Countries at the COP29 climate conference reached a historic agreement on Saturday to establish rules for a global carbon credit market. This system is designed to help mobilize billions of dollars for climate projects that aim to reduce global warming. The deal was a decade in the making and marks a significant step forward in the effort to combat climate change.
The Role of Carbon Credits
Carbon credits are generated through climate projects such as planting trees or building wind farms in developing countries. These projects reduce or capture carbon emissions, and for every metric ton of carbon dioxide removed, a credit is issued. Countries and companies can buy these credits to meet their own climate targets, providing financial support for projects in poorer nations.
Also read: COP29: Understanding Carbon Credits and the Role of Article 6
The new agreement sets the stage for a centralized global carbon trading system, which could start as early as next year. This system aims to make carbon credits more accessible and transparent, allowing countries and companies to participate more effectively.
Key Points of the Agreement
During the conference, negotiators focused on two major aspects of the carbon credit market. One was the establishment of a centralized UN trading system, while the other was a bilateral system that allows countries to trade carbon credits directly. The challenge was to ensure the credibility of these markets and create rules that would allow for transparency and accountability.
The European Union (EU) pushed for stricter oversight and greater transparency in carbon credit trades. Meanwhile, the United States argued for more autonomy in handling deals.
Also read: ASEAN Moves Toward a Unified Carbon Market at COP29
The final agreement represents a compromise, with the EU securing registry services for countries unable to set up their own systems for tracking credits. At the same time, the US ensured that simply recording transactions in a registry would not imply UN approval of the credits.
The Impact of the Deal
The agreement paves the way for a global market that could be worth up to $250 billion annually by 2030. This market could offset up to 5 billion metric tons of carbon emissions every year. While some critics believe the system lacks strict enforcement mechanisms, others see it as a step toward more robust international carbon trading.
Bilateral carbon credit deals have already been initiated. For instance, Switzerland purchased credits from Thailand earlier this year. However, the global market remains limited without clear, enforceable rules. The COP29 agreement aims to resolve these issues, making it easier for countries to participate while ensuring the integrity of the system.
Moving Forward with Carbon Trading
As more countries and companies get involved in carbon credit trading, the new rules are expected to encourage a surge in transactions. The ultimate goal is to create a system that can help meet global climate goals by directing funds into projects that reduce greenhouse gas emissions.