COP29: 3 methodologies approved for issuing high-integrity carbon credits

Highlights

The Integrity Council for the Voluntary Carbon Market on Friday announced approval of three methodologies for issuing high-integrity carbon credits for reducing emissions from deforestation and forest degradation in developing countries (REDD+).

Baku: The Integrity Council for the Voluntary Carbon Market on Friday announced approval of three methodologies for issuing high-integrity carbon credits for reducing emissions from deforestation and forest degradation in developing countries (REDD+).

Carbon markets are increasingly seen as key drivers of climate ambition and capital flow. They enable countries to trade carbon credits, permits to offset a specific amount of emissions, allowing sellers to earn revenue and contribute to climate action.

Leading nature NGOs have welcomed the announcement of REDD+ as the United Nations Climate Change Conference, also known as COP29, in Baku, Azerbaijan, has been underway since November 11 to commit developed countries to providing at least $1.3 trillion each year until 2030 as climate finance to developing nations.

Clare Shakya, Global Managing Director, Climate - The Nature Conservancy, said, “A sustainable future hinges on prioritizing nature today. This announcement reaffirms our confidence in natural climate solutions, proving their integrity and potential to drive private finance through carbon markets. With ICVCM’s approval, REDD+ is validated, allowing buyers to invest confidently in high-integrity, forest-protecting strategies.”

In India, 1,669 projects have been successfully registered under the Clean Development Mechanism (CDM) under the Kyoto Protocol, the predecessor to the Paris Agreement.

Millions of certified emission reductions (CERs) credits, better known as carbon credits, remain unsold with the collapse of the CDM market. One CER equals one tonne of carbon dioxide. As per rough estimates, nations hold close to 4 billion unsold certified emission reductions (CERs). India has a depository of 750 million and China has much more than India.

Experts told IANS, a high-integrity carbon market has the potential to unlock funding that would not otherwise be available for natural climate solutions.

After years of deadlock over carbon markets, parties at COP29 approved the new standards on methodologies and removals for the Article 6.4 Mechanism, setting the stage for a global carbon market.

Under the mechanism, reducing emission levels in one country can be used by another country to fulfill its climate target, nationally determined contribution (NDC).

“A back door deal was reached on one half of carbon market rules on Monday, but the other half is in a shambles so far. There are 460 brackets worth of issues in the 43 page text aiming to lay down rules around transparency and quality of emissions trade between countries,” remarked a negotiator.

Meanwhile, a research suggests less than 16 per cent of carbon credits actually deliver emissions reductions. The latest Stern-Songwe report shows investment needed for developing countries is $1.3 trillion per year by 2035, requiring an increase in private sector investment, which high-integrity carbon credits can help generate.

India, China, Brazil and some other developing countries have been strongly advocating at every UN climate summit for continuation of carbon credits, which allow companies to compensate for their greenhouse gas emissions, under the 2015 Paris Agreement -- an ambitious global action plan to fight climate change.

Carbon markets are trading systems in which carbon credits are sold and bought. companies or individuals can use carbon markets to compensate for their greenhouse gas emissions by purchasing carbon credits from entities that remove or reduce greenhouse gas emissions.

There are two types of carbon markets: compliance and voluntary. Compliance markets are created as a result of any national, regional and/or international policy or regulatory requirement, while voluntary carbon markets - national and international - refer to the issuance, buying and selling of carbon credits, on a voluntary basis.

The Integrity Council is establishing a global benchmark for high-integrity carbon credits that aims to build trust in the market and unlock urgently-needed finance for climate solutions.

The Multilateral Investment Guarantee Agency (MIGA), which houses the World Bank Group Guarantee Platform, on Thursday launched a Letter of Authorization template at COP29 to facilitate guarantee issuance in support of private investors engaged in Article 6 carbon markets.

“Buyers must trust that the goods they purchase will serve their intended purpose; sellers must trust that the market will provide fair compensation. For over 35 years, MIGA’s guarantees have bred trust,” said Ethiopis Tafara, MIGA Vice President and Chief Finance, Risk, Legal, and Sustainability Officer.