Parties at COP29 have reached an agreement on standards for a centralized carbon market under the UN, following more than a decade of work in the process. Once operational, these carbon markets will enable countries to implement their climate plans more efficiently and cost-effectively, helping to reduce emissions.

Article 6 focuses on a carbon market system that allows countries to offset their emissions by purchasing carbon credits from other countries to enable them to continue producing pollution. This has been a contentious issue at previous climate summits, as some parties worry it could undermine the urgent need to reduce global emissions.

To move forward this year, a technical committee was assigned the task of drafting the rules to implement the carbon market mechanism.

On November 12, 2024, a day after the opening session, this version of Article 6 was swiftly adopted by participating countries, marking what COP29 lead negotiator Yalchin Rafiyev described as “we are seeing an unprecedented level of enthusiasm and determination on Article 6…..the breakthroughs in Baku have now begun.”

Under Article 6, countries can generate carbon credits by implementing projects that help them achieve their own climate goals, such as protecting forests from deforestation and shutting down coal-fired power plants. These carbon credits can then be purchased by private-sector companies or high-emitting countries, allowing them to offset their own emissions by purchasing the right to emit a certain amount of carbon dioxide or other greenhouse gases.

Each carbon credit would represent the reduction, sequestration, or avoidance of one tonne of CO2, or its equivalent in other greenhouse gases, achieved through green energy or other climate-friendly initiatives. The revenue generated from the sale of these credits would be directed towards supporting local projects. The price of carbon credits would fluctuate in the market, meaning that as the price rises, green projects could earn more by generating new credits.

Again, under carbon markets, countries that reduce their emissions can sell carbon credits to others. The revenue from selling these credits can then be reinvested into clean energy projects, such as installing solar panels or electrifying public transportation systems.

Mr. Rafiyev called it a crucial step towards finalizing the Article 6 negotiations, emphasizing that it would be a transformative tool for channeling resources to the developing world.

He also highlighted that, once fully implemented; it could save up to $250 billion annually in the cost of executing climate plans.

“It is a crucial opportunity for global leaders to speak up and step up. The world is waiting to see them and eager to hear from them,” Mr. Rafiyev stated.

He said leaders cannot miss this opportunity to send a strong signal of “our collective commitment to confront the climate crisis. We also need them to provide clear direction and mandates for their negotiators at COP29.”

UN Climate Change Executive Secretary, Simon Stiell, stated in a press briefing that while parties are still far from halving emissions this decade, the progress made on carbon markets at COP29 will help get them back on track in the race to meet climate targets.

“We must ensure that developing countries benefit from new flows of finance. There is more work to do on Article 6, and the process allows for all perspectives to continue to be heard,” said Mr Stiell.

He warned that unless all countries make deep cuts to emissions, every country and household will face even greater hardships, with citizens living in a constant state of inflationary crisis.

“And this is not some far-off risk. The climate crisis is a cost-of-living crisis right now in every economy across the planet.”

Mr Stiell stated that, as climate disasters hit supply chains and food production harder each week, climate action is global inflation insurance.

“So, on the NCQG I say to all nations – let's get a good result. Billions of people cannot afford their governments to leave COP29 without having a strong outcome on finance.

And it's not only about averting disaster, bolder climate actions are a recipe for stronger economies, more jobs and equality, less pollution, better health, and a more secure energy supply.”

Article 6 was introduced at the Paris Climate Conference in 2015, where global leaders committed to limiting global warming to below 1.5 degrees Celsius above pre-industrial levels. Its primary goal is to establish mechanisms for countries and companies to trade emissions reductions, preventing more carbon pollution from entering the atmosphere.

The concept involves creating carbon trading markets, where higher-emitting countries can offset some of their pollution by purchasing carbon credits from countries with lower emissions.

Article 6 also provides two pathways for countries to engage in this system. The first allows two countries to set their own rules and standards for carbon credit trading. Reports indicate that several countries are already entering agreements, such as Switzerland with Ghana, Singapore with the Philippines, Costa Rica, and Sri Lanka, and Peru, and Ukraine.

Climate Change High-Level Champion for COP29 Nigar Arpadarai stated that multiple initiatives will be launched as part of the COP29 Action Agenda, and the government of Azerbaijan will make national announcements at different points throughout the conference.

“And we believe that together, we can turn this immense challenge into an opportunity. We need to see the opportunities and we need to showcase to the private sector, especially these opportunities.”

Another subject that the summit will focus on is the green transition of small and medium enterprises. “So one of the campaigns that we've been working on is climate-proofing SMEs, and I'm happy to share that already 35 collaborators having 65 million SMEs in their networks joined us,” Nigar pointed out.