Governments urged to agree carbon credit rules at Cop29

Reuters

• Cop29 in Baku, Azerbaijan
• Rules need to be established
• Carbon trading still controversial

Experts have said governments need to reach binding agreements on carbon credits at Cop29 underway in Baku, Azerbaijan, to improve transparency, accountability and quality. 

Among the topics being debated over the two weeks at the UN conference is Article 6 of the Paris Accord, which aims to help set rules on global carbon trade. 

Countries have agreed to standards for a UN-backed global carbon market that funds schemes which reduce greenhouse gas emissions. But they are yet to establish rules that could unlock billions in investment for carbon-reducing projects. 

Inigo Wyburd, from Carbon Market Watch, said there must be clear rules for reporting and reviewing carbon credit transactions to ensure they are genuine and effective.

Wyburd said strict standards need to be set, particularly for removal and reduction activities with so-called reversal risks. “These standards must address current gaps to prevent the approval of low-quality credits,” he said.

The voluntary carbon market has come under increasing scrutiny in recent years, from media and academics who question the quality of some projects. 

The UN’s Intergovernmental Panel on Climate Change has said carbon markets are essential for achieving net-zero by 2050.

Nameer Khan, founder and CEO of Fils, a carbon credit tokenisation platform, said governments at Cop29 need to establish transparent frameworks with strict standards and verification processes to ensure carbon credits are legitimate. 

“In the interim, they should encourage businesses to engage with carbon markets by providing clear guidelines that build trust and momentum,” Khan said. 

Last week Saudi Arabia became the latest country to launch a voluntary carbon trading market that it is hoped will provide much-needed financing for climate programmes. 

The Regional Voluntary Carbon Market Company’s market exchange platform launched with more than 2.5 million tonnes of carbon credits for auction. 

Buyers can obtain carbon credits from 17 climate projects from around the world. The company said it has 22 Saudi and two international companies registered to buy carbon credits. 

• Carbon credit schemes are not a straight road to zero 
• Cop29 seeks an off-ramp from the ‘road to ruin’
• Carbon credits trading predicted to hit $4bn

Yvonne Lam, head of carbon capture, usage and storage research at Rystad Energy, said the market will provide transparency and encourage the development of decarbonisation projects that require a lot of capital. 

“It will drive the low carbon economy and, at the same time, provide an alternative to carbon abatement (reduction) for companies,” Lam said. 

She said the measurement, reporting and verification of the carbon credits will be important in ensuring there is transparency and that the emissions are delivering on what has been promised.

“It is important to make sure that the integrity of these credits [are] providing tangible emissions reduction to the environment and not just playing or manipulating with numbers,” she said. 

Lam said companies should not be solely using the market as a means of reducing carbon.

“The most important part, possibly, is to make an enforceable rule that would be beneficial for the [value chain management] development,” she said.

“For example, when and at what level a company could use these credits for their emissions abatement. An emission reduction initiative should be prioritised before the use of credits, as well as penalty for non-abatement,” she said.