Azerbaijan’s COP29 presidency claimed a quick victory at the start of the climate summit when countries adopted, without any debate, highly anticipated – and controversial – rules laying the groundwork for a new UN carbon market .

But the approval of documents setting out the main guidelines – or “standards” – for the development of carbon credit projects and carbon removal activities has sparked strong opposing reactions.

For some, including supporters of carbon credits and the COP29 presidency itself, the late adoption of the first day of negotiations in Baku constituted a major “breakthrough” that ended a years-long impasse and opened the path to raising hundreds of billions of dollars. for climate action.

“This will be a revolutionary tool for directing resources to the developing world,” said COP29 President Mukhtar Babayev.

U.N. climate chief Simon Stiell told reporters at a news conference Tuesday that “this is not just a piece of obscure U.N. bureaucracy,” but something something that could help countries implement their climate plans “more quickly and at lower cost”.

Azerbaijan’s COP presidency put a number to this claim, saying “cross-border cooperation” under Article 6 of the Paris Agreement using carbon credits could reduce the cost of implementing national climate plans of 250 billion dollars each year.

This figure comes from a theory modeling exercise conducted in 2019 by the International Emissions Trading Association (IETA), a pro-carbon market group that counts among its members several of the world’s largest fossil fuel companies, including Saudi Aramco, ExxonMobil, Shell and BP.

Climate Home spoke to a carbon market expert who cast doubt on the $250 billion figure because many of the assumptions made in the study may now be outdated.

“Rushed” approval

Many close observers of carbon market negotiations strongly opposed the “unprecedented” decision to greenlight the rules at the opening plenary of COP29, bypassing the scrutiny of negotiators and groups of observers. They expressed concerns not only about the risk that the resulting carbon credit projects would produce questionable emissions reductions and weigh on climate ambitions, but also about the precedent the decision sets.

“This decision should not have been made hastily without providing space to adequately discuss the issues,” said Trishant Dev, program manager for carbon markets at the Center for Science and Environment (CSE) based in Delhi. “Especially since, in previous years, several countries had protested against the unsuitability of these standards.”

Maria AlJishi, Chair of the Article 6.4 Monitoring Body, speaking after the adoption of a decision on carbon markets. Photo: UN Climate Change – Kiara Worth

Although it surprised many on Monday, the accelerated adoption of the rules was a strategic decision. made almost a month ago by the supervisory body responsible for supervising the development of the credit mechanism of Article 6.4.

After several days of drawn-out discussions, this technical group decided to directly adopt the guidance on carbon credits and carbon removal methodologies as “standards”, rather than presenting them as a proposal for discussion at the COP .

Government negotiators were therefore presented with a comprehensive document that they could accept or reject as a whole without reorganizing its content. They opted for the first solution, with a strong push from the Azerbaijani presidency which made the “operationalization” of Article 6 one of its main objectives for the climate summit.

Still work to do

While the COP29 decision rubber-stamped the Oversight Body’s approval, countries left the door open for a request from the technical committee to add more provisions or stronger safeguards on top of the rules adopted. Negotiators will discuss over the next two weeks whether and how to move this forward.

But whatever the outcome of this COP, carbon market experts also urged caution over the impact of Monday’s decision on long-term efforts to make the UN carbon market a reality, as several key elements still need to be agreed before credits can be exchanged. .

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“This was certainly one of the most important steps in terms of implementing Article 6.4,” Jonathan Crook, policy expert at Carbon Market Watch, told Climate Home. “However, it’s not like from January we will see this market become operational. We are a long way from that.”

Technical committees operating within the Monitoring Body must still develop and approve a series of “tools” that carbon credit project developers will apply to demonstrate that emissions reductions or removals are credible, sustainable and create no unintentional damage. Additionally, the ledger where the credits will be physically exchanged has not yet been created.

“I wouldn’t expect this to be finished until the end of next year, if not 2026,” Crook said.

“Unwanted” credits relaunched

The first credits likely to be traded under the new UN carbon market are old offsets initially developed under the Clean Development Mechanism (CDM) of the Kyoto Protocol era, from early 2000s. More than 1,200 CDM projects are currently awaiting approval from their host country to transition to the new system.

Nearly four-fifths of these are renewable energy activities, such as solar plants or wind farms, which experts say produced “unnecessary” offsets because revenue from carbon markets was not needed during their construction and therefore do not produce “additional” emissions. reductions.

Maria AlJishi, chair of the Monitoring Body, told a press conference in Baku on Tuesday that the adoption of the standards on the opening day of COP29 would allow the process of transferring CDM projects to the mechanism of article 6.4.

“This means we will soon be able to see the first broadcast of 6.4 credits,” she added.

(Reporting by Matteo Civillini; editing by Megan Rowling)