The COP29 conference in Baku, Azerbaijan, has reached a significant decision establishing global standards for carbon trading under Article 6.4 of the Paris Agreement. After years of deliberation, negotiators have finally developed a framework for carbon markets, potentially unlocking billions in climate finance. However, previous issues of greenwashing, double counting, and under-reporting have created scepticism around these markets.
The UNFCCC oversees international carbon markets through established protocols. The Kyoto Protocol introduced the Clean Development Mechanism (CDM), enabling industrialised nations to support emission reduction in developing countries through Certified Emission Reductions (CERs). Article 6 of the Paris Agreement enhances international cooperation in reducing greenhouse gas emissions, with Article 6.4 establishing a successor to the CDM. The supervisory body at COP29 in Baku has significantly advanced this new UN carbon market system, allowing government-approved international carbon credit trading. This positions UNFCCC as a crucial regulator of global carbon markets. The new structure could reduce national climate plan implementation costs by approximately $250 billion annually, according to climate negotiators.
For developing nations, these carbon markets represent substantial investment opportunities in renewable energy, reforestation, and infrastructure resilience. These countries, despite their minimal emissions contribution, face severe climate impacts and have advocated for meaningful benefits from this mechanism.
India’s position in the carbon market is crucial for achieving its 2070 net-zero target. The Energy Conservation (Amendment) Act of 2022 and COP29’s decisions could shape India’s national carbon trading platform. The India Carbon Market project focuses on establishing regulatory frameworks for carbon trading and credible MRV mechanisms. As the third-largest emitter and a renewable energy leader, India presents an opportunity to demonstrate sustainable development in a rapidly growing economy.
Challenges persist in the global carbon market. Previous CDM credits often lacked integrity, failing to deliver genuine emissions reductions. The equilibrium between fairness and effectiveness remains unresolved. Developing nations have expressed concerns about carbon markets potentially becoming a mechanism for wealthy nations to transfer climate responsibilities. Effective implementation requires strong governance, inclusive decision-making, and trust. While COP29’s efforts to standardise carbon markets represent progress, implementation remains crucial.
Success requires rigorous monitoring, anti-corruption measures, and appropriate carbon credit pricing. COP29 offers an opportunity to rehabilitate carbon markets’ reputation. All stakeholders must ensure the system delivers genuine results. These markets could significantly impact emissions reduction and provide developing nations with essential climate finance. The international community must now transform this framework into practical action, addressing both carbon compensation and historical inequities in climate policy.
(The writer is a sustainability practitioner based in USA and an alumni of Columbia University, New York)
