(Bloomberg) -- Negotiators at the COP29 climate summit in Azerbaijan landed a carbon credits agreement after almost a decade of deliberation. The decision will pave the way for more trading activity under a new market overseen by the United Nations.
“We have ended a decade-long wait,” said COP29 President Mukhtar Babayev. “Climate change is a transnational challenge and Article 6 will enable transnational solutions.”
Securing a deal on the latest set of rules for Article 6 of the Paris Agreement was a top priority for the Azeri COP29 Presidency. On day one of the summit, negotiators rushed through a deal advancing rules under Article 6.4 on how a new UN-backed global crediting mechanism will function and adopted additional rules on Article 6.2 on Saturday.
The rulebook allows for countries to trade carbon credits with each other, as well as companies. Critically, it details an accounting system for how a country selling a credit can deduct that off its national carbon inventory to prevent the same credit from being used twice.
The new rules ironed out a number of unaddressed issues including provisions for a robust accounting of credits that countries can use against their climate targets, so-called internationally transferred mitigation outcomes or ITMOs, as well as for more detailed information from countries on how the credits they trade meet general market standards around environmental integrity.
A number of countries, including Singapore, Switzerland, Thailand and Japan, have already struck agreements to trade ITMOs before finalization of the rulebook. In practice, the rules will almost certainly evolve in the coming years.
Industry campaigners, meanwhile, are concerned the rules set a low bar for countries and may facilitate the trading of credits that have little environmental value. “The flaws of Article 6 have, unfortunately, not been fixed.” said Isa Mulder, policy expert at Carbon Market Watch. “It seems countries were more willing to adopt insufficient rules and deal with the consequences later, rather than prevent those consequences in the first place.”
The voluntary carbon market, a separate existing system for trading credits, has been the target of greenwashing allegations because many of the units haven’t delivered the promised reduction in planet-warming emissions. That’s caused buyers, including some of the world’s largest companies, to exit the market or seek higher-quality and more expensive credits that remove carbon dioxide from the air.
Already Article 6.2 has been designed through the United Nations system with limited safeguards, allowing countries to effectively agree with each other over what counts as a high-quality unit. Some early deals are already leading to questions. Switzerland's deal with Ghana for credits tied to clean cookstoves promises 3.2 million tons of emissions reductions, which a nonprofit Alliance Sud says is overestimating the carbon savings by 79%.
“Baku is infamously now an offsets COP, delivering carbon markets with loopholes and a lack of integrity,” said An Lambrechts, biodiversity policy expert at Greenpeace. “But all is not lost. At COP30 in Belém, in the Amazon, it’s time to connect the climate and biodiversity fights together.”
--With assistance from John Ainger.
(Updates throughout after Article 6 was agreed at the COP29 climate summit on Saturday)
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