Sticking point remains on carbon market proposal at COP29, but talks are on track

BAKU, Azerbaijan - As ministers and negotiators race to an agreement on carbon markets at the COP29 UN climate change summit, a sticking point remains over the nature of an international registry that will document carbon trading between countries.

An updated negotiation draft is expected late on Nov 20, or the morning of Nov 21, but parties are still divided on what the registry would look like.

While some countries want to limit it to pure accounting functions, several developing countries want the platform to also perform carbon credit transactions, as they lack the means to build their own national registries, which would facilitate carbon trading.

Minister for Sustainability and the Environment Grace Fu – who is facilitating negotiations along with her ministerial counterpart from New Zealand – said on Nov 20: “There are some discussions going on, some divide in the room, but we have some proposals on bridging solutions... We will consult every group and parties again.”

To cater to developing countries, the latest proposal negotiated at COP29, being held in Baku, Azerbaijan, includes an additional function in the registry to enable some nations to carry out

carbon credit transactions.

In terms of the COP, carbon markets are governed under Article 6 of the Paris Agreement.

Countries are divided on the proposal that the international registry also issue carbon credits for two main reasons.

One is that it would add hugely to the cost of the registry, said Mr Rueban Manokara, global lead of the carbon finance and markets task force at conservation group World Wide Fund for Nature.

It has not been decided how the registry would be financed.

The second question relates to the accountability of the international registry if blunders occur in the issuance of a carbon credit.

Mr Manokara explained: “If the international registry is issuing the carbon credit, there are unanswered questions such as what processes would need to be put in place to prevent double issuance, or what steps need to be taken to correct it.”  

Ms Fu said extensive ministerial consultations have been held, with parties being encouraged to propose revised texts.

“We encourage the parties to propose text, so that the text that has the most acceptance will eventually be the text for everyone to adopt,” she said.

But overall, the mood in the negotiation rooms has been “very positive because we have unanimous support for the conclusion of Article 6”, said Ms Fu.

Negotiations

fell through at the last COP in Dubai

when parties could not see eye to eye on various matters.

Under Article 6, countries can trade carbon credits in two ways. One is through bilateral pacts.

Singapore, for instance, is collaborating with more than 20 countries on carbon markets, to eventually buy credits to offset some of the country’s carbon emissions.

The conclusion of negotiations on Article 6 would be immensely valuable to the carbon services sector, Ms Fu said.

“When there is a global standard, it makes it a lot easier for the (carbon) market to work. When there is standardisation and unification, that increases the depth of the market, and we hope that that helps to develop a more healthy, functioning carbon credit market,” she told the media on Nov 20.

In the second approach to carbon trading, emitting countries will be able to buy carbon credits through a UN-managed entity.

With carbon markets one of the priorities at COP29, this centralised global carbon programme under the UN was given the green light on the first day of the summit to begin operations.

However, it could take one to two years to become truly functional.

While negotiations for Article 6 continue apace, things are not going as smoothly for the main target of COP29 –

a climate finance goal

that will from 2025 channel more money from developed countries to vulnerable, developing countries to help them decarbonise and adapt to climate impacts.

While developing nations are asking for a total of US$1.3 trillion (S$1.75 trillion) in funding each year, richer nations have not yet revealed the amount they will commit and what form the funding will take.

Developed countries also want more donors to come in.

Ms Tasneem Essop, executive director of Climate Action Network-International, said: “Developed countries are insisting that the issue of the expansion of the contributor base and the role of the private sector must be decided before they put an amount forward.”

Given the challenges and sensitivities of the issue, meetings between ministers and heads of delegations have been conducted behind closed doors.

Ms Fu said: “Finance is not an easy topic to address, particularly post-Covid, particularly when the fiscal positions of many governments are being stretched to reach this goal.

“We’re at this stage where I think there are still many issues up in the air. So lots of work going forward.”