This year’s Conference of the Parties (COP) garnered a mixed reception to its overall climate progress, but a key advancement was the “operationalisation” of international carbon market governance.
Article 6.2 of the 2015 Paris Agreement allows countries to voluntarily trade emission reductions to meet climate targets through bilateral agreements, while Article 6.4 details a UN-supervised international voluntary carbon market.
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
A decade in the making, COP29 negotiations addressed the remaining sections of Article 6, establishing how countries can authorise carbon credit transactions and manage tracking registries, alongside mechanisms for technical reviews on environmental and human rights.
At the London Climate Technology Show 2024, industry experts discussed the new framework and the role of carbon credits in driving climate mitigation.
Andy Harris, managing director of carbon credit advisory firm Nature Broking, described COP29’s progress as an “incredible breakthrough”. Citing Oxford University’s State of Carbon Dioxide Removal report, which finds that the Paris Agreement’s 1.5°C goal hinges on seven to nine billion tonnes of carbon being removed from the atmosphere per year by 2050, he stated that enhanced carbon market governance will play a key role.
Julien Hall, pricing director at carbon credit marketplace Climate Impact X, echoed Harris’s enthusiasm: “You can argue that all COPs are bad because they have failed so far to get us where we need to be – but for only the second time in history, a carbon market was born.
“Critically, going forward there will be more stability around carbon trading policies, with no more decisions around carbon trading until 2028. This means that the market can go ahead and start trading, and projects will be more bankable because there will be less uncertainty around carbon policy.”
Carbon credit projects can include forest conservation, waste management, agricultural activities or implementing household and community devices such as biogas stoves.
Hall also highlighted that this year’s conference saw support emerge for developing nations to set up their own carbon registries as “the World Bank stepped in with templates, documentation and guidance”.
Corporate carbon credits
Another key development from COP29 was the adoption of the New Collective Quantified Goal on Climate Finance (NCQG) to support developing nations in addressing the impacts of climate change. The NCQG involves an annual commitment of $300bn led by developed countries as well as a broader target of mobilising $1.3trn in climate finance annually by 2035 from both public and private sources.
Although the inclusion of the private sector was heavily debated at the summit, Integrity Council for the Voluntary Carbon Market (ICVCM) director of public affairs Lorna Ritchie claimed that it was a “positive step forward” as it would further drive corporate participation in climate projects.
The role of carbon credits in corporate sustainability is a contentious issue. A 2022 report by the Climate Change Committee asserted that offsets can mask companies’ “insufficient efforts” to cut emissions. ‘Phantom credits’ also made headlines in 2023, causing skittishness in the market.
Hall acknowledged the difficulties of decarbonisation for businesses. “Very often it is hard, expensive and has diminishing returns, but it is arguably cheaper to buy carbon credits with a greater impact per pound spent, and many carbon projects around the world need this money, so it is a win-win.
“With the new regulatory framework coming in, you are seeing companies realise they need to engage with this market.”
Securing carbon markets
While COP29 has helped restore confidence in carbon credits, Sam Welsh, head of sales and marketing at carbon offset project developer Forest Carbon, emphasised the enduring risks: “We don’t know what their value will be in five or ten years, let alone post-2050. We need to understand that there is long-term risk, and the market requires careful navigation.”
Ian Jones, chair of agricultural data platform Carbon Asset Solutions, listed “precision, transparency, consistency, permanence and reliability” as crucial considerations for buyers that are currently “holding the market back”.
To ease the identification of high-quality credits, in June 2024, the ICVCM established seven carbon crediting methodologies under its Core Carbon Principles. With an additional 27 categories under assessment, Ritchie stated that the organisation is aiming to “transform the market and ratchet up ambition”.
As a nascent industry, Harris predicted that carbon credits are “on the threshold from being voluntary to more regulated”, citing Japan as an example of bringing “the second version of the carbon market” to fruition.
The panellists agreed that technology is key to achieving integrity and encouraging participation with carbon credits. Digitalised finance and risk management tools supported by robust regulatory frameworks would “stimulate participation, as we are at greater risk now of inaction as opposed to getting involved with an imperfect market”, Welsh concluded.
