In Baku breakthrough, COP clears carbon credit trade

• Countries assembled in Baku for the annual climate conference, COP29, voted to clear a much-delayed agreement to finalise a global carbon market.

Highlights:

• At the COP29 climate conference held in Baku, countries approved a long-awaited agreement to finalize a global carbon market. This system, rooted in the Paris Agreement's Article 6, will enable nations to trade carbon credits—certified reductions in emissions. The prices of these credits are influenced by emission caps set by individual countries.

Understanding the Global Carbon Market

What Is a Carbon Market?

• Article 6.2: Facilitates bilateral carbon trade between countries.
• Article 6.4: Focuses on establishing a global carbon market regulated by a UN body.
• The operational framework for the market has been under discussion since 2022, with delays caused by the need for transparency and credibility in carbon credit generation.

Outstanding Challenges and Resolutions

Ensuring Credibility in Carbon Credits:

• A key concern has been the genuineness and traceability of carbon credits. The UN supervisory body released draft standards addressing carbon removal and project assessments, though further refinements are still needed.

Accounting Issues:

• Ownership of Credits: If a developed country funds a project in a developing nation, who owns the credits—the financier or the host country?
• Eligibility Criteria: Determining when a renewable energy project’s credits can be traded.
• NDC Impact: Clarifying how credits generated from foreign-financed projects count towards Nationally Determined Contributions (NDCs).

India’s Climate Commitments:

• India has pledged to:
  • Reduce emission intensity by 45% from 2005 levels by 2030.
  • Create a carbon sink of 2.5–3 billion tonnes through additional forest and tree cover by 2030.

Progress and Optimism at COP29

Positive Outcomes in Baku:

• COP29 President Mukhtar Babayev hailed the breakthrough as a "game-changing tool" to funnel resources to developing nations.
• UN-approved carbon credits are expected to be operational by 2025.
• Article 6 negotiations could potentially save $250 billion annually by facilitating international cooperation.

Future Goals and Focus Areas

New Collective Quantified Goal (NCQG):

• An update to the existing $100 billion annual fund for developing countries to mitigate and adapt to climate change.
• The NCQG, set to take effect by 2025, remains a critical objective.

Emphasis on Climate Finance:

• UN Climate Change Executive Secretary Simon Stiell underlined that climate finance is not charity but a shared global responsibility. He stressed the urgency of an ambitious funding goal to enable swift emission reductions globally.

Prelims Takeaways

• Paris Agreement
• New Collective Quantified Goal (NCQG)