A main objective of COP29 was to create a robust process for tracking carbon credit transactions between countries, and to set a globally recognised standard for the projects associated to those credits.
Whilst strides were made towards establishing a suitable trading mechanism, agreement on a quality standard for carbon credits proved elusive.
A Global Registry for Carbon Credits
One of the most notable outcomes of COP29 was the agreement to establish a global registry to track carbon credits. While the operational specifics of this registry are yet to be determined, its purpose is clear: to provide a centralised log of credits that will improve oversight and transparency. This registry will be especially critical for countries that lack the resources to create their own systems for issuing and tracking credits.
The registry will also require the publication of information about Internationally Transferred Mitigation Outcomes (ITMOs), the standardised units used for emissions trading between countries, which can by quoted by organisations. This move aims to enhance transparency in how emissions are offset and traded globally. However, at this stage the registry will not assess the quality of credits or endorse issuers, a decision that has drawn criticism. Some view this as catering to larger countries or emitters who prefer greater autonomy in managing their carbon trading systems.
Article 6.4: Principles and Challenges
Decisions on Article 6.4 reaffirmed key principles, such as avoiding projects that perpetuate dependence on fossil fuels. However, there are notable gaps in ensuring accountability and quality. Older projects are not required to undergo updated testing or verification, and only future projects will need to adhere to standards guided by the “best available science.”
This lack of retrospective scrutiny raises concerns about market integrity. Critics warn that without firm, consistent rules for assessment and determining quality of credits, the supervising body risks undermining trust in the global carbon trading market.
Market Expansion and Opportunities
Despite these challenges, the carbon market’s potential remains significant. The International Emissions Trading Association (IETA), a business group that supports the expansion of carbon credit trading, projects that a U.N.-backed market could be worth $250 billion annually by 2030. Such a market could offset up to 5 billion metric tons of carbon emissions each year.
Looking Ahead
The establishment of the global registry is a promising step towards greater transparency in carbon trading. However, ensuring the market’s credibility will depend on addressing concerns about credit quality, issuer oversight, and consistent regulatory standards. As the market evolves, striking a balance between accessibility and accountability will be key to its success.
For businesses looking to offset their emissions, the challenge lies in selecting projects that align with both their sustainability goals and long-term integrity standards.
Organisations seeking guidance in identifying suitable projects can reach out to info@lcutility.co.uk for support.
