The following article, written by Nicole Trent, is part of a series of reflections on the 2024 United Nations Climate Change Conference, also known as the 29th Conference of the Parties (COP29) that took place in Baku, Azerbaijan in November 2024. The series covers different aspects of the COP negotiations from Article 6 discussions and the Global Stocktake to commitments to technology advancements. All articles in the series were initially developed for Professor Achinthi Vithanage’s Advanced International Environmental Law course at the Elisabeth Haub School of Law at Pace University.
Introduction
As the 29th Conference of the Parties (COP29) of the United Nations Framework Convention on Climate Change (UNFCCC) convened, the discussions around climate finance took center stage. Climate finance “refers to local, national or transnational financing…that seeks to support mitigation and adaptation actions that will address climate change.” Climate finance requires voluntary cooperation from parties, therefore, it is difficult to discuss climate finance without also discussing Article 6 of the Paris Agreement. Article 6 is a pivotal section of the agreement that outlines mechanisms for international cooperation on carbon markets. If followed correctly, carbon markets can act as a key tool for reducing greenhouse gas emissions while also enablingcountries to meet their climate targets in a cost-effective manner. However, while Article 6 was implemented in 2015, its provisions still contain a great deal of ambiguity. Thus, COP29 provided parties with an opportunity to elaborate, expand, and take action on the Article’s provisions.
Progress and Challenges in Carbon Markets
The negotiations at COP29 were shaped with urgency. The focal point of the carbon market discussions was the operationalization of the Article 6.4 mechanism, often referred to as the Paris Agreement Crediting Mechanism. This framework allows countries to trade carbon credits generated from emission reduction projects, including actions outlined within a country’s Nationally Determined Contribution (“NDC”). The mechanism established a supervisory body to “incentivize and facilitate participation in the mitigation of greenhouse gas emissions by public and private entities authorized by a Party.” However, this was the extent of the discussion defining the board and its responsibilities; further guidance was necessary.
In preparation for COP29, the supervisory body overseeing the Article 6.4 mechanism finalized key standards, such as methodology requirements for assessing projects and standards for greenhouse gas removal activities. These standards aim to ensure transparency, integrity, and environmental effectiveness within the carbon markets. Certain issues still persist since the enactment of the Article in 2015, such as double-counting of credits and ensuring equitable access for developing nations, whom often lack the resources to participate fully in carbon markets.
COP29 Outcomes for Paris’s Carbon Markets Framework
One of the most ambitious goals of COP29 was to establish high-integrity carbon markets that can generate significant cost savings while driving real emissions reductions. Operationalizing Article 6 took form through an agreement for a centralized carbon market and transparency reports. The new rules allow countries to trade units amongst themselves which could potentially yield $250 billion in savings. Additionally, “the decision taken now allows for the transition of large volumes of old credits from the Clean Development Mechanism (CDM) to the new Paris Agreement Crediting Mechanism (PACM).” CDM units fell short of the high-quality carbon offsets countries needed, mainly through information asymmetry and qualitative barriers. have been discredited over time and through various assessments. EDF urges countries not to use these credits towards any commitments. Finally, in a significant step forward, the Article now formally acknowledges Indigenous Peoples within its text. While Indigenous Peoples are often excluded from climate discussions, achieving climate justice requires inclusive engagement and ensuring that resources are directed to the communities most in need.
Conclusion
The COP29 discussions of Article 6 highlight the transformative potential of carbon markets to drive climate action. Yet, the success of these mechanisms hinges on ensuring that all nations, particularly those most vulnerable, can benefit from this critical tool and will participate. It is essential to address the shortcomings of the COP29 decision to ensure the successful launch of the credit mechanism, particularly with COP30 approaching in November 2025. Many critics of COP29 and the Article 6 decisions highlighted concerns about the lack of transparency and insufficient incentives to encourage meaningful participation. A significant shortcoming within the agreement is the absence of penalties for countries that fail to comply with the rules or submit inconsistent reports. With the growing urgency of the climate crisis and its escalating impacts, the question remains: will this mechanism work, and will COP30 rise to the challenge?