BAKU, Azerbaijan, June 12. The recent agreement on international carbon markets at the 2024 Conference of the Parties of the United Nations Framework Convention on Climate Change (COP29) in Baku, Azerbaijan, could help advance market participation and has the potential to stimulate greater investment flows to low-income countries, said the World Bank.
“This agreement provides clarity on the rules for cross-border transfers of carbon credits under Article 6 of the Paris Agreement. With the agreement in place, focus will transition to operationalization, which will require building countries’ capacities—from setting up institutional and regulatory frameworks to deploying market infrastructure, such as registries,” reads the latest report issued by the Bank.
The WB analysts note that the confirmation of UN-administered carbon markets has opened an alternative avenue for market participation, which is significant given the increased scrutiny over the integrity of voluntary carbon markets in recent years.
In November 2024, COP29 Presidency announced the end of the decade-long wait for the conclusion of negotiations on high integrity carbon markets under Article 6 of the Paris Agreement. This was one of the Presidency’s top priorities for the year and it drove Parties towards this milestone achievement through intensive dual-track technical and political negotiations. This strategy broke through years of stalemate and finalized the last outstanding item in the Paris Agreement.
Article 6 provides trusted and transparent carbon markets for countries as they collaborate to reach their climate goals. This cross-border cooperation is expected to reduce the cost of implementing countries’ national climate plans (NDCs) by up to $250 billion per year.