COP29: What are the “approved” rules on carbon markets?

It had been baptized as the climate finance conferencebut two days after its start, the Baku COP29, Azerbaijan, yields the first result of this UN climate summit. On the afternoon of Monday, November 11, some key regulations were given the green light for carbon marketsprovided for in Article 6 of the Paris Agreement (reached at the 2015 COP in the French capital), one of the most complex of the many climate-related issues. Carbon market means the trade of voluntary carbon offsets by investing in greenhouse gas programs. For example, in reforestation plans. But let’s try to understand what happened at COP29 in Baku, starting at the beginning.

What is Article 6 and what are carbon markets?

Article 6 of the Paris Agreement is basically a mechanism of carbon trading between countries. There are two key points, 6.2 and 6.4. According to the first, Countries can cooperate bilaterally with each other with emissions credit trading agreements (equivalent to what are called “carbon credits” on the open market). In point 6.4, the basic principle is the same, but a new mechanism is being built to replace the clean development system of the Kyoto Protocol. In practice, a new global carbon market is createdwhose operation is regulated by the United Nations and, in particular, by the so-called “oversight body”.

Standards are needed for the operation of this architecture. that were missing until this monday (even though the Paris Agreement dates back to 2015 and has been in force since 2020). But who “approved” what? It is a complicated issue, like everything in the COP. Jacopo Bencini, Carbon Market researcher hub from the European University Institute in Florence, is one of the leading experts on the subject in Italy. Bencini provides WIRED with the key points of the negotiation process. Starting with the quotes around the word “approved.”

“In practice, the supervisory body has been delegated by the COP to develop standards and methodologies,” according to the expert. As in 2023 the conference had not approved any of the proposals presented, it then decided to technically adopt and on the basis of that mandate a set of standards and methodologies for then propose them to the COP in Baku “for approval”, that is, for the assembly to “take note”.

A diplomatic stalemate was looming, Bencini continued. And he adds: “To get out of the quagmire, COP29 President Mukhtar Babayevput on the table on Monday, on his own initiative, a draft decision in which the assembly took note of the adoption of the standards technically prepared by the control body. It was precisely this decision that the COP adopted.” It is the beginning of a new stage.

Why are standards necessary?

In reality, the expert continues, there was already a global carbon market; Since the Paris Agreement, in the absence of a decision on 6.4, the world moved. There are already projects on the ground, rating agencies doing assessments, there are also private multi-stakeholder initiatives. A fortuitous flowering that has given rise to scandals, like the one that uncovered The Guardian last year.

The rules served to the market (still small, billion dollars a year: but in 2050 it could reach hundreds of billions) would grow efficiently. Today it remains small and fueled by the demand of a few large companies: in recent years, they buy credit giants like Microsoft and Delta Airlines. Tesla sold billions years ago, bolstering its accounts.