Delegates at the COP29 U.N. Climate Summit on November 12, 2024, in Baku, Azerbaijan.
| Photo Credit: AP

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

Also Read: COP29 Day 2 LIVE updates

Such a market would allow countries to trade carbon credits – certified reductions of carbon emissions – among themselves and whose prices are determined as a consequence of emission caps imposed by countries.

The market itself follows from a section in the Paris Agreement, called Article 6. Sub sections with the Article spell out how countries can bilaterally trade carbon among themselves (Art 6.2) and participate in a global carbon market (6.4).

Though most of the necessary nuts and bolts to make operational such a carbon market supervised by a United Nations body have been in place since 2022, there were several niggles, particularly on ensuring that the carbon credits generated are genuine and its antecedents are transparent.

There have been several rounds of talks involving the Parties (country signatories to the Paris Agreement) on these outstanding concerns that are raised. Last month, a supervisory body of the United Nations, which would be the ultimate arbitrator of the market, set out a draft text that laid out the standards for carbon removal and assessing projects.

A senior official who is part of the Indian delegation told The Hindu days before the COP 29 commenced, that even this version was not “entirely acceptable” but was something that could be ironed out.

Key issue

A key issue surrounding carbon markets is accounting.

Say, a company in a developed country finances an afforestation project in a developing country, and this theoretically prevents 1,000 tonnes of carbon from being released into the atmosphere. Would this saved carbon be part of the developed country’s ledger of saved credits when the actual prevention is happening elsewhere? At what stage of a renewable energy project’s life-cycle will a generated credit be considered eligible for trade? Can countries claim credits generated in their own borders, financed by foreign companies, and count them towards their Nationally Determined Contributions (NDC)?

India, as part of its NDC, has committed to reduce emissions intensity by 45% by 2030 from 2005 levels and create a carbon sink of 2.5 to 3 billion tonnes of additional forest and tree cover by 2030.

In the run-up to COP 29, there was general optimism that a global carbon trading mechanism could be a reality and that the first U.N.-sanctioned carbon credits would be available in 2025.

“This will be a game-changing tool to direct resources to the developing world,” Mukhtar Babayev, COP29 president, said in a statement. “Following years of stalemate, the breakthroughs in Baku have now begun. But there is much more to deliver,” he added.

Finalising Article 6 negotiations could reduce the cost of implementing national climate plans by $250 billion per year by enabling cooperation across borders.

“The decision on Article 6.4 is a major step forward. There is still some time till the rubber hits the road as now the methodologies for implementing have to be finalised but this should be fairly soon. However, this should not take the focus away from the New Collective Quantified Goal (NCQG) as carbon markets are one of the ways to deliver on the NCQG,” Vaibhav Chauturvedi, energy economist and an expert on carbon markets, Council on Energy Environment and Water, Delhi, told The Hindu.

NCQG refers to an update to the $100 billion a year pledge made in 2009, that was to be made available to developing countries by developed countries to adapt to climate change as well as mitigate emissions. The Paris Agreement says that this new target must come into effect by 2025 and is therefore one of the most keenly awaited outcomes of the Baku COP.

U.N. Climate Change Executive Secretary Simon Stiell also emphasised the importance of reaching a new global climate finance goal in Baku.

“If at least two-thirds of the world’s nations cannot afford to cut emissions quickly, then every nation pays a brutal price,” he said. “So, let’s dispense with any idea that climate finance is charity. An ambitious new climate finance goal is entirely in the self-interest of every nation, including the largest and wealthiest.”

Bogota:

Colombia’s Constitutional Court on Wednesday annulled a controversial carbon credit deal in the Amazon rainforest, which six local tribes said had been signed without their consent.

Indigenous communities living in the remote area of Pira Parana had accused US-based Ruby Canyon Environmental and Colombian company Masbosques, which acted as an intermediary, of illegally foisting the deal on them.

Carbon credits are bought by corporations — or countries under certain conditions — from forest preservation or other projects to offset or “compensate” their greenhouse gas emissions.

This money is supposed to go to local communities that protect their home regions from deforestation.

In Pira Parana, the credits — also known as green bonds — were sold for about $3.8 million to a Colombian data processing firm called Latin Checkout.

According to EcoRegistry, which keeps tabs on carbon credit trading, Latin Checkout then sold the credits to US airline Delta which faces a lawsuit at home for alleged “greenwashing” by claiming to be carbon-neutral while purchasing questionable carbon offsets.

The deal, signed in March 2021, was for the Indigenous communities to preserve an area of 7,100 square kilometers (2,741 miles) — close to the size of Puerto Rico.

But the tribes said the deal was signed with false representatives of their communities.

They went to court claiming violations of their rights to territorial autonomy and self-government.

On Monday, the court ordered the tribes’ legitimate representatives to meet and decide within six months whether to authorize a new agreement.

If they do not, authorities must “ensure” the carbon credit project “is no longer carried out in the territory,” the judges ruled.

The concept behind carbon credits has taken a major hit recently as scientific research has repeatedly shown claims of reduced emissions being hugely overestimated — or even nonexistent.

In late 2023, AFP walked, motor-boated and overflew part of the Pira Parana territory, an area so remote it is accessible only by million-dollar private flights or a boat trip of at least six days from the nearest city of Mitu.

There, local leaders said they wished they had never heard of the deal.

While it brought an economic “bonanza,” it also led to conflict in communities unaccustomed to handling large sums of money and a loss of Indigenous autonomy, they said.

The project “contaminates spiritually, physically, it destroys everything… in this territory, for money,” Indigenous leader Fabio Valencia said at the time.

Some experts have said there was no real deforestation threat in the area and therefore no emissions “savings” to be made.

The Constitutional Court case was the first of its kind in Colombia.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)