At COP29 held in Baku, Azerbaijan, a key milestone in climate governance was reached with the operationalisation of international carbon market governance.
This progress is significant as it marks the first time that carbon credit trading systems have been formalized under the Paris Agreement’s Article 6, which allows countries to voluntarily trade emission reductions.
The conference established critical mechanisms for authorizing carbon credit transactions, managing registries, and ensuring technical reviews on environmental and human rights standards. These developments are expected to enhance the stability of carbon markets, giving more certainty to carbon trading projects.
Experts at the London Climate Technology Show 2024 described this outcome as an “incredible breakthrough,” with optimism about the future of carbon trading markets. Julien Hall, pricing director at Climate Impact X, emphasized that this stability would make carbon projects more bankable, as businesses face fewer uncertainties around policies until 2028.
Carbon credit projects, which include forest conservation, waste management, and renewable energy initiatives, are seen as essential for supporting global decarbonization. However, the role of carbon credits in corporate sustainability has raised concerns about companies using them to offset insufficient emissions reduction efforts.
Despite the challenges, the new regulatory framework for carbon markets has driven confidence and stability. Panelists at the event agreed that the UK’s government-backed carbon credit mechanisms, along with improved transparency and digital tools, are crucial for the sector’s growth.