanism

(Bloomberg) -- Climate negotiators secured a breakthrough on day one of the COP29 climate summit by agreeing on rules for a United Nations-administered global carbon market.

Proponents argue the new market will form the gold standard for emissions trading, unlocking billions in finance for emissions mitigation projects in the developing world. Buyers, mostly in wealthier countries, would be able to meet their climate goals by buying credits from projects that cut pollution. 

The rules, dubbed “Article 6.4” after the initial proposals under the landmark 2015 Paris Agreement, stipulate how countries should trade carbon credits through a UN-operated marketplace. They have been log jammed in recent years due to disagreements on their integrity, or how to make sure that any promised emissions reductions are additional and can be easily verified. 

COP29 President Mukhtar Babayev said today at the opening session at Baku in Azerbaijan that a final agreement on Article 6  is “long overdue” and called it critical to “ensure that protecting the planet pays.” Negotiators still need to agree on rules for Article 6.2, which sets the framework for bilateral trades.

“By matching buyers and sellers efficiently, such markets could reduce the cost of implementing NDCs by 250 billion dollars a year,” Babayev said. “In a world where every dollar counts, that is essential.”

NDCs, or nationally determined contribution, are the plan individual countries put foward to meet their share of the global targets enshrined in the Paris agreement.

Climate groups were hesitant in welcoming the new rules, which they said still had “significant issues.” Carbon Market Watch said that one key issue was over how projects would deal with so-called reversal risks, where stored carbon leaks back into the atmosphere, such as through fire.

Kicking off COP29 with a “back-door deal” sets a poor precedent for transparency and proper governance, said Isa Mulder, a policy expert on global carbon markets for Carbon Market Watch. “If these texts can be adopted in this way, where do we draw the line.”

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