A new set of global carbon credit trade market standards has been agreed to during the United Nations Climate Change Conference in Baku, Azerbaijan, or COP29, following years of deadlock. Some analysts say that under the guidelines, a bigger number of entities could join a more regulated voluntary carbon credit trading system to reduce emissions.
Known as Article 6.4, delegates agreed on the rules for establishing a system that allows trade in carbon credit between individual countries and companies, under the supervision of a centralized U.N. body. These include how to validate, verify and issue credits.
Another option, known as Article 6.2, allows countries to set their own terms to trade carbon credits bilaterally. Countries weren’t able to agree on the standards for either option before COP29.
Under the Paris Agreement to limit global warming to 2 degrees Celsius compared to pre-industrial levels by the end of the century, countries have committed to green goals, including slashing carbon emissions.
The new deal could “reduce the cost of implementing national climate plans by $250 billion per year by enabling cooperation across borders,” the COP29 presidency said in a statement, which hailed the outcome as a “game-changing tool to direct resources to the developing world.”
Controversial move
The agreement is more a recognition from countries of the new rules, but negotiations are still ongoing and details are still being worked out so they are not fixed, according to Je-liang Liou, researcher at the Chung-Hua Institute for Economic Research in Taiwan.
“In the previous COP, the supervisory body usually drafted a bill for countries to discuss and decide if they approve it or not. But this year, the body of Article 6.4 approved their own draft before COP29 started so it became more of a situation for countries to give their votes,” Liou explained to VOA.
The hasty process drew ire from some countries’ negotiators, including Tuvalu’s. It said that “adopting decisions without prior consultations by the governing bodies does not reflect the Paris Agreement’s party-driven process,” according to the International Institute for Sustainable Development.
Some climate advocates also said the agreement isn’t a success, as regulations have been an issue for voluntary carbon credit trading in the past.
“We should be very concerned in the Global South, especially if we don’t have sufficient safeguards in place to protect against the possibility of land grabs, human rights abuses, threats to subsistence and forest-based livelihoods, gender and indigenous interests,” Tara Nair van Ryneveld, climate policy coordinator at the Southern African Faith Communities’ Environment Institute, or SAFCEI, told VOA News.
She cautioned against carbon credit trading as part of “false solutions” that distract from work to be done on phasing out fossil fuels.
Last year, Human Rights Watch found that the carbon offsetting projects that Cambodia’s government agreed to, the Southern Cardamom REDD+ Project, violated the rights of the indigenous Chong people. Authorities reportedly made decisions on incorporating villages into a national park two years before consulting the community.
Rights abuses aside, amid the prospect of companies joining in for carbon trading, voluntary carbon offsetting projects from companies were revealed to be ineffective in serving their purpose, according to a 2023 investigation from The Guardian newspaper and trade watchdog Corporate Accountability.
Nearly four in five of the top carbon offset projects are considered “worthless” as they can’t guarantee cutting greenhouse gases, the report found.
Despite the criticisms, Article 6.4 can be a “push toward stronger regulation and accountability” and bolster transparency in climate finance, according to Luca Taschini, director of the Centre for Business, Climate Change and Sustainability at the University of Edinburgh.
Expanded inclusion
For non-U.N. member regions like Taiwan that have long been excluded from discussions and the country-to-country trading system, the expanded system under Article 6.4 can be positive news, Liou said. This allows companies to invest in projects, potentially allowing its participation, he added.
“Taiwan isn’t eligible for bilateral carbon credit trading because it’s not a U.N. member party, so it wasn’t able to join in directly to purchase credits from developing countries and fulfill our climate commitment, but Article 6.4, compared to Article 6.2, allows Taiwan a higher chance to trade carbon credits internationally,” he elaborated.
Liou said the expanded carbon credit system - if set up and starts next year - can boost governments’ climate ambitions, amid nations’ looming submission deadline for a new climate plan by February 2025.
Self-ruled Taiwan imports almost all of its energy from other countries. Under its climate goal to source 15 percent of its power from renewables by 2025 and reaching net-zero in 2050, slashing emissions in the medium term can be challenging and carbon trade can be beneficial for the island, according to Liou.
Taschini said that Article 6 allows countries to invest in actions beyond their borders and raise global ambition.
“This is because, even if all NDCs [national determined contributions] are met, we will still fall short of our climate goals,” he explained.
The year’s largest climate conference is set to end November 22.
Some information for this article came from Reuters.
