How COP29 is Paving the Way for Global Carbon Trading and Sustainable Action

 November 11–22, 2024, Baku, Azerbaijan

The 29th Conference of the Parties (COP29) under the United Nations Framework Convention on Climate Change (UNFCCC) commenced on November 11, 2024, in Baku, Azerbaijan. This year’s COP marks a pivotal moment in the journey toward addressing global climate challenges, particularly with the anticipated launch of the first-ever global carbon market. COP29 brings together world leaders, government officials, climate experts, and activists to discuss, negotiate, and set the stage for ambitious climate actions to curb emissions, promote resilience, and drive sustainable development.

1. Understanding COP and Its Significance

COP, or the Conference of the Parties, is the supreme decision-making body of the UNFCCC. Since its inception in 1992, the conference has served as a platform where governments negotiate and commit to climate action to keep global temperature rise within 1.5°C above pre-industrial levels. Over the years, COP has evolved into the largest annual gathering focused on climate action, drawing representatives from governments, civil society, the private sector, and the media.

The significance of COP is underscored by the urgency to address the climate crisis. The UNFCCC Executive Secretary stated, “Every tenth of a degree matters, every year matters, and every COP matters.” As global temperatures continue to rise, COP provides a structured forum to scale up climate action, monitor progress, and enhance the world’s collective response to the climate emergency.

2. Key Themes and Objectives of COP29

This year’s conference focuses on four main areas:

a) Setting New Climate Finance Targets

COP29 aims to establish the New Collective Quantified Goal (NCQG) for climate finance. The goal is to secure commitments for mobilizing funds that will empower countries to take stronger climate actions, reduce emissions, and build resilient communities. Questions under consideration include how to structure the finance targets, who contributes, and which categories of recipients to prioritize.

b) Operationalizing Article 6 of the Paris Agreement

Article 6 facilitates international cooperation in climate action, particularly through carbon market mechanisms. COP29 in Baku is expected to finalize the frameworks necessary for countries to engage in carbon credit transactions, facilitating a globally supervised carbon market.

• Article 6.2 enables bilateral agreements allowing countries to trade emission reductions.
• Article 6.4 establishes a centralized UN-supervised carbon credit mechanism.
• Article 6.8 promotes non-market-based cooperation in achieving emission reduction targets.

These mechanisms are expected to reduce the cost of achieving Nationally Determined Contributions (NDCs), channel funding to low-emission projects, and support sustainable development in developing nations.

c) Strengthening Transparency and Reporting

Transparency is critical for building trust and accountability in global climate action. COP29 emphasizes the importance of transparent reporting through the Biannual Transparency Report (BTR), helping track progress and make informed decisions for stronger climate policies and investments.

d) Introducing NDC 3.0

NDCs, the cornerstone of the Paris Agreement, reflect each country’s commitment to reducing emissions. As current NDCs are set to expire in 2025, countries are expected to adopt the next generation of climate pledges — referred to as NDC 3.0 — which must demonstrate heightened ambition and alignment with the 1.5°C target.

3. Launching the Global Carbon Market

One of the most anticipated outcomes of COP29 is the formalization of the global carbon market, expected to start as early as 2025. The global carbon market, based on Article 6.4 of the Paris Agreement, will enable nations and corporations to trade carbon credits derived from verified emissions reduction projects. The goal is to make carbon credits an effective financial tool to incentivize emissions reductions and fund sustainable projects.

The United Nations-backed carbon market has established quality standards for carbon credits, which are essential for the market’s integrity and credibility. The new framework allows countries to use credits to offset emissions, contributing to their NDCs and driving international climate finance.

4. The Impact of COP29 Decisions on China and Other Major Economies

China, as the world’s largest emitter, plays a vital role in the global carbon market. By participating in the 6.4 framework, China can integrate its national Certified Carbon Emissions Reduction (CCER) mechanism with international standards, allowing domestic companies to access the global carbon market. This integration will not only attract foreign investments into China’s green projects but also bolster China’s leadership in green technology exports and its path to energy transformation.

Similarly, countries in Asia, Africa, and Latin America can benefit from the influx of international funding for low-emission projects, thereby advancing sustainable development goals. The availability of international carbon finance can stimulate green investments and provide an economic boost in emerging markets.

5. COP29’s Influence Beyond the United States

While COP29 centers on the global community’s climate agenda, the influence of American policies and economic shifts reverberates across borders. The U.S. climate representative expressed concerns over potential setbacks due to political shifts, yet assured that a commitment to decarbonization would persist. With subsidies driving investments in emission-reducing projects in conservative regions, the U.S. aims to uphold its climate commitments.

The COP29 outcomes will likely guide policies and strategies for countries worldwide. Nations seeking to accelerate their climate transitions can learn from the innovations in financing mechanisms, transparency, and sustainable investments discussed in Baku. For instance, emerging markets may look to develop digital infrastructure that facilitates low-cost carbon credit trading, or encourage private sector involvement in sustainability initiatives.

6. The Role of Governments and International Cooperation

COP29 emphasizes the importance of collective action across government, industry, and civil society to address the climate crisis. The UN Secretary for Climate Change noted that the current climate agreements are crucial to avoid a dangerous 5°C rise in global temperatures. The concept of “climate finance is not charity” was reiterated, as securing ambitious funding goals aligns with the economic interests of both developed and developing nations.

To achieve these targets, governments are urged to reform financial systems, strengthen climate policies, and support international climate partnerships. Developing nations, particularly those with vulnerable economies, require financial backing to adapt to climate change impacts while reducing emissions.

Conclusion

The COP29 discussions in Baku mark a turning point in the fight against climate change. This event underscores the urgent need for concerted global efforts to establish effective carbon markets, implement ambitious NDCs, and secure the necessary climate finance to support resilience and adaptation.

Overall, COP29 provides valuable insights for countries at various stages of economic development, guiding policymakers, industries, and civil society toward sustainable solutions. Whether by supporting national climate agendas, encouraging investments in green technology, or strengthening carbon credit frameworks, COP29 invites stakeholders to embrace a circular economy that aligns with sustainable development goals.

This year’s COP is not only a venue for dialogue but a definitive call to action, urging the global community to ensure a responsible and sustainable future for all.

Perhaps, by revisiting the speech delivered by UNFCCC Executive Secretary Simon Stiell at the opening ceremony of COP29 in Baku, Azerbaijan, on November 11, 2024, we can feel the personal relevance of climate change to each one of us. His powerful words are as follows:

“Excellencies, Delegates, Colleagues, Friends,

It is an honor to welcome you to COP29.

I thank Dr. Sultan Al Jaber and the Emirati Presidency for their tireless work, as they pass the baton to President Babayev and Azerbaijan.

In tough times, up against difficult tasks, I don’t go in for hopes and dreams.

What inspires me is human ingenuity and determination. Our ability to get knocked down and to get up again over and over again, until we accomplish our goals.

The lady I’m standing with, in this picture, is my neighbour, Florence, in Carriacou. In July this year, this was us, standing in all that remained of her home after the devastation of Hurricane Beryl.

At 85, Florence has become one of the millions of victims of runaway climate change this year alone.

She was focused on one thing: Being strong for her family and strong for her community.

And there are people like Florence in every country on Earth. Knocked down, and getting back up again.

This UNFCCC process is the only place we have to address the rampant climate crisis, and to credibly hold each other to account to act on it.

And we know this process is working. Because without it, humanity would be headed towards five degrees of global warming.

In these halls, we negotiate on specific pieces of the puzzle each year. It can feel far away from what’s happening in Florence’s living room. We cannot afford to continue up-ending lives and livelihoods in every nation — so let’s make this real:

Do you want your grocery and energy bills to go up even more?

Do you want your country to become economically uncompetitive?

Do you really want even further global instability, costing precious life?

This crisis is affecting every single individual in the world one way or another.

And I’m as frustrated as anyone that one single COP can’t deliver the full transformation that every nation needs. But if any of your answers to those questions was no, then it is here that Parties need to agree a way out of this mess.

That’s why we’re here in Baku. We must agree a new global climate finance goal.

If at least two thirds of the world’s nations cannot afford to cut emissions quickly, then every nation pays a brutal price.

If nations can’t build resilience into supply chains, the entire global economy will be brought to its knees. No country is immune.

So, let’s dispense with the idea that climate finance is charity. An ambitious new climate finance goal is entirely in the self-interest of every single nation, including the largest and wealthiest.

But it’s not enough to just agree on a goal. We must work harder to reform the global financial system. Giving countries the fiscal space they so desperately need.

And here in Baku, we must get international carbon markets up and running, by finalising Article 6.

We need to move forward on mitigation, so targets from Dubai are realized.

We mustn’t let 1.5 slip out of reach. And even as temperatures rise, the implementation of our agreements must claw them back.

Clean energy and infrastructure investment will reach two trillion dollars in 2024. Almost twice that of fossil fuels.

The shift to clean-energy and climate-resilience will not be stopped. Our job is to accelerate this and make sure its huge benefits are shared by all countries and all people.

We must agree adaptation targets. You can’t manage what you don’t measure. And we need to know if we’re on a pathway to increasing resilience.

And we must continue to improve the new mechanisms for financial and technical support on loss and damage.

We can’t make decisions in the dark. Biennial Transparency Reports, due this year, will give us a clearer picture of the progress we’re making, and the gaps that we need to fill.

[Next] year, all countries will deliver their third generation of national climate plans — NDCs.

To support countries in creating and communicating them, the UNFCCC will launch a Climate Plan Campaign.

It will mobilise action from all stakeholders, and align with the efforts of the UN Secretary-General and the incoming Brazilian COP Presidency.

In parallel, we’ll re-start Climate Weeks from 2025. Aligning them more closely with our process and the outcomes it must deliver.

At the Secretariat, we will continue to work tirelessly with what we have got, while being clear on what funding we need, so we can deliver on what’s increasingly being asked of us.

And we will keep focus on the safe, inclusive, and meaningful participation of all observers at this COP.

In the past few years, we’ve taken some historic steps forward. We cannot leave Baku without a substantial outcome. Appreciating the importance of this moment, Parties must act accordingly.

Show determination and ingenuity here at COP29 — We need all parties to push for agreement right from the start — To stand and deliver.

Now it is the time to show that global cooperation is not down for the count. So I urge you all, let us rise together.

I thank you.”

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