The COP29 climate conference concluded with a landmark agreement on Saturday, setting the foundation for a global carbon credit trading market. The deal is expected to channel billions of dollars into climate projects aimed at curbing global warming.
The agreement, reached after nearly a decade of discussions, seeks to establish a credible and transparent system that ensures measurable reductions in greenhouse gas emissions. Carbon credits, generated by initiatives like tree planting or renewable energy projects in developing nations, represent one metric ton of carbon dioxide removed or avoided. These credits can be purchased by countries and companies to meet their climate targets.
A Two-Tier Trading System:
Early in the conference, delegates agreed to launch a centralized UN-backed trading system as early as next year. However, much of the two-week negotiations in Azerbaijan centered on developing a parallel bilateral trading system, allowing countries to trade directly. Key issues included the structure of a global credit registry, the extent of information-sharing among nations, and safeguards for failed projects.
Balancing Oversight and Autonomy:
The European Union and the United States, two of the strongest voices in the talks, advocated for different approaches. The EU pushed for stricter UN oversight and greater transparency, while the U.S. emphasized flexibility and autonomy in bilateral deals.
The final agreement struck a balance. Countries lacking the resources to establish their own credit registries will have access to centralized UN registry services. However, the U.S. secured provisions ensuring that the inclusion of transactions in the registry does not equate to UN endorsement of the credits’ quality.
Pedro Barata of the Environmental Defense Fund noted the compromise, calling it a “viable international trading system” despite some criticisms about its robustness.
A Growing Market with Global Potential:
Bilateral carbon credit trading has already begun, with Switzerland purchasing credits from Thailand earlier this year. Dozens of countries have similar agreements in place, though the lack of uniform rules has slowed the market’s expansion.
With clearer guidelines now in place, experts expect a surge in trading activity. The International Emissions Trading Association (IETA) estimates that a fully operational UN-backed carbon market could grow to $250 billion annually by 2030, offsetting up to 5 billion metric tons of carbon emissions each year.
This milestone agreement at COP29 marks a critical step toward scaling up global efforts to combat climate change through market-driven solutions.
