COP 29: a global carbon market in the making

Alert

04 December 2024

4 min read

The 29th Conference of the Parties to the United Nations Framework Convention on Climate Change ('UNFCCC') ('COP29') adopted decisions on Article 6 of the Paris Agreement. After nearly a decade of negotiations, the outcome of COP29 lays the groundwork for operational global carbon markets involving Paris Agreement Parties, mandating the technical body under Article 6.4 to effectively implement the adopted standards. The mechanism of Article 6.2 has also been further refined and will be monitored by the UNFCCC Secretariat.

Background

COP29, held in Baku, Azerbaijan, from November 11-22, included multilateral negotiations on the mechanisms provided for by Article 6 of the Paris Agreement.¹

These mechanisms include (i) a centralized market under Article 6.4 of the Paris Agreement for trading emissions reduction credits ('A6.4ERs') among countries, overseen by a designated Supervisory Body; (ii) Internationally Transferred Mitigation Outcomes ('ITMOs') under Article 6.2 of the Paris Agreement, which enable countries to meet their climate targets through bilateral or multilateral cooperation agreements.

Key outcomes

Article 6.4 of the Paris Agreement

The new framework adopted at COP29 for Article 6.4 of the Paris Agreement follows the Supervisory Body’s earlier standards,² introducing stricter (i) requirements for removals, and (ii) methodologies for emission reductions or removals. The Supervisory Body is now mandated to further elaborate these standards and implement them.

The adopted guidance, referring to the Supervisory Body’s standards for the requirements on removals, includes:

Monitoring and reporting requirements: monitoring of removals must be carried out based on robust, conservative and statistically representative measurements, sampling, remote sensing, third party sources and published literature.³ Participants must also adopt comprehensive reporting on the monitoring conducted.⁴
Post-credit monitoring and reporting: reversals should also be assessed after the end of each credit period.⁵
Accounting for removals: removals will be accounted for through the net change in greenhouse gas storage, as well as the net change in emissions.⁶
Reversal risk assessment: participants must conduct a risk assessment and have a risk mitigation plan in place to address possible reversals.⁷
Reversal notification: if any reversals occur, participants must notify the Supervisory Body within 30 days of becoming aware of the release of stored greenhouse gases.⁸
Reversal risk buffer pool account: a pool of buffer A6.4ERs will be put in place by the Supervisory Body, which will address both avoidable and unavoidable reversals.⁹
Measures concerning social and environmental safeguards and rights of Indigenous Peoples were also put in place.¹⁰

The guidance adopted at COP29 also endorsed the Supervisory Body’s standards on methodologies,¹¹ including how to assess emission reductions or removals with robust baselines and how to avoid leakage of greenhouse gas emissions from the project.

Article 6.2 of the Paris Agreement

The decision adopted at COP29¹² clarifies that there are three components to authorization under Article 6.2. of the Paris Agreement, i.e. approval of the (i) cooperative approach; (ii) the ITMOs; and (iii) the participating entities¹³. The COP29 Article 6.2 decision also introduced a new transparency framework, requiring all requests for authorization to be submitted via a single consolidated authorization accounting and reporting platform. Countries will have to publicly disclose approval information for ITMOs. The UNFCCC Secretariat has been mandated to perform checks on the submitted annual data to confirm compliance¹⁴, though no sanctions for non-compliance are specified beyond public disclosure.

Next steps

The decisions adopted at COP29 further facilitate the operation of Article 6.2 and 6.4 mechanisms. However, technical work implementing these decisions remains. For Article 6.4, it is now for the Supervisory Body to effectively adopt and implement the rules for the operation of a global carbon market involving Paris Agreement Parties. With respect to Article 6.2, the authorization process has been clarified and the UNFCCC Secretariat has been mandated to monitor its implementation. The outcome of this technical work will likely inform further discussions, including those that are expected to take place during the 62nd sessions of the UNFCCC Subsidiary Bodies in Germany in June 2025, and the 20th Conference of the Parties to the UNFCCC in Brazil in November 2025.

Elinda Karpoutzoglou (Legal Trainee, White & Case, Brussels) and Marta Teixeira Pires (Legal Trainee, White & Case, Brussels) contributed to the development of this publication.

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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