COP 29: Parties at UN Climate Summit Agree on Standards to Launch Global Carbon Market

In an effort to advance a global carbon market, the parties to COP 29 — the United Nations climate conference hosted by Azerbaijan this year — approved important standards for such a market to be developed under Article 6.4 of the Paris Agreement. 

The approval purports to pave the way for uniform UN oversight of the eligibility of projects to generate carbon reduction credits that can be traded between countries to meet their individual national carbon reduction targets under the treaty, known as “nationally determined contributions” or NDCs.

Background of the Paris Agreement and Article 6.4

The Paris Agreement is the landmark international treaty on climate change that was adopted by 196 countries at the UN climate change conference (COP 21) in Paris, France in 2015 and entered into force in November 2016. Its overarching goal is to hold the increase in the global average temperature to “well below 2°C above pre-industrial levels” and pursue efforts to limit this increase to 1.5°C. The most immediate step toward these goals has been the establishment of NDCs by contracting countries. The first Trump administration withdrew the United States as a contracting party to the Paris Agreement in 2017, but the U.S. rejoined under the Biden administration in 2021. It remains to be seen whether the incoming Trump administration will again withdraw the U.S.

Article 6.4 of the Paris Agreement envisions a global carbon market overseen by a United Nations entity, referred to as the Article 6.4 supervisory body. Once this market is operational, project developers will apply to register their carbon reduction or removal projects with this supervisory body. A project must be approved by both the country where it is implemented and the supervisory body before it can start issuing UN-recognized carbon credits. These credits, known as Article 6.4 emission reductions or “A6.4ERs,” can then be acquired by countries, companies, or even individuals.

Article 6.4 is distinguished from Article 6.2 of the Paris Agreement, which allows countries to trade emission reductions and removals through bilateral or multilateral agreements they can negotiate and enter into separately. These traded carbon credits are called “internationally transferred mitigation outcomes.” Countries such as Japan and Switzerland already have frameworks in place to buy these types of credits and count them towards their NDCs. Article 6.4 is intended to be more structured than Article 6.2 insofar as Article 6.4 provides a system of oversight to ensure A6.4ERs are validated, verified, and issued according to a uniform framework.

Article 6.4 articulated high-level principles that were intended only as a template for countries to develop detailed rules. Doing so has proved contentious, leading to a near three-year deadlock. Negotiations to hammer out these rules continued into COP 29.

What Happened on Monday at the Start of COP 29

COP 29 runs from November 11 to 22. In October, in advance of the current meetings, the Article 6.4 supervisory body finalized two key standards under Article 6.4: (1) a standard on methodology requirements, outlining requirements for developing and assessing projects under the Paris Agreement crediting mechanism, and (2) a standard for projects that remove greenhouse gases from the atmosphere. The supervisory body has sought approval from the parties to the Paris Agreement on two prior occasions but, in October, took the unprecedented step of approving the new standards unilaterally. On the first day of COP 29, countries reached consensus to approve these two standards without major scrutiny.

The standard on methodology requirements for developing and assessing projects articulates requirements for, among other things, emission baseline setting, the avoidance of leakage, and demonstration of additionality of carbon reduction activities. The standard for greenhouse gas removals articulates, among other things, monitoring and reporting of and accounting for removals, monitoring after the creation and crediting of carbon credits, and conducting assessments on the risks of the reversal of greenhouse gas removals. The standards focus on carbon dioxide removals over reductions, and nature-based solutions.

There are several additional steps in making Article 6.4 operational and we will continue to monitor as the steps unfold.