UN Climate Conference agrees on standards for global market mechanisms

At the UN Climate Conference (COP29) the Parties reached an agreement on standards for global market mechanisms concerning emission reductions and methods used in projects that produce carbon sinks. The standards will help in producing the much-desired climate financing on market terms.

The global market mechanisms enable the countries that have signed the Paris Agreement to also take climate actions outside their own national borders. Since the adoption of the Kyoto Protocol, climate actions such as afforestation and renewable energy projects have been popular on the voluntary carbon market.

Rules are needed for how countries can make use of climate actions financed in partner countries to meet their own emission reduction targets. The market mechanisms should produce additional emission reductions, thus raising the level of ambition in climate action.

The principles of the global market mechanisms are set out in Article 6 of the Paris Agreement. Negotiations on the Article have been under way for years, and now an agreement on the standards in Article 6.4. was reached in Baku. This will enable the approval of projects that are compliant with the UN rules and the creation of carbon credits.

The states can use the carbon credits to fulfil the obligations under the Paris Agreement. Companies can also use the credits on the voluntary carbon market. By buying carbon credits, companies can assume responsibility for their emissions.

Agreement on the standards in Article 6.4 will enable the implementation of a global certification mechanism for mitigation outcomes. The implementation of the mechanisms will be supervised by the Supervisory Body designated under the Paris Agreement. Now that this agreement has been reached, the Supervisory Body can take up different kinds of projects to be reviewed. However, negotiations between the Parties are still under way on the processes related to the administration of the mechanisms under Article 6.4.

In addition, negotiations also continue on Article 6.2 concerning bilateral cooperation between countries. This Article is concerned with agreeing on transfers of emission reductions and removals between countries to meet national commitments.

Even before the agreement, the lack of UN standards under Article 6.4 has not constituted an obstacle to the international use and functioning of other mechanisms on the carbon market. Article 6.4 offers one of the channels through which carbon credits can be produced for the voluntary carbon market. Besides this, there are other standards and independent initiatives on the voluntary market that also participate in the discussion on the quality of climate credits. EU regulation on this is being prepared within the EU’s own certification framework for carbon sequestration.

At the Climate Conference in Baku, Azerbaijan a key focus is on climate finance. The EU’s target is to expand the sources of financing and mobilise all financial flows. If implemented effectively, the global market mechanisms can make it easier to mobilise private money flows.

Inquiries:

Tuomo Kalliokoski
Senior Ministerial Adviser
tel. +358 295 250 053 (in Baku until 23 November, tel. +358 50 562 5582)

Karoliina Anttonen
Senior Ministerial Adviser, Legislative Affairs
tel. +358 295 250 065 (in Baku until 23 November, tel. +358 50 401 6439)