Negotiators at the COP29 climate summit in Azerbaijan are close to finalizing a carbon credits agreement after nearly a decade of deliberations. This decision, if approved, will enable greater trading activity in carbon markets under the oversight of the United Nations. The latest progress revolves around implementing Article 6 of the Paris Climate Agreement, with a particular focus on establishing rules for a new global carbon crediting mechanism and allowing countries to trade credits to meet national emissions reduction targets.
A key priority for the Azeri COP29 Presidency was securing a deal on these rules. On the first day of the summit, a provisional agreement was reached on how the UN-backed global crediting system would operate. By late Friday, further details were published concerning the more specific rules under Article 6.4 and Article 6.2, which outline how countries can trade credits and account for these transactions to prevent double-counting of carbon reductions.
Lambert Schneider, a research coordinator at Oeko-Institut, hailed the latest developments as an “important achievement,” as they addressed several unresolved issues, including the need for strong accounting measures. These measures ensure that credits used by one country to meet its climate goals, known as internationally transferred mitigation outcomes (ITMOs), adhere to environmental integrity standards.
However, concerns persist regarding gaps in the new rules. Critics, such as Schneider, pointed out that the framework lacks meaningful consequences for countries that inaccurately report carbon credits. Instead of halting trade in cases of discrepancies, the system would merely flag the inconsistencies without mandating corrective action.
Despite these limitations, several countries, including Singapore, Switzerland, Thailand, and Japan, have already struck ITMO agreements ahead of the finalization of the rulebook. Experts believe that the latest clarity on carbon market regulations will foster further development in this sector.
However, industry observers are raising alarms about the potential for abuse. Campaigners argue that the low standards set by the rules could facilitate the trading of credits with minimal environmental value, thus undermining the carbon market’s credibility. This has already been a major issue in the voluntary carbon market, where numerous credits have been accused of not delivering promised emissions reductions, prompting major companies to withdraw or seek higher-quality alternatives.
Isa Mulder, a policy expert at Carbon Market Watch, expressed concern that the new framework offers little improvement, stating that even with tweaks at COP29, it will not be enough to ensure the high quality of credits traded. Early deals, such as Switzerland’s agreement with Ghana for clean cookstove credits, are also under scrutiny, with some watchdogs claiming these projects overestimate emissions reductions.
Jonathan Crook, policy lead on global carbon markets at Carbon Market Watch, described the new rules as “disappointing” and suggested they open the door for market manipulation. If adopted, the texts would place significant responsibility on independent observers to monitor market participants. Crook warned that Article 6.2 could become a regulatory “Wild West,” lacking strong safeguards to ensure market integrity.
As COP29 continues, the focus will remain on how these rules evolve and whether they can deliver the robust framework needed to combat climate change effectively.
