COP 29: What Remains After It Ends?

COP29, held in recent weeks in Azerbaijan, ended with both good and bad news but brought significant developments for the carbon market and the fight against climate change as a whole.

The primary focus of this year’s conference was climate finance, with the goal of defining the New Collective Quantified Goal on Climate Finance. This topic sparked significant debate among developed countries (the main financiers), less-developed countries (which require funding to implement local actions), and developing countries (in a more complex position, as they believe they should receive funding due to ongoing challenges but also have robust economies capable of contributing to poorer nations).

After much difficulty, a decision was reached (albeit with objections) to establish a target of $300 billion per year by 2035. This represents an increase from the previous $100 billion goal but falls far short of the $1.3 trillion demanded by less-developed and developing countries. Developed nations are expected to lead this financial mobilization, while developing countries are “encouraged” to contribute.

Other negative aspects include the lack of progress on operationalizing the Just Transition Work Program and implementing recommendations from the Paris Agreement’s Global Stocktake (particularly regarding the submission of the next NDCs).

On the other hand, the significant victory of this COP was progress on the rules governing mechanisms of international cooperation under Article 6 of the Paris Agreement. The decision reached enables the implementation of two carbon market mechanisms: the development of UN-approved projects (Article 6.4) and the trading of mitigation outcomes between countries (Article 6.2).

An important advancement was the clarification of rules for authorizing and revoking authorizations for trading Internationally Transferred Mitigation Outcomes (ITMOs), which will provide much greater security for investors seeking to trade these assets. Additionally, a complex international credit registry system was established, ensuring interoperability between Article 6.2 and Article 6.4 units.

Requirements were also defined for approving methodologies and activities for removing greenhouse gases (GHGs) from the atmosphere under Article 6.4. These guidelines will determine which activities are eligible to issue this type of credit.

In light of these developments, it is clear that the essential role of carbon markets in reducing greenhouse gas emissions is increasingly recognized across various levels, and this market is poised for further growth.

Environmental integrity remains a clear priority, with an emphasis on higher-quality projects that effectively reduce emissions or remove greenhouse gases, while also providing benefits for the environment and society.